The movement of jobs, and especially white-collar service jobs, away from the United States: a political as well as economic matter.

" The View from America: Losing Jobs is Grim"
March 25, 2004

Huck Gutman

Offshoring of white collar jobs has begun to threaten the US electorate in such a big way that the upcoming presidential polls may hinge on the war against terrorism-faltering economy axis, argues HUCK GUTMAN

The third in a series of three articles on offshoring from an Indo-American perspective.

     Two weeks ago, I attended a meeting in the north-eastern USA between a public official and eight IT experts. The eight were part of a cadre of 50 in a large insurance company. Most of the people in the meeting had worked for the company for 20 years or more. Suddenly their work had been outsourced to a domestic firm. That firm had in turn announced that it would be replacing the IT workers – who earned an average of $65,000 a year – with Indian workers who would earn something like a tenth of that. Not only would most of these American workers lose their jobs: they were told that, in coming weeks, they would be required to train the Indian employees who were to replace them.
     The US stock market, severely depressed since the implosion of speculative fever of the boom, is in the midst of a strong rebound. The balance sheet on corporation after corporation shows profits at or exceeding expectations. Even the fall of the dollar, a plunge of about 35 per cent against the Euro, has its positive side, making US goods strongly price competitive with those of other developed nations. Things would seem to be going well in the realm of the world’s greatest economic power.

      “Seem” is the operative word. For while stocks soar and some CEOs earn $100 million a year in pay, the American populace is increasingly worried about the economic future of the US workplace. Chief among their worries is this: Forrester Research predicts at least 3.3 million white collar jobs and $136 billion in wages will shift from the USA to low-cost countries by 2015.

     It has been argued that the loss of blue collar jobs, which has marked the previous decade and become a veritable torrent of offshoring in the past three years, did not strike at the heart of the US body politic in the same way as does this new loss of service and information-related jobs. The dream of everyone in the USA is that sometime, someday, their children will not have to work with their hands. Office jobs are more desirable – they are cleaner, pay better and have more status – than jobs in manufacture. So as blue collar jobs disappeared, and the nation was promised that white collar jobs would take their place, there was little outcry.

     But now the white collar jobs are disappearing too. The USA is in the midst of what is being called a “jobless recovery”. For 43 consecutive months, manufacturers have cut the number of workers on their payrolls. The USA is in the longest employment slump since the 1930s, when the nation was mired in the Great Depression.

     The seemingly robust economic recovery, with its 6.1 per cent growth in the last half of 2003, just has not created jobs. Unlike the previous two decades, which saw job growth averaging more than a quarter of a million jobs a month, current job growth is negative or flat. The last month reported, February, did note a net gain of 21,000 jobs, but they were all in the government sector. Unemployment is officially pegged at 5.6 per cent, but because the economic outlook is so bleak, many have stopped looking for work and therefore are no longer counted as unemployed. If the labour force had not shrunk in the last half year, the unemployment rate would be 6.4 per cent. Many economists believe the actual number of unemployed is closer to 10 per cent.

     As Americans confront the evaporation of their dreams, they are beginning to look at where their jobs have gone. What they find, a discovery greatly abetted by the media, is that their jobs have gone, or are going, to India.

     It should be made clear that India in this regard is a synecdoche (a term of rhetorical analysis for a part which stands for the whole). The first great offshoring of service jobs occurred when back-office work and call centres went to Northern Ireland over a decade ago. The Northern Irish, like Indians, were available at “low wages”, they spoke English and at the time there were excellent phone hookups to Belfast. Today, excellent telephone links are global and there are many sources of lower-wage workers who speak perfect English. Sometimes English is not even required.

     The offshoring of white collar jobs is the current American nightmare. The professional jobs, the well-paying jobs, the future jobs of the USA’s young people, seem to be moving across distant seas to countries where people will work for salaries so low that they would not pay the rent on a small American flat. Soon, people fear, all that will be left are jobs that cannot be exported: flipping hamburgers, making beds in hotels, picking up the garbage.

     Indeed, in an attempt to skew the dismal statistics on manufacturing jobs, President Bush proposed in his annual economic message to the Congress that cooking hamburgers, notoriously one of the lowest-paying of jobs, be henceforward defined as a “manufacturing” job. But then, Bush seems to have a tin ear, unable to hear what is going on in the nation he governs. He guessed wrongly, deeply wrongly in setting the tenor of his whole administration: it’s not terrorist planes flying into skyscrapers that keeps Americans awake at night, but the sense that future of the middle class and working people is ebbing away, their jobs more and more often landing on foreign shores. The Americans see their future seeping away to the Philippines, to Poland, to Russia, of course to China, and especially – especially – to India.

     As said earlier, India has great advantages in the world labour market. Its cost of living and wage standards are, by the measure of the developed countries, low; it has a huge highly educated work force, with, for example, over 5,20,000 IT engineers; and its professional workers are fluent in English.

     So when Americans bemoan the offshoring of white collar jobs, it is, unhappily, India that most often comes to mind. Partly this results of from an awareness of how attractive are India’s professional services, highly trained and of modest price. Forrester Research found, for instance, that more than half of all outsourced IT jobs go to India.
Partly it is related to the fact – tragic fact, not defensible in any way – that colour prejudice sometimes runs deep in the American psyche, so that it may be more politically or socially acceptable to be upset by Indian software engineers than Russian ones, by Indian call centres than Northern Irish ones.

