http://www.usatoday.com/money/workplace/2003-08-05-outsourcing_x.htm
Posted 8/5/2003 12:47 AM
USA's new money-saving export: White-collar jobs
By Stephanie Armour and Michelle Kessler, USA TODAY
White-collar employees have long believed their jobs were safe from
the economic forces that have shifted millions of factory jobs to
foreign countries in the last 30 years.
Not anymore.
It's not just clothing and electronics being made by workers in India,
China and similar places. Now, office and professional jobs are being
shipped out — raising the specter that skilled white-collar workers
could face the same devastating job losses that decimated the
manufacturing industry.
Almost any professional job that can be done long-distance is suddenly
up for grabs. Jobs done by financial analysts, architectural drafters,
telemarketers, accountants, claims adjusters, home loan processors and
others at higher levels of the labor food chain are being farmed out
to workers in other countries.
"We're not just talking about call-center jobs, but all kinds of
jobs," says Deloitte Consulting analyst Christopher Gentle. "It
doesn't leave any part of the corporation untouched."
These include high-paying, highly sought-after jobs that often require
advanced degrees and years of study to attain. But instead of paying
six-figure salaries to trained workers in America, more companies are
shelling out $10,000 to $20,000 to get cheaper employees an ocean
away.
Major U.S. companies, including such giants as IBM, Microsoft and
Procter & Gamble, are leading the pack. Tens of thousands of jobs
already have been shipped out, and analysts project that millions more
will go in coming years.
Employers say outsourcing jobs to foreign countries makes them more
competitive because they can reap enormous savings in labor costs.
They argue that most of the jobs now going abroad are positions many
Americans snub, such as telemarketing. Farming out that work leaves
better, higher-paying jobs for American employees to do.
The trend represents a potentially seismic shift: In the next 15
years, American employers will move about 3.3 million white-collar
jobs and $136 billion in wages abroad, according to Forrester
Research. That's up from $4 billion in wages in 2000.
Financial services companies alone plan to move more than 500,000 jobs
offshore in the next five years, says consulting firm A.T. Kearney.
Deloitte Consulting expects 2 million jobs worldwide to eventually
move to countries such as India.
A warning from organized labor
To labor unions, farming out white-collars jobs is more than just
another way for businesses to cut costs. They say the trend has the
potential to plunder American jobs, prolong the weak job market that
has characterized this jobless economic recovery and pose a long-term
danger to the employment security long enjoyed by white-collar
workers. Critics now are trying to mount an offensive.
"We see it as a threat to America's middle-class workforce, in terms
of wages and benefits," says Marcus Courtney, president of Washington
Alliance of Technology Workers in Seattle. "The service sector is not
immune to the forces of globalization. We're talking about highly
skilled, best-paying jobs. It's raising the concern of workers."
The Communications Workers of America this spring began pressing
Congress to authorize an investigation into the growing number of jobs
being shifted abroad. High-tech workers have handed out leaflets and
held demonstrations protesting the trend in states such as Texas,
Washington, Massachusetts and New York.
Critics are pushing for legislation that would halt projects from
being sent abroad if they're funded by tax dollars. Others want tax
incentives to help keep business on U.S. soil.
The worry: Increasing profit pressures and the ease of information
exchange provided by the Internet will turn the wave of companies
shipping out work into a tsunami — potentially affecting every sector
of the white-collar labor force.
Among concerns:
• Benefits and pay. Secure in the knowledge that they can get cheaper
workers abroad, American companies might begin slashing benefits here,
critics say. Even U.S. workers who get jobs could see wages slashed
because of the competition posed by their counterparts abroad, they
say.
Companies have already been curbing benefits as labor costs — driven
largely by health care costs — escalate.
Pay has also suffered as companies cut back on raises in a sluggish
economy. As more companies start tapping workers abroad, critics say,
U.S. workers will lose the last vestiges of their bargaining power.
At 123jump.com, a Miami Beach provider of investment advice, the
company's 32 financial analysts live in India, Bulgaria and Argentina,
earning $15,000 to $20,000 a year.
CEO Manish Shah says he could shell out $150,000 or more to hire
analysts here. But why? His analysts usually have MBAs and speak
fluent English.
"Can we stop (globalization)? No," Shah says. "We go to the cheapest
possible cost with the best possible product."
• Loss of American jobs. Labor unions and consultants fear a repeat of
what happened in the manufacturing sector, which has lost more than
2.6 million jobs in the past three years.
