Offshoring Accountants, Engineers, and College Professors

Germany’s a free-trade country, and so is America. All American economists are also feverish proponents of free trade. But lately a few have been getting nervous about the coming offshoring of the service industry. Prominent American economist Alan Blinder points out that free trade has begun destroying millions of service-industry jobs in the United States:

It’s going to be painful because our country offers such a poor social safety net to cushion the blow for displaced workers. Our unemployment insurance program is stingy by first-world standards. American workers who lose their jobs often lose their health insurance and pension rights as well. And even though many displaced workers will have to change occupations — a difficult task for anyone — only a fortunate few will be offered opportunities for retraining. All this needs to change.

Hmm. Generous unemployment benefits, portable health insurance, and government-funded retraining schemes for displaced workers. Sound like any countries you know?

16 thoughts on “Offshoring Accountants, Engineers, and College Professors

  1. Blinder makes good points although he’s a little late to the game. Offshoring is already happening and having a big impact. I am making about 30% less than I did 5 years ago and pay expenses that I used to be able to charge to the employer (travel, lodging, etc).

    Only one problem with your theory that German workers are better off, though. What is this I keep hearing about German software engineers leaving Germany to emigrate to the US, Andrew? I guess it must be an urban myth or something. Either that – or things are still worse in Germany…..

    As for ‘government’ retraining? I’ve seen those schemes in the UK and they are worse than useless. I buy books and do my own retraining because that way I know it’s aimed at the actual job market – not some out of touch ‘education professionals’ idea of what the market was a decade ago.

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  2. Is it bad to be offshored in the USA? You should see how things get uglier when you talk about “offshored” professionals in countries like Brazil…

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  3. “For these same forces don’t look so benign from the viewpoint of an American computer programmer or accountant. They’ve done what they were told to do: They went to college and prepared for well-paid careers with bountiful employment opportunities. But now their bosses are eyeing legions of well-qualified, English-speaking programmers and accountants in India, for example, who will happily work for a fraction of what Americans earn. Such prospective competition puts a damper on wage increases.”

    Wage increase? What’s that?! I’d happily settle for the salary I had in 2001 and swallow the inflation myself, because that would mean that I would only be about 10% down rather than more like 30%. I don’t eat out any more, live in a much smaller house, and travel much less than I used to.

    “And if the jobs do move offshore, displaced American workers may lose not only their jobs but also their pensions and health insurance. These people can be forgiven if they have doubts about the virtues of globalization.”

    No kidding.

    There is another battleground Blinder doesn’t mention – let’s call it onshoring. I’m currently working at the British Telecom campus at Martlesham outside Ipswich. I’d worked there in 2000 and the changes are enormous since then. In 2000 the parking lots were jammed – one had to arrive before 8 Am to get a parking space. No problem now. I ride the buses. In 2000 the buses were rarely full going out to BT, and the people riding them were mostly British. Today it’s standing room only in the mornings – and 90% of the ridership are from India. The parking lots aren’t full, but the cars which do park are much more exotic. The mundane Mondeos and Golfs have been largely replaced with Mercedes, Porsches, and other high-end marques. Where are the middle-class Brits? Largely gone.

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  4. I am an Aerospace engineer in the United States. Either offshoring is going to stop, or we are going to be reduced to a nation with a massive poor population and a very small rich population. By rich I don’t mean *nice big house on the hill* rich, I mean large luxury yacht and vacation homes in Miami beach rich with 4 cars. This silly outsourcing trend is making some people blindingly rich and most people very poor.

    Maybe things will speed up and we can just skip to the revolution. Let them eat cake.

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  5. “This silly outsourcing trend is making some people blindingly rich and most people very poor.”

    That’s true in general about this “silly” globalisation: For skilled people, globalisation tends to be positive because it helps them making money by selling their services or products on a global level. For unskilled people, however, globalisation tends to be negative because they face ever-growing competition from outside: more and more people are able to do their exact same job at a much lower price and therefore, they will have to accept lower wages in order to survive. These lower wages, in turn, help the skilled people drive down their costs and thereby, to get rich quicker.

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  6. Norbert, you are about 10 years behind the game. That was actually true then, and it is still the conventional wisdom now. But it’s not true for many or most skilled knowledge workers, although it may still be true for skilled plumbers and mechanics, trades which are difficult to outsource.

    IT, accountancy, and many, many things are being outsourced enthusiastically – have been throughout the past decade.

    You would be amazed at the things which can be outsourced to India. Anything which can be digitized. Including much doctoring and even nursing work. Anything which can be monitored can be monitored in India. Perhaps surgery cannot be outsourced, but reading and interpreting X-rays and CAT scans can be. And even surgery, actually. Ever heard of something called medical tourism?

    The last people who will wake up to this trend will be the tenured jackasses who populate the universities and the government. Obama doesn’t appreciate what outsourcing is doing because he doesn’t know the great American middle class by and large. He knows millionaires and billionaires from Silicon Valley (who benefit from outsourcing and H1B). He knows social activists and government dependents from hsi activist days. He knows politicians. None of these groups know the impact of outsourcing, even the pols.