     Partly it is, as with China, the size of these two behemoth nations, both felt to be future competitors rather than junior partners in the world economy: India is a potential rival, Poland and Korea are not.

     While China has “taken” more jobs from US workers than India, there seems not as much outcry against job outsourcing to East Asia as there is against the movement of jobs to India. As noted earlier, on some deep psychic level, the loss of manufacturing jobs is partially acceptable to Americans. The contemporary American dream says manufacturing jobs are being lost because developed nations are heading into a knowledge-driven, 21st century economy. Information-based jobs, talking-to-people jobs, office jobs: these were to be the sanctum into which the next generation of Americans would move. Now, more and more of those jobs are being offshored, and often offshored to India.

     Added to the American situation is a political variable. It is a truism in the USA: the lower one’s income, status, age, the less likely one is to vote. So voters are disproportionately well-employed, professional, established in their jobs. Offshoring of white collar jobs threatens the very core of the voting public and so it has become a major factor in US politics.

     There will be two major issues in the next election. If national security – meaning, primarily, the ongoing war against a faceless terrorist adversary – is seen by voters as the primary issue, President Bush, who portrays himself as having a solid and capable hand on the tiller of the ship of state, will likely win re-election. If the faltering economy – despite record low interest rates and a rising stock market, jobs are not increasing and joblessness is on the rise – is the central concern, John Kerry will likely be the next President. There will, of course, be what are called wedge issues abortion, homosexual marriage, concerns about immigration – but they will function as the Ram Temple in Ayodhya functions in India, to muddy the waters so that the central issues of war and prosperity will not dominate.

     A recent poll indicates that support for “free trade” is dropping in every income category, and falling most in the high income groups that most strongly supported free trade just five years ago. In the primaries, every Democratic candidate for President expressed concern about job losses overseas; the likely nominee, John Kerry, who supported free trade agreements until recently, has thus far resisted calling for renegotiated multinational trade agreements. Nonetheless, speaking of the Bush administration he recently proclaimed, “They have delivered a double blow to America’s workers, 3 million jobs destroyed on their watch, and now they want to export more of our jobs overseas?” Kerry has pledged that as soon as he is elected, he will order “a 120-day review of all existing trade agreements to ensure that our trade partners are living up to their labour and environment obligations and that trade agreements are enforceable and are balanced for America’s workers.”

     But Bush and his challenger may feel a need to respond more strongly yet to what is going on in the body politic. In general, Americans exist in a different world than their politicians. While the majority of Congress and the two presidential candidates court the corporate interests for their potential for sizeable campaign contributions, there is a tectonic shift taking place in the American populace. The spectre of continuing job losses – a major financial publication suggested that as many as one third of all US jobs are vulnerable to offshoring – has shaken the American middle class to its core. There’s not yet a call for protectionism, but there is mounting pressure for some variety of government action to halt the outflow of white collar jobs.

     The problem of offshoring is a difficult one for Americans. Caught in an economic squeeze – real wages have been flat for 30 years, and the middle class is shrinking – there are three ways an American family can maintain its standard of living. One is to work longer hours: Americans now work longer hours than workers in any other industrialised country, even Japan. Another, so widespread it has become the norm, is for all adults in a family unit, not just the husband, to work. The third is to subsidise the cost of necessities by importing low-price goods. Today, a pair of shoes, a shirt, a television, a cooking pot, a computer, cost far less in inflation-adjusted dollars than they did 10 or 15 years ago. For Americans, globalisation’s main benefits have gone to those who own and run MNCs and international banks, but some of its benefits have underwritten the economic stability of American families.

     That stability is now doubly imperiled. If offshoring is curtailed, the continuing subsidy to American consumers of everything from electronics to apparel to telephone services to computer services may end, and prices will rise so that the necessities of life are less affordable. If offshoring is not curtailed, American jobs may disappear, or Americans may find themselves working for increasingly lower wages as employers try to keep pace with the downward movement of wages in the world economy.

     Which brings our attention back to India. It is hard to say just what may happen. There is a serious proposal in the US Congress to deny federal aid to companies who move their employment overseas. There are calls for not just re-examination of multinational trade treaties, but renegotiation of them. The visa policies that currently allow foreign professionals easier access to the US workplace may be tightened. Then again, the demands of arguments of MNCs [multinational corporations], free-market capitalists and internationalists may hold sway, and free trade, regardless of its consequences for US workers, may continue unrestricted and unabated.

     The greatest danger to India, of course, is that the USA may move toward a protectionist policy, through the imposition of tariffs or the erection of barriers to offshoring of service jobs. There is, however, no move towards serious protectionism at the present moment. Still, the issue of offshoring has been raised to a very high level in the public consciousness.

     While what will ultimately transpire is not evident, the offshoring of jobs, and in particular the offshoring of high-tech and professional service jobs to India, is on the USA’s agenda.

(The author, a Visiting Fulbright Professor at Calcutta University, teaches at the University of Vermont.)