Posted on 12/03/2003 11:17:18 AM PST by Pikamax
BusinessWeek Online U.S. Programmers at Overseas Salaries Wednesday December 3, 8:27 am ET By David E. Gumpert
It's the great unanswered business-economic question of our day: How do we replace the hundreds of thousands of information-technology, call-center, paralegal, and other jobs rapidly exiting the U.S. for India, Russia, and other low-wage countries? The main answer that the so-called experts put forth, without a lot of conviction, is that we'll create new "high-value" jobs to replace those leaving the U.S. What are those jobs? No one seems to know. ADVERTISEMENT
In the meantime, the matter of overseas subcontracting appears to have become open-and-shut. If you're an executive with half a brain, you can come to only one conclusion when tallying the differences in costs between hiring computer programmers in the U.S., vs. India or Russia. These days, the jobs are going to Indians and Russians.
OFFSHORE BARGAINS. But what if there was another way to skin this particular cat. That's what Jon Carson wondered a few months back, when confronted with the need to complete a major programming project in a hurry, and at the lowest possible cost. Jon is a serial entrepreneur whose latest venture, cMarket, helps nonprofit organizations increase their revenues by putting fund-raising auctions online. I have known Jon for years, and -- full disclosure -- have invested in several of his ventures. I only learned about his computer-programming dilemma after the fact, though.
cMarket had been pursued, as many business owners are these days, by an intermediary who promised he could cut cMarket's programming costs significantly by outsourcing his needs to India. So last spring, when cMarket signed an agreement with the national Parent Teachers Assn. [PTA] to handle online auctions for its 20,000-plus local chapters and, simultaneously, began taking on charity auctions from Boston to Miami, Jon knew he had to rapidly expand cMarket's capabilities. He had his IT director call the intermediary and tell him that cMarket needed four programmers, pronto. Jon knew the numbers for experienced American programmers doing the specialty work he required: $80,000 a year, with benefits adding an additional $5,000 to $10,000 per programmer. The intermediary came back with the number for the services from India: $40,000 per programmer.
It seemed like a cut-and-dried decision, the kind U.S. executives are making every day without hesitating, but for some reason Jon hesitated. Much as he likes the idea of having projects completed at the lowest possible cost, and as responsible as he feels to investors, he didn't like the feeling of becoming someone who callously pushes jobs to other countries. "I'm in the entrepreneurial economy," where competition around both costs and revenues is very intense, he says. "But I was personally very uncomfortable. This situation brought me face-to-face with how easy global disintermediation is being made for folks, to the point where it is almost inevitable."
TOUGH CALL. As he thought more about his decision, Jon realized he had a valid business reason to hesitate: As the head of a startup that had been going for less than a year, he wasn't at all certain he should take the risk of having essential work done at a far-off location by people he didn't know, and with whom he could communicate only via e-mail and phone. Still, there was that matter of nearly $200,000 in annual savings. Each time he hesitated about making his decision, various confidantes reminded him about the big money at stake.
And then Jon had a brainstorm. What if he offered Americans the jobs at the same rate he would be paying for Indian programmers? It seemed like a long shot. But it also seemed worth the gamble. So Jon placed some ads in The Boston Globe, offering full-time contract programming work for $45,000 annually. [He had decided that it was worth adding a $5,000 premium to what he'd pay the Indian workers in exchange for having the programmers on site.]
The result? "We got flooded" with resumes, about 90 in total, many from highly qualified programmers having trouble finding work in the down economy, Jon says. His decision: "For $5,000 it was no contest." Jon went American. And the outcome? "I think I got the best of both worlds. I got local people who came in for 10% more [than Indians]. And I found really good ones."
HERE AND NOW. In the interim, Jon has promoted two of the programmers to full-time employees, at standard American programming salaries, rather than risk losing them to the marketplace. And he is convinced that having people working onsite gives him control over quality and timing that he wouldn't have enjoyed if he had subcontracted overseas.
While cMarket has solved its immediate challenge, the implications of Jon's approach are potentially mind-bending. What if other companies begin taking the same approach -- offering Indian-style wages to American workers? On the positive site, we could begin to solve our job-creation problems. But on the negative side, America's standard of living would inevitably decline. There's only one way to find out for sure how it all might shake out, and that is for other executives to replicate Jon's experiment. The results could be quite interesting.
You make wrong assumption, some simple ideas are hard to find out, especially when you are under the stress. Safety pin is very simple, yet the inventor became a millionaire for a reason.
