It's gotten so prevalent that even the outsourcing is being outsourced.
A firm in India is performing offshore outsourcing services for at least one American pharmaceutical company.
Offshore outsourcing is, of course, the practice of hiring a foreign organization to perform some of the business functions of a domestic company.
There are many reasons why it takes place, but the prime motivation is lower labor costs. Another advantage for companies is the opportunity to avoid America's labor laws including those concerning overtime work, safety and health considerations, compensation for work related injuries and layoffs. In many instances environmental regulations that would apply in the United States are also avoided overseas.
And an added consideration that is gradually drawing our pharmaceutical industry to foreign shores is the desire to avoid the laborious process of obtaining drug approvals from Washington.
At this time, India is the prime beneficiary of the outsourcing phenomenon, being more than capable of providing the basic prerequisite of an inexpensive labor pool involving intelligent, skilled workers, although wage levels are rising. The population's knowledge of the English language also gives it a big edge, at least for the time being.
A recent report in the LA Times revealed that China is also marching into the process, and this could provide an added impetus to the trend. Retired New York Times Beijing bureau chief Nicholas Kristof, writing in his memoirs, reminded us of Napoleon's prophetic words: "When China wakes, it will shake the world."
Furthermore, no one can refute the fact that China is also well positioned to provide a highly intelligent and skilled labor force.
The outsourcing process usually starts with jobs in the field of information technology (data entry, computer programming and customer support). The criteria in such instances call for the work to be easy to set up and to be repeatable.
The potential, however, extends far beyond this narrow area. Pfizer has announced, for example, that it intends to transfer its extensive, highly-skilled research operations to India. .
The savings in labor costs can be significant. According to a Development Bank Research Bulletin dated 5/6/08, the minimum wage in China's highly industrialized Guangdong province is equivalent to about 50 cents an hour in U.S. Dollars. It's reported that a monthly income in China can be roughly equal to a one-hour wage for many workers in the United States.
And India is an even better deal for American companies. A report by Deloitte and Touche cites IMF data indicating that the typical monthly wage for manufacturing workers in China is 4.7 times greater than that of India.
And now it's reported that Africa wants a piece of the action. Egypt, Ghana, Nigeria, Senegal and South Africa are all reported to be more and more aggressive in their efforts to compete with India, and their labor costs are currently among the world's lowest.
All of this, of course, is bad news for American workers who are currently struggling with a recession which is threatening to become a generational event.
Economists will generally extol the benefits of globalization with its accompanying off-shoring of jobs, but they only seem to vaguely describe the inflation risks of the alternative, which is realistically called protectionism. However, with a nod to the independence of some of our own financial experts here on Gather, it should nevertheless be noted that most economists are either on corporate or government payrolls or are funded by grants from one or the other. It may be well to bear in mind that their opinions, which in times of crisis seem to flood our collective consciousness, may well be colored by conflicts of interest.
Despite this impediment to unbiased communications, however, some dire predictions have managed to seep through the media filter.
The McKinsey Global Institute estimates that the volume of offshore outsourcing will increase by 30 to 40 percent a year for the next five years. Forrester Research estimates that 3.3 million white-collar jobs will move overseas by 2015. The Gartner research firm has estimated that by the end of this year, one out of every 10 information technology jobs will be outsourced overseas. And, Deloitte Research predicts the outsourcing of 2 million financial-sector jobs by 2009.
Given the momentum that has been added to the mix by the effects of the current recession, these projections are likely to be severely underestimated.
Disturbingly, none of the presidential candidates have expressed any more concern for this problem than they felt was absolutely necessary. It doesn't appear that the subject is on either party's priority list despite the agitation of the labor unions.
However, if left unchecked, as big business would prefer, the long term consequences could be considerable. The general consensus seems to be that as big business goes, so goes America. But, consider this. Consider that this nation may be just a container that currently happens to be holding the headquarters and many of the operations, albeit dwindling as they are, of the multi-national corporations that call America home.
And consider that, as other regions such as Asia, account for an ever increasing share of both the market base and the employee base for these companies, the executive populations may gradually change to reflect the nationalities involved in these trends.
From there it's but a hop, skip and a short jump to get to the point where these global giants could well move their executive offices closer to their employees and their customers.
After all, Halliburton has already done just that. If you want to meet with that company's CEO, you'll now have to travel to the Persian Gulf.
It's time this issue ended up on someone's priority list. If left unchecked, unrestrained globalization could become a major factor in an international shift of economic power that could leave the United States as a second rate world nation. |
Added: Thu May 22, 2008 6:13 am GMT 