The scope and type of jobs being farmed out show how vulnerable many
professional positions are. J.P. Morgan Chase expects to have 40
research analysts in Mumbai (formerly called Bombay), India, by year's
end. Deloitte Consulting has about 1,000 employees in Mumbai and
Hyderabad, India, many handling research work. A.T. Kearney uses
workers in New Delhi for research and office support.
IBM has expanded offices in Bangalore, India, to handle engineering
work, and is reportedly considering a big offshore push.
Hewlett-Packard has 5,000 employees in India, doing research,
developing software and staffing call centers. The companies say
they've had Indian workers for years.
• An unstoppable force. While the overall percentage of jobs being
farmed out to workers abroad is still small, the advantages to U.S.
companies are so attractive that labor unions fear any congressional
efforts to curtail the practice will be doomed.
Already, major companies are able to work around the clock because of
their presence in other countries.
Oracle has two big development centers in India, and 4,000 employees
will be stationed there by year's end. Programmers there pick up
projects when their American counterparts leave for the day, and vice
versa. That way, Oracle is working 24 hours a day.
The numbers are continuing to swell. Consulting firm Brulant recently
surveyed 38 large companies about outsourcing plans. While only 18%
were seriously considering it, "100% of them were evaluating it," says
CEO Len Pagon Jr.
Once gone, jobs won't return
If outsourcing takes off, it's unlikely to stop, experts say. "The
jobs aren't coming back, that's for sure," says Forrester Research
analyst John McCarthy.
While the trend has been underway for years, only now — as the pace of
outsourcing picks up and new projections show its use continuing to
grow — is debate about the practice increasing. One reason for the
attention is the recent economic doldrums. With unemployment at 6.2%
in July, more white-collar workers are becoming anxious about job
security. While many have been shaken by layoffs, workers' new concern
that jobs could be lost permanently to other countries is sounding an
alarm.
Says Josh Bivens, an economist at the Economic Policy Institute in
Washington: "This will cause more churning and concern higher up the
professional food chain. Blue-collar workers have been used to this
for years."
Since the first migration of white-collar work involved tech jobs,
other employees in professional jobs thought they were immune. Now,
office jobs many thought could never be done abroad are being farmed
out.
In recent years, the Internet has made it easy to pass data and
documents around the world. In India, deregulation of the telephone
industry has caused rates for some international calls to fall as much
as 30%. That's made it possible for telemarketers and customer service
agents to work seamlessly with U.S. customers. Many assume an American
name and take training in U.S. customs, making it hard to distinguish
between a call from Houston or Hyderabad. "In India, it's a very
respectable job," says Chaitra Aiyar, 23, who works at Cellbion, a
call center near Mumbai. She goes by the name Cindy Newman when making
calls.
Workers who have never been in a U.S. office are handling such
sensitive areas as payroll and benefits. Procter & Gamble handles
payroll, travel, benefits administration, accounts payable, invoice
processing and other work at offices in San Jose, Costa Rica; Manila;
and Newcastle, United Kingdom. About 7,000 people work in these
offices, which opened in 1999.
Companies say their offices abroad are run as tightly as those in the
USA. But critics disagree.
"There are real security risks," says John Guinasso at Data Systems
Security in San Jose, Calif. "Corporations here don't have control
over who has access to information once it gets out of their hands.
There are real concerns."
Are the fears real?
Is all the hand wringing overblown? Labor groups say no, but companies
and some analysts argue that shipping white-collar jobs abroad is
hardly a menace to American jobs.
"The recession is making all sorts of people insecure. I don't see
this as a huge threat to the U.S. economy," Bivens says.
Since labor and land in countries such as India can be cheap, the cost
savings can become "extraordinary," says A.T. Kearney Vice President
Andrea Bierce.
An MBA with three years experience in India will make about $12,000 a
year, compared with $100,000 in the USA, she says; a programmer will
make $5,000, compared with $60,000. "There are an awful lot of
companies thinking about this," Bierce says.
But Bierce warns that the savings aren't immediate for many companies.
The cost of moving part of a business abroad can, at first, be higher
than the cost of keeping it in the USA, experts say.
But it's the fact that workers abroad are so cheap over the long term
that has detractors crying foul. It even gnaws at some employers.
David Stixrood, president of Dallas-based Corp-Wireless, which
provides broadband wireless connectively to the Internet in truck
stops, opted not to use an overseas help desk — even though it was
cheaper — partly because he's concerned about what outsourcing will do
to American jobs.
"We're going to lose all those jobs," Stixrood says. "People are
losing their jobs to overseas markets. Unfortunately, we live in a
very competitive world, and sometimes competition is very cruel."
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