Example - calculate the following 123456 * 654321 in three seconds without using the calculator.
On LABOR? That is the only commodity being discussed...
More, a tariff is a tax on imported goods. Since, in effect, India is exporting their labor by either the worker moving to the USA or exporting the finished code over the internet to the "buyer," how would a tariff make any difference?
Yep. It's called competition.
I favor free market Capitalism within the USA that does not mean supporting some otehr nation duue to belief in internationalism and the lies that were put forth about the WTO. I have no problem with having Free Trade with nations provided they lower their tariff barriers against the USA.
Now anyone who argues for no American tariffs while other nations maintain high tariffs against American goods and subsidize exports to the USA is merely another anti-competive internationalist socialist. It is that simple.
There are several other reasons for tariffs specifically to retaliate against nations that raise tariffs on American goods and to protect industries essential for teh national defense. Clearly IT falls into the latter category as the defense applications of a healthy IT industry is behind China's massive government push into that area.
I actually find it ludicrous that many who argue against tariffs are arguing for government subsidized products being sold in the USA to maintain foreign socialist regimes.
Tariffs are an essentuial part of capitalism and have been from the establishment of our Constitution. Learn what Free Market Capitalism means. Learn history. There is at least one tariff that has been shown to be harmful to the American Economy. It is not Smoot Hawley. I am still waiting for one of those opposed to cite it so I have evidence of at least enough background in economics that we can reasonably discuss teh issue.
Read Adam Smith. Read David riccardo not just some ignorant columnist who parrots some praise of these economists. Their specific arguments include tariffs for paticular reasons.
Better to hire Americans at the lower wage then send it offshore for teh sake of sending it offshore. One of the big problems we have had in the past is companies not offering Americans the chance to compete. I actually have faith in the Free market overall to resolve these differences.
As to how a tarif would work simple an ad valorum tariff on tre purchase of computer software or services from India. It is not all that difficult.
If you take the time to study the effects of such protectionist policies, they are always a loser. They simply don't work. And the ultimate losers of such a tariff is the consumer.
Now anyone who argues for no American tariffs while other nations maintain high tariffs against American goods and subsidize exports to the USA is merely another anti-competive internationalist socialist. It is that simple.
Again, I disagree. Such countries can have perfectly rational, logical reasons for protectionist policies, especially when the government of said country wants to foster the implementation of new manufacturing or technological industries. However, once those industries are well-established, then the government will be forced to eliminate those protectionist policies, or the government will face dire financial consequences. Ultimately, the subsidization of internal industries for export will hurt the country doing the subsidizing. Therefore, those protections must ultimately come down, or that country will go bankrupt. I offer, as a shining example of this, Japan.
...Tariffs are an essentuial part of capitalism and have been from the establishment of our Constitution. Learn what Free Market Capitalism means. Learn history. ...Read Adam Smith.... etc., etc.
Well, since my degree happens to be in Economics, such reading was required. I would suggest, however, that you start taking some basic classes on Macroeconomic Theory. Study it in depth, crunch the numbers (90% of the economics problems include the phrase "take the derivative...").
While I too, read various commentaries on the economy, I do have the knowledge of the subject to think independantly of what that columnist thinks.
Your first comment sums up your lack of knowledge on the subject, very clearly.
The USA can compete and should compete but right now we as a nation must use tariffs to prevent unfair compoetition...
You can't be more wrong.
Again, I disagree. Such countries can have perfectly rational, logical reasons for protectionist policies, especially when the government of said country wants to foster the implementation of new manufacturing or technological industries. However, once those industries are well-established, then the government will be forced to eliminate those protectionist policies, or the government will face dire financial consequences. Ultimately, the subsidization of internal industries for export will hurt the country doing the subsidizing. Therefore, those protections must ultimately come down, or that country will go bankrupt. I offer, as a shining example of this, Japan.
We are not that far apart but subsidization for export is far different than fostering a domestic industry especially a domestic industry vital for national defense. I not Japan is far from bankrupt and the Yen has gained value vis a vis the dollar over the years.
As to your degree being in economics I would suggest studying quantitative analysis rather than merely theory. You seem to not have absorbed the essential parts of the primary theorists behind Free Trade theory.
