Sunday, May 30, 2004

Outsourcing Watch: LAT update - It's still bad out there

Despite the news of the "recovering" economy, the LAT does a story covering about how the trend of out-sourcing jobs overseas is still a sore point in the hi-tech industry.

With the crash of the technology sector and overseas outsourcing, thousands of U.S. jobs are disappearing and salaries are under pressure. The late-'90s sense of well-being is diminished.

Experts disagree over how much of the job loss and salary slippage can be attributed to outsourcing, but most say it has clearly been a factor.

"It is unprecedented, the turn of fortune that has occurred in the high-tech industry," said Marcus Courtney, president of the Washington Alliance of Technology Workers in Seattle. "Less than five years ago, we were talking of adding hundreds of thousands of new employees every year in this industry…. We've gone from that to widespread job losses and stagnant wages and benefits.

"The reason it's happening is companes are exporting jobs overseas to increase their profits and not creating jobs here in the U.S."

This growing class of dispossessed and demoralized tech workers is creating new economic and political fault lines. For the first time, large numbers of technical professionals are losing their jobs to lower-paid counterparts in other countries, a phenomenon once associated mainly with blue-collar factory work. Some remain unemployed or underemployed for long periods, and some are beginning to challenge policies that give rein to globalization.

The practice of requiring U.S. workers to train their replacements has become a flashpoint in the intensifying debate over "offshoring" jobs to other countries and the use of temporary visas by foreign nationals who come here to learn their employers' systems.

Critics have denounced the process as inhumane, and some members of Congress are trying to curtail it.

Apparently the insult to injury here is that they're being forced to train their replacements. The company does claim that it offers "competitive severance packages" - meaning I guess a sizable sum and probably help finding work in the form of workshops, etc.

Are new jobs being created? Sure. The problem is that competition from lower-cost individuals is forcing down compensation. As the article notes:

Although Cotterill has lost faith in Agilent, he hasn't given up on the computer industry. He has lined up a two-week contract with a small consulting company, and a manager at Agilent wants him to do several months of consulting on an unfinished project. The catch: He would receive less pay and no benefits.

Meanwhile, he has been applying for jobs online and received callbacks from four IT recruiters. Three of them had Indian accents, he said. Among the first questions they asked: "Can you work in the U.S.?"

Note that BLS statistics would treat this person as "employed" even though they're getting paid less and not getting benefits.

To be fair, here is a Financial Times report indicating that personal incomes rose recently.

Personal income rose by 0.6 per cent in April, its fastest growth since last November, suggesting that a strengthening jobs market is feeding through into higher wages.

There was also good news on the industrial front on Friday with the Chicago purchasing mangers index rising to its highest level since 1988.

Disposable income accelerated, to 0.5 per cent over the month. Income growth was led by another large gain in proprietors' income and strong compensation of employees. Wage and salary growth climbed to 0.5 per cent from 0.3 per cent in the previous month.

A fundamental question though is how large has been the inflation increases? With housing prices still sky-high in many places, medical costs rising, education costs rising, car prices high, fuel and heating costs high, food costs higher, does anyone actually believe that the nominal government cost adjustment is actually accurate anymore?

The figures showed no sign of substantial inflationary pressures. The consumer price deflator posted a 0.1 per cent rise - its smallest monthly gain in five months. Adjusted for inflation, real disposable income rose 0.4 per cent, its fastest growth since January, while real consumer spending posted a 0.2 per cent gain.

Apparently people who are in the government bureaucracy think prices are basically flat. Hmmm...

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