    But outsourcing and economic discontent he;ped put the Democrats in office in 2006 and 2008; it can surely put them out of office if the problem is not recognized and measures taken…. Perhaps as soon as 2012, but my money is on 2014….

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  7. Don, Obama did say in the course of his campaign that he would “stop giving tax breaks to companies that ship jobs overseas, and… start giving them to companies that create good jobs right here in America.” Whether he will follow up on this promise remains to be seen. But at least it is a start and a refreshing change from the Republican politicians who have paved the way for much of the offshoring that has been impeding your career.

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  8. Campaign rhetoric, Ralph. At least to this point. How can he measure it? And what can he do to stop it? Not much.

    What can help is a revaluation of the dollar against world currencies such as the yuan and the rupee. That would better reflect the balances of world trade – and make labor in the US a better bargain.

    Until something like that happens I’ll continue to fight an unequal battle trying to be worth twice or three times as much as an Indian counterpart, an Indian whose salary makes him very wealthy in realtion to his society – while I grow poorer in relation to mine.

    It’s been like living through a series of economic hurricanes since 2001, and more hurricanes are rolling in…..

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  9. > Sound like any countries you know?
    Yes, smells like teen spirit welfare state, euro style à la crâpe flambée. Milton Friedman had an insight on how not to handle it: “You cannot simultaneously have free immigration and a welfare state.” We don’t have that, you say? See below–we’re doing our best.

    > Obama doesn’t […] know the great American middle class
    Don, Meinhard Miegel explains why you should return to Teutschland asap: “Die Mär vom Absturz der Mittelschicht” (The fairytale of the middle class’ crash). Those buggers are doing great over here, public whining and media frenzy notwithstanding.[1] Of course, there’s a catch. Read for yourself.

    …that’s why prof Hammel is enjoying himself over here very much, thank you.

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  10. Don, so far it does indeed seem like campaign rhetoric, as do some other promises Obama has made. Will he turn out to be a paper cutout of a president?

    We seem to be between a rock and a hard place–between miserly isolationism and unbalanced foreign trade, both of which erode the economy.

    Stopping, among others, the Chinese from pegging the dollar at sub-par would help. Revaluing our own dollar–I’m not sure how this could be done without disrupting other fine-tuned economic mechanisms. Currency manipulation is in violation of WTO.

    Obama´s scared of triggering a trade war at a time of financial crisis. He can’t rock the boat while engineers are below deck plugging leaks. That’s why we haven’t heard anything about amending the tax code to punish companies sending jobs overseas.

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  11. Andrew, I miss Czesław Miłosz in your reading list. I will be taking a look at the “Barbarian in the Garden,” though, and look forward to your further recommendations.

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  12. Marcus, what we have here is a failure to communicate. Caused by the difference between the meaning of ‘middle class’ in Europe and the same phrase in the US.

    In Europe it means what in the US would be called ‘upper middle’ or even moderately rich. Der Kleinbourgesie.

    In the US ‘middle class’ has come to mean a much larger range of people, including those who would be called working class in Germany. I myself am sort of on the border between the working classes and the middle classes. But do understand that for many in my situation successive waves of ‘downsizing’ and ‘rightsizing’ have converted us from proud professionals into something very like factory workers in an office. With the lower pay and status of factory workers.

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  13. “Stopping, among others, the Chinese from pegging the dollar at sub-par would help.”

    Yes. In violation of WTO itself, I might point out.

    “Revaluing our own dollar–I’m not sure how this could be done without disrupting other fine-tuned economic mechanisms. Currency manipulation is in violation of WTO.”

    Revalueing the dollar as a direct policy manipulated by the Federal Reserve & the Treasury would be in violation of WTO. But Obama is doing it in another fashion. The vast deficits being run will accomplish the same purpose, I think. The deficits will hurt the dollar, and relatively prosperous (or at least growing) China won’t be able to hold the line with the yuan.

    That is what all this Chinese complining is about, BTW. Nominally it’s about the fact that US deficit spending is going to hurt the value of their dollar holdings. The only thing they can do is sell those holding, and they cannot sell fast enough to avoid taking an enormous loss while selling.

    One could almost feel sympathy for them. But my sympathy is tempered by the knowledge that the Chinese did not buy those bonds with profit as their motive, but in order to manipulate their currency to maximize exports and jobs whilst beggaring workers in the West who cannot compete in a loaded labor market.

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  14. > Marcus, what we have here is a failure to communicate.
    > Caused by the difference between the meaning of ‘middle
    > class’ in Europe and the same phrase in the US.

    Don, I knew that, I just took the liberty of wilful misunderstanding to coax this blog’s gentil rederes to rede, um, read Mr Miegels thinly veiled rant, particularly its last paragraph, where he speaks of the unspeakable. Unspeakable, you know, because Ms Sontags general objections.

    btw, Donaldus: Marcus non sum, Marek me appelunt hostes amicisque 🙂

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