You may have a degree or not I have no way of verifying but unless and until one learns to do research that degree is little more than a piece of paper which means you could sit in class and regurgitate what a professor fed you. I am totally familiar with your point of view as I held it myself until challenged to do the research to back up my position in a debate. I would submit that when one does one's homework one has a far different point of view. Could I have listed the woven goods tariffs of the 19th century or the steel tariff of the 19th Century as tariffs which on the whole beneficed the USA of course. I could even have listed one tariff which was harmful. If you mention it by the way it will at least give your views some credence as having been based on actual knowledge of the issues rather than mere bombast.
Now if you note I have not advocated a massive increaser in American tariffs against all nations. I am only seeking fair access for American goods in return for the access that those nations have to our markets and the tariffs necessary for our national defense.
You are the one who has a doctrinaire approach which is beyond reason. By the way the one study I found that showed a tariff being actually harmful to the USA was not on the web but was contained in a scholarly journal of economic history. A few hours with the abstracts and you should be able t come up with the reference. You also will run across a plethora of articles demonstrating a net benefit from specific tariffs.
Once more The USA can compete as we have the worlds most productive workforce. The primary problem with the current WTO rules is they do not constitute Free Trade per se merely free acess to American markets by other nations without the full access of American products to foreign markets without tariffs and non tariff barriers. I am the one who is actually arguing for real Free Trade. That includes full access by American products to foreign markets. you are the one arguing that tariffs are fine for other couyntries to foster their industries but not America because it hurts the American consumer. Well I have news for you consistency in argfument helps get your point accross I merely wish to use tariffs as a tool to crack open foreign markets and retaliate against barriers to American export and foreign subsidy. You seem to believe in government subsidy socialism and foreign ascendancy. This is by definition internationalist socism and is something the USA should fight by all available means.
Pretty much any tariff for which aggregate data of that particular market protection is implemented, can be mathematically proven to be an overall detriment. This is not theory- it is fact.
Note, I said "overall" detriment, not applying it to that specific industry for which the protection was applied. Since your superficial analysis of Japan precludes you from understanding my last example, and why you are again wrong, I will give you (yet again) another perfect example of the overall loss to the consumer, by "protectionist" policies:
Airbus cannot compete in an open market, with Boeing. They lose money hand over fist, yet they are still in the market, and not yet bankrupt...
Why?
Because they are subsized heavily by the E.U., since the E.U. does not want Boeing to be the only supplier of planes. Such a policy (like a protectionist tariff) protects that particular industry (in that one particular market), to the detriment of all consumers within that market. It hurts people living in the E.U., because Boeing is not allowed to compete with better planes at the same price, so Airbus raises their prices to be at the same (artificially high) level that Boeing is forced to sell at... (But maybe a few bucks cheaper, to cinch their bids.) Boeing loses the bid, Airbus sells at an artificially inflated price, and the people who fly are forced to pay higher fares to fly... The consumer in that market, loses. At the same time, it hurts competitors (Boeing and Lockheed-Martin), forcing them sacrifice profits and money that were hard-earned, and should come to the USA. Again, it's easily proven, mathematically. But only if you understand applied calculus, equilibrium pricing, marginal costs and revenues, and what an economic "dead-weight loss to society" really means...
Need I go on, or are you starting to get the picture?
IF we adopt such idiotic tactics as trade tariffs, it might hurt the off-shore competitors... But it hurts us more!!!
Of course, I have already given you two ideal contemporary examples, of the harm that tariffs cause. I could mathematically prove them to you, but it won't change your uninformed opinion. You have, after all, made up your mind- facts be damned.
I suggest you return to the University and start taking some classes on economics.
Until then, any further expanations to you, is akin to explaining subatomic physics, binding energy and the true implications of isotope half-lives, to an anti-nuclear-power demonstrater.
But then again, you're also an expert on nuclear power, too... Right? Even though you've never seen a control rod drive mechanism, main coolant pump, fuel cell or worn a TLD??? < /sarcasm >
Until further educated on this subject, you have insufficient knowledge to even enter a debate, much less prevail. And I'm starting to feel a little embarrassed for you.
When a thread takes a different turn, and goes beyond your understanding of the subject, it degrades your credibility, when you try to continue interjecting, when it is patently clear that the content of the conversation has surpassed your knowledge.
A wise man, instead of unsuccessfully attempting further debate, would either gracefully bow out of the thread, become more educated on the topic or ask questions, in an attempt to understand better the points being made.
That you try to continue to debate, makes you look silly. And unwise.
On the subjects that I know, I can (and often do) make comments. However, on subjects such as medicine, biogenetics and other things, I simply read and listen... Because there's very little I could conceivably contribute to such discussions, which are well outside my areas of expertise.
Food for thought.
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