I Work Cheap - Part 2
I Work Cheap - Part 2
Date: Saturday, June 08, 2002 11:51 AM
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ABOUT LEE GOMES
Lee Gomes, who writes the Boom Town column on Monday and the Boom Town
Exchange on Friday, has been covering various topics, technical and
otherwise, for The Wall Street Journal since 1996. He is a graduate of
the
University of Hawaii and the Columbia University Graduate School of
Journalism, and lives in San Francisco.
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Lee Gomes's Boom Town column appears in the print and online Wall Street
Journal every Monday. Readers' letters appear here Fridays.
Lee writes: To say the latest column touched a nerve would be an
understatement; in fact, it seems to have exposed a huge world of pain.
The piece was something of a meditation on my hiring a programmer in
India
over the Internet to do a little project for me, and what that portended
for
future labor markets -- especially for workers in various
computer-related
fields, the same ones who had rushed to embrace the Internet and who had
previously seen it as something of a friend. I wondered whether what
happened to many manufacturing workers during the 1980s would soon start
happening to computer programmers, people presumed to have the sorts of
"future-proof" jobs everyone had been told to get during the last 10 or
so
years.
In fact, this employment exodus seems to be already happening, and in
spades, as several of the following letters make clear.
At the same time, many readers took the column to be a critique of "free
trade" and the like. Most of these readers suggested that the phenomena
I
was seeing and describing was a solution and not a problem -- as well as
something that in the end was ultimately in everyone's best interests.
Several of their letters are below, as well.
I'll have a few concluding thoughts after all the letters. The last
word,
though, will go to my friend Mani, who helped start it all.
It's ironic that your article about cheap labor appears on the same day
I
was relieved from my duties, where this type of hiring practice has
taken a
stronghold. A job done well is no longer the criteria for staying
employed;
rather, the cost to the company decides whether you stay or go. And,
yes, a
company based in India will be performing this work remotely for a price
less than what the local mailroom worker charges. Of course, you cannot
fault a company for reducing its costs. What does this mean for the
American
worker? In my opinion, Americans will not be able to compete against a
country where a week's apartment rent is $25 (and for all we know, this
might be the rent for a luxury apartment). One observation from my
travels
around this country is the explosion of Indian nationals working in the
IT
world on H1B-visas. American companies, like Oracle, argue they cannot
find
qualified Americans with the same skills. In actuality, the argument is
only
partially stated, as these companies forget to add "for a cheap cost." I
envision myself standing someday on a virtual street corner with a sign
saying, "Will program/consult for food." Or better yet, moving to India
and
competing against the locals. By the way, did Mr. Kumar pay tax to the
U.S.
on his $25?
Brian Wallace
Mani Kumar negotiated a fair price based on his economic model, while
you no
doubt received a bargain. No one is harmed in this transaction and
ultimately the wage scale for Mani or more likely his successors will
improve. The bigger sin would be not to let Mani compete for the job.
Ignoring lower wages, commodity prices and competition for too long
inevitably leads to the sad story of "Roger & Me" mentioned in your
article.
Those companies employing the Mani Kumars of the world in all
probability
would be the best organization for an American to work at long term.
Dan MacDonald
As someone who strongly supports globalization as the path to better
lives
for people in developing nations, I must express my disagreement with
your
extremely narrow view. A few things to consider. The programmer in India
is
earning a week's rent by providing a service to you that is facilitated
by
the global economy. He is happy to do so. I expect he is better off than
his
father and has a chance to give his children a better future than he
has.
This is great news, although, as with many stories that result in
opportunities for individuals, it has hard work and sacrifice at its
core.
As the demand for his services grow with an expanding world economy, he
can
raise his prices and work less or continue to work the same amount and
make
more money. His only foe is those in our midst who would deny him this
opportunity in the name of some type of misguided paternalism or guilt.
Your example of the Mexican workers in San Francisco is also worth
thinking
through as opposed to your understandable emotional reaction. First and
foremost, Mexicans move to the U.S. in great numbers, legally and
illegally
because their government engaged in decades of protectionism designed to
milk the wealth of the nation for the benefit of a privileged few. The
way
it worked in Mexico was the favored families in industry and politics
got
business franchises -- in most cases protected from outside competition
and
were able to have high prices that in effect transferred the wealth of
working-class Mexicans to this royal class. That is all changing now
because
of -- you guessed it -- globalization supported by a democratized
political
system. I spent almost four years in Monterrey setting up a General
Electric
business that has flourished. For the last five years wage inflation has
greatly outstripped currency devaluation so the Mexican workers standard
of
living has improved by double digits for each of those years. Tangible
evidence of this is we have recently had to greatly expand parking lots
for
the great expansion of cars owned by our workers there. People who were
forced to take awful public transportation a few years ago are now able
to
buy cars and improve their quality of life.
