Storm in a Thimble



Politicians can’t outsource the vote,’’ says Scott Kirwin, founder of
the Wilmington, Delaware-based lobbying group Information Technology
Professionals Association of America.

It is nice to know that election years are the same in all democracies.
Incumbent governments do their best to pander to mass feelings when election
time draws near. So the Americans pass laws to protect jobs — and we reduce
duties, lower taxes and generally recognize that the way individuals see
economic progress and security is not always the same as the way governments see
them. And if that vicarious pleasure was not enough one also gets a sense of
smug satisfaction when the Americans crib about job losses and the need to
protect their own.

For years we have been told the virtues of opening up our economy to the rest
of the world and let competition thrive. We were reluctant to do so — not all
the reasons were right — but finally have started moving in that direction.
Now that the Americans face some of these challenges — rather small ones —
it is kind of nice. It is wrong — but nice things are often wrong.

Shyam
Malhotra
Indian
companies are "stealing" just about 1% of the jobs.
The real issue therefore for the US is unemployment and not
offshoring

But why is this a small problem? The Great Indian Outsourcing Industry will
employ 152,000 people in 2003-04 as per Nasscom. Assuming that even two thirds
of this – 100,000 – was a job loss in the United States, it is small numbers for
an economy the unemployment rate is running at 6 — 7% – that is 8.4 million
people in December 2003. What that means is that Indian companies are
"stealing" just about 1% of the jobs. The real issue therefore for the
US is unemployment and not offshoring. The problem therefore will diminish only
when jobs start reappearing in the US economy. And if that does not happen,
President Bush would see the weapons of mass destruction, that were not found in
Iraq, appearing in the US, in the form of disgruntled voters.

There are calculations that prove that when jobs go out they create more jobs
due to higher efficiencies. There are reports that Indian companies do not only
steal jobs — they also create them by hiring locally in many cases. That is a
lot of work for a thimble-sized industry — and that too for 2% of its business
prospects. The reaction is clearly disproportionately related to the cause.

The present movements may be small by GDP standards, but you are still
talking about 152,000 people. And many many more going forward. The theory is
that as the lower end jobs get moved out there place is taken by up the value
chain jobs and eventually people graduate to these and live happily till the
next job churn happens. That is perfectly acceptable and correct. Therefore
logically what the US government should be doing is creating situations where
such transitions can be made as painless as possible. That means creation of new
types of jobs and making people ready for them. So far one has not heard
anything about this. No one seems to be articulating the need for this. Even if
all offshoring were to halt (which is just about impossible) would that solve
the problems of employment and growth for the US economy?

To my mind even these job migration is not the end of the story. It sort of
assumes that low-end jobs move out and high-end jobs move in. And as a recent
article in Wired would seem to suggest, the movement out of low-end services
jobs would unleash forces that will create high-end "creative" jobs.
The article assumes that offshoring destinations are good enough for low-end
jobs only. And people skills there are not suitable for up-the-
value-chain-jobs. The differences in people abilities are small and rapidly
disappearing. There are likely to be more "creative" people in India
than the United States and Europe put together. And technology makes it possible
for them to work from anywhere. And efficient corporations would try and get the
best people for their work — regardless of the place pf physical being. The
churn will not be limited to one category of jobs. Many vocations will get moved
around. That is the reality that a globalising world has to come to terms with.

In the meantime we can debate about the storm in a thimble.

The author is Editor-in-Chief of CyberMedia, the publishers of Dataquest. Shyam
Malhotra

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