Discovery Times The outsourcing of American jobs

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OUTSOURCING: A Brief TimelineBy 2005, 830,000 formerly American jobs will belong to foreign workers overseas, according to Forrester Research. And a study by two University of California economists identifies 14 million American workers whose future employment may be at risk by the practice of outsourcing. Proponents say outsourcing helps U.S.-owned companies remain competitive in the global marketplace, holds down consumer prices, and ultimately preserves American jobs by keeping companies afloat. Opponents say Americans risk being forced out of certain professions by foreign competition. They also warn that reliance on overseas technical talent will undermine American industry's research and development capabilities. What follows is a brief look at what has fueled the outsourcing of American jobs.

Fiber-Optics

The development of fiber-optic telecommunications cable in the 1970s made it possible to transmit vast amounts of information

rapidly over long distances. The laying of fiber-optic lines across the Atlantic and Pacific in the 1980s connected the United States with the rest of the world. The

use of bookkeepers, customer-service reps and software debuggers on other continents all is made possible by fiber-optic

cable.

The Internet

In the 1990s, the assimilation of regional computer networks into a worldwide Internet made

it possible to connect the desktop computers of workers in far-flung parts of the globe. Advances in computing power

and data storage, combined with software advances, made

it possible to manage their labor.

Microsoft CEO Bill Gates meets with Indian Prime

Minister H.D. Deve Gowda during a 1997 trip to discuss

business opportunities and collaborations in software

development.Picture: Ajit Kumar/AP Photo |

Keyboard Revolution

For years, American manufacturers have used cheap Third World labor to

make everything from shoes to cars. However, the massive

shifting in demand for jobs in which workers use keyboards rather than sewing needles and wrenches is a relatively

recent one:

• U.S. insurance and financial services companies began to use offshore telemarketing and data-processing operations in the early 1990s.• American companies first began to go overseas for computer programming support in earnest during the mid-1990s, when they needed extra help to debug a massive amount of existing software to prevent Y2K problems.• Outsourcing grew rapidly during the Internet-driven economic boom of the late 1990s, as companies found themselves under intense pressure to grow rapidly to keep shareholders happy and competitors at bay.• A tight U.S. labor market, in which information workers could pick between a variety of high-salaried corporate jobs and the opportunity to start their own businesses, provided another incentive for companies to look overseas for cheaper, more plentiful talent.

India Leads the Way

Today, a study by Hewitt Associates, a global human resources consulting firm, indicates that 92 percent of companies outsource jobs to cut their labor costs. Many of those jobs go to India. India leads in benefiting from American outsourcing, providing $9.5 billion in annual services to American companies. Next are Ireland ($6 billion), Israel ($2.6 billion), the Philippines ($1 billion) and Russia ($800 million). While many Americans probably still think of the world's second most populous nation as an impoverished rural land, India produces about 300,000 college graduates with engineering degrees each year, according to an Indian government Web site. That's approximately six times the number of Americans who earn engineering degrees annually, according to the National Science Foundation.

Anil Jain, general manager of personal computing products for Wipro InfoTechPicture: Gautam Singh/AP Photo |"Electronics City"

India's outsourcing capital is Bangalore, a southern city of 4.3 million inhabitants that is known for both its pleasant weather and "Electronics City," 330-acre industrial park on its outskirts. The city is home to companies such as Wipro, an outfit with $1 billion in annual revenues, run by Azim Premji, a Stanford University dropout who converted the struggling family cooking-oil business into a software firm in the late 1970s. That metamorphosis, strange as it seems, had a certain logic. At the time, India still had a centrally planned economy, and the government had decided to kick out IBM to make room for Indian companies. Wipro stepped into that void and prospered. Eventually, the research and development team assembled by Premji began to sell its services to American firms such as Intel and Texas Instruments.

Today, Bangalore's offices are filled with youthful workers who've been dubbed "Zippies" by an Indian magazine that

described the confident spryness in their walk. Graduates of schools such as the

Indian Institute of Technology in Bombay, they earn wages that, although meager by

U.S. standards, are about 10 times the typical Indian income of $500 a year, and

enjoy a lifestyle that would have been inconceivable to their parents.

A software festival in Hanoi, VietnamPicture: Richard Vogel/AP Photo |

The Beat Goes On

The impact of outsourcing on India as a whole isn't quite as dramatic. India's outsourcing

revenues amount to a little more than 2 percent of its $600 billion economy, and the inflow of

formerly American jobs hasn't made much of a dent in a nationwide unemployment rate of 8

percent — more than two points higher than the present joblessness figures in the United States.

Even in prosperous Bangalore, there are not enough jobs to go around. Recently, according

to the Express India newspaper Web site, a melee erupted in front of a major software company where 8,000 applicants had been

waiting in line for hours to interview for jobs. And critics of globalization and free trade warn that whatever economic benefits are gained by India and other outsourcing countries may not last. If the model for outsourcing holds true, skilled jobs eventually will flow from those

places to countries with even lower wages, such as Vietnam.