I am forever disappointed in people who take a short snapshot of the
effects
of globalization, apply sensibilities that are developed from experience
living in the richest nation on earth without any countervailing real
experience living in a developing nation, and decide if this modern
phenomena is good or bad for people in places like Mexico, or Brazil, or
India. Opportunity and the chance to compete for an ever-increasing
economic
pie is what people in the Third World want and deserve to have.
Globalization and free economic systems supported by democratic
governments
deliver that opportunity. Ask your friend from India.
Stephen L. Smith
As a photographer who also does digital work (motion graphics /Web
sites/
animation/ etc.) I've been creamed by the Internet.
I moved to New York over 20 years ago, and for about 10 years after
that,
photographers could still make a good living. But the rise of "stock
photography" and the Internet have reduced the profits.
I've moved into things like motion graphics and animation. But there are
no
barriers of entry into those fields. It was expensive to get into
photography; a Hasselblad lens can cost $4,000. But getting into digital
work is easy and cheap, and anyone with an iMac and a pirated copy of
Flash
can work on Web sites. Now my clients are hiring animators in Russia and
New
Zealand. I regularly get spam from people who are selling web site
creation
for $299 by designers in Eastern Europe. Maybe next year, Web sites will
be
designed by 12-year-old Chinese girls for $10 a month.
Nothing can be done, and I don't think it's "unfair." But I'm obviously
not
happy with it.
David Vesey
I live in South Texas; my parents immigrated from the north of Mexico.
The
questions and issues your article raises hit us all in the heart and in
the
bank account. I think many people in the U.S. struggle over which of
those
is more painful. I don't know how a person can't feel compassion for the
men, women and children who sit on the side of Cesar Chavez Boulevard
(the
same street name in Austin has a similar group of workers-for-hire) or
the
side of the information superhighway saying, "I work cheap." I also know
that the last thing many of those people want from others is pity. They
believe strongly that they are working to improve themselves by learning
skills or working harder than the next guy with the skills they've got.
Most
aren't looking for anyone's compassion, they are looking for an
opportunity
to work and earn a living with as much dignity as they can muster.
I think that the laws of economics work well in most cases. Whether it's
Mani Kumar in Bangalore or a worker-for-hire on Cesar Chavez Boulevard,
the
best thing you can do is, if you have work that needs doing and they are
offering a quality service for the money, hire them and give them a
chance
to either work or learn that they need to do something else.
Gerardo Lopez
I am an unemployed techie. Now I am starting a humble business that does
not
have anything to do with computers. To augment my small income I will
join
my neighbor's tiny business. She cleans offices and offered to take me
in.
Do not laugh: she charges anywhere $40-$75/hour and has flexible hours.
She
has turned down some clients due to overbooking. There is another
benefit to
joining her: plenty of physical exercise on the job (IT offers none) and
no
pointy-haired bosses (IT has an excess of those).
Elmira Cancelada
You were clearly taught -- long ago and very carefully -- that the
prosperity and security of your life in a civil society should make you
feel
guilty. This is the same corruption that has eaten the brain cells of
those
on the custard-head Left, who claim that increased global trade causes
poverty. I remind you:
* Those who claim that free markets in labor represent a "race to the
bottom" have it exactly backwards. The alternative to the street corner
for
the laborer (usually an illegal immigrant) you mention is subsistence
farming where he came from. That's an 80-hour work week and death of old
age
at 40. That, and not the street corner here, is the "bottom" of the
global
economy. The opportunity to bid for casual work here, lousy as
conditions
are, is a possible, very small, step off the bottom. What we should
offer
such workers is legal recognition -- a work visa that gives them access
to
our courts and removes the threat of deportation.
* The programmer you mention has already taken several steps off the
economic bottom. If he could sell his skills in his local market for
more
than you are willing to pay, clearly he would. The communication
afforded by
the Internet is an enormous benefit to him because it gives him a far
wider
market in which to find customers. What is your problem? If it makes you
feel better, hire him for what he asks and then pay him more than that
when
he does your job well.
* Our prosperity derives, more than anything else, from the accumulated
intellectual and physical capital of 150 years of learning to produce
food
cheaply. When fewer people produce more food, more human time is freed
to do
programming and write newspaper articles. The progression is not always
direct, not everyone gets a piece of the goodies in every generation,
and
the changes in individual lives as technology and labor markets evolve
are
often wrenching; that is about the best you get in a human universe.
