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[ale] Indian outsourcing

On Thu, Jan 29, 2004 at 11:36:31AM -0600, ChangingLINKS.com wrote:
> probably for the better, too. It's simple capitalism, folks. It's a perfect 
> example of the free market at work. Indian programmers are providing a 
> product, their labor, at a better price/performance efficiency than American 
> ones are.

And theren lies the key -- performance is largely irrlevant, because the 
(up-front) price is so much cheaper.  If it wasn't that much cheaper, 
nobody would bother. 

> than before, or that things will be worse in the future. While we may lose 
> jobs in the short-term, that's for the better. It's natural selection. Many 

Question.  What comes after Information?  When the farmers lost their 
jobs they went to work in manufacturing.  When the manufacturers lost 
their jobs they went to to work in "knowledge-based industries."  What's 
next, now that the information/knowledge jobs are leaving?

> There also seems to be a misconception that lost American jobs are gone 
> forever--this, as well, is untrue. As unemployed laborers become more 

"jobs" in general, no.  But that specific job is gone forever.

> numerous, their cost drops. As their cost drops, jobs that were once 
> unavailable because the cost outweighed the revenues suddenly open up. 
> Americans will be reabsorbed into the workforce, and will be placed in jobs 
> that are more effective uses of their labor. Given, pay will probably drop. 

"cost drops" == "Pay drops"   

That's it.

But by every other metric, costs are rising.   

My income has fallen about 3% a year for the past four years, simply
because inflation is going on, but my pay has not incresed.  And then we
have things like energy costs and medical insurance and other fun things
which have gone up much more than inflation, thereby further reducing my
"real income".

> That's not a problem, thanks to the equilibrium of the economy. Pay dropped, 
> but didn't we cover the fact that prices did, too? And if you'll notice, that 

And pray tell what ere you basing this information on?  There's been 
exactly one time in American history where prices fell, and that was the 
great depression where one third or more of the country was unemployed.

See above.

> implies the valuation of the dollar on the exchange market. When fewer 
> dollars are buying the same product, that means the dollar is becoming 
> stronger. In common terms, it's deflation. In reasonable amounts, this is a 
> Good Thing???.

What's cheaper now than it was a couple of years ago?  I mean basic 
stuff to live, like rent, medicine, utilities, food, energy.  

> to circumvent our monopoly on the product of labor. Once again, competition 
> is going to take effect. The net result is that we'll be forced to be harder
> workers, and probably accept lower wages. Sounds bad, right? Not when you 

It isn't a matter of "lower wages", it's "lower cost of living".  The 
princely sum of $11K/yr that an Indian programmer makes wouldn't even 
cover rent on a studio apartment in San Fransisco, for example.. and 
even in the cheapest areas of the US, you'd be struggling, to say 
nothing about actually supporting a family.

(to say nothing about paying off the student loans that onehad to take 
 out to pay for the education to work in that field..)

> The worst thing we can possibly do is attempt to combat this change. 
> Regressive protectionist policies may help in the short-term, but American 
> consumers' demands will force American companies to find a way around the 

Oh I completely agree; the "cures" would be far worse, both short and 
longer term.

> term, probably. On the other hand, the current waves we're feeling throughout 
> the IT job market are directly proportional to the disparity between the 
> wages and product quality that Americans and their Indian counterparts 

See my first paragraph.  It has nothing to do with "quality", but the 
"expenses" on the balance sheet.  If it was about "quality" the work 
would never be outsorced to begin with, because it would have been 
important enough to do in-house, and if the in-house developers were 
incompetent they'd have been fired and replaced long ago.

The reason why Indian firms can charge so much less less for the same
work is because they pay their employees less.  The reason why they can
pay their employees less is that the cost of living there is a fraction
of what is here.

I agree, this is inevitable until the global cost of living is more or 
less uniform.  Which is a long ways off.

But back to my original question -- what's next?  The traditional answer 
is "creativity" and "innovation".  To which I answer -- how are we going 
to do that?  And, more pressing, why would anyone else need us?

By outsourcing, we lose our ability to "innovate" in the long term.  

When was the last time the US was behind any innovation in
manufacturing, for example?  We outsourced our manufacturing to other
countries because it was cheaper, and then they learned how to make
things better and cheaper (even beyond wages), and eventually rendered
us unable to compete on a technological level.

By outsourcing something, you implicitly state that it's not important
enough to you to know what the details are.  You implicitly state that
it's not important that your people are the ones that learn from the
trenches.  You implicitly state that you don't care that there won't be
anyone coming up in the ranks that really knows the ins and outs of what
you rcompany really *does*.  You implicitly state that it's not
important that you're training a competitor who in the long run, won't
need you.

Our schools are cranking out tens of thousands of CS and engineering 
students who can't get a job without experience.  But to get the 
experience they need a job.  Traditionally this is what low-level jobs 
were for.  But now the low-level jobs are leaving.. what is the 
wet-behind-the-ears graduate to do?    Work for minimum wage, which is 
actually more than that $11k/year that's so princely in India?

He can't compete with the $11K/year Indian programmer, no matter how
good he is.. because he costs too much.  Quality is irrelevant.

When viewed from a global perspective, yes, we're all overall better 
off.  Except until people are as free to move as capital, there's going 
to be some fundamental imbalances.  

Personally, I'm not looking forward to another great depression, which 
is where we'd be heading if prices were indeed falling as well as wages.

 - Pizza
Solomon Peachy                                   pizza at f*cktheusers.org
                                                           ICQ #1318444
Quidquid latine dictum sit, altum viditur                 Melbourne, FL
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