Steve Daniels
As a retired software engineer with about 40 years of experience, I
taught,
in 1997-98, programming (C and C++ languages) to a class of 12-13
students
for a period of three months. These courses were part of a nine-month
sequence of courses designed to prepare students who had earned
high-school
diplomas but had not gone to college for entry-level positions
programming
computer software. This full-time program cost the students over
$15,000;
they usually took out loans to finance it. Even though it was a
full-time
program, most of the students worked in addition at part-time jobs to
support themselves.
I was impressed with the outstanding ability of many of the students who
had
no college to grasp programming concepts and to write meaningful,
valuable
computer programs, given the proper instruction. So it was with no small
amazement that I found that even the very best ones (with only one
exception) were unable to obtain a single job offer after they had
completed
their nine months of study. I can certify on the basis of a successful
software career myself that many of them were without peer among
qualified
entry-level professionals. One of the very best of my students kept
looking
for a job for a full year before she finally found one.
You article indicates, quite correctly, that Mr. Ellison (and most
likely,
Mr. Gates and a great many other very rich men who head American
software
providers) have "grown" their companies by hiring people under such
conditions as you were able to hire Mr. Kumar, as a conscious strategy.
It
seems to me we may confidently assume that Mr. Ellison and others of his
ilk
have significantly lowered the average salary of programmers in their
companies relative to professionals doing similar work who cannot be
replaced by foreigners; and with equal confidence we may also assume
that
Mr. Ellison's own salary is in no way lower than those of other
executives
in American companies.
This kind of strategy was a significant factor in preventing the
outstanding
software professionals in my class from obtaining jobs for which they
were
outstandingly qualified.
You mention "the sight of a young father trying to put food on his table
by
promising to do a day of back-breaking work for even less money than the
young father right next to him"; I think I have a similarly
disheartening
thing to think about: The situation of a young father (or mother) who
will
be working as a salesperson in McDonald's or a shoe store for 5-10 years
to
pay off a $15,000 loan which went to waste (not to mention the nine
months
of a young life which also went to waste) because the U.S. is no longer
a
land of opportunity.
John D. Robinson
Most of the world's population does indeed suffer under circumstances
less
desirable than those enjoyed by most Americans. The opportunity for
Third-World persons to offer goods and services to Americans, however,
is
not the cause of this discrepancy, it is what will eliminate it.
With regard to pointers on how to handle the "Darwinian" labor economics
of
the Internet, this is what you should do. Seek out opportunities to do
as
much business as possible over the Internet, and aggressively seek out
the
lowest price. That will most often result in your taking your business
to
the individuals in the least well off condition. You will not only be
permanently raising the standard of living of the world's poorer people,
you
will be raising the standard of living in your own nation as well.
In your column you have reinforced a common myth of trade -- that
trading
with less-well-off persons harms them and us. This myth deters people
from
embracing international trade, and perpetuates the horrific conditions
under
which millions of people live world-wide. No one need feel guilty about
getting a good deal by trading with persons less well off. Remember, for
you
it is merely a matter of saving a few dollars. For persons in truly
desperate conditions, the opportunity to trade with you can be a matter
of
life and death. No one need feel ashamed of eliminating world poverty
and
increasing the well-being of Americans, even if you save a few dollars
in
the process. And if you do still feel guilty, there is nothing wrong
with
giving the low bidder a tip when you buy from them.
Alan Lockard
Your "Darwinian" metaphor is inappropriate, which is part of your
conceptual
problem. A market economy is not about the "survival of the fittest";
it's
simply an expression of freedom -- the freedom to buy and sell on the
basis
of perceived mutual gain. Freedom, property rights, and the rule of law
will
lead to societal wealth creation. A rising tide lifts all boats, and
everyone survives, as in the U.S. There is no Darwinian aspect to this
process, though some people succeed more than others.
You seem bothered by the willingness of some individuals to work for
what
you perceive to be unreasonably low wages. If the result of such
low-wage
employment (primarily in developing countries) is that some American
jobs
are lost, then that's simply a market signal that the Americans who can
no
longer compete for those jobs should move their efforts into something
more
highly valued by the economy at large. Admittedly, if you happen to be
one
of those people, that's not very good news, but in the broader scheme of
things, that's how wealth is constantly created -- by moving resources
from
lower-valued activities to higher-valued activities. Without this market
discipline, innovation would be stifled, as people threatened by
technology
or lower-wage workers would insist that consumers squander resources on
activities that have dropped in value.
By the way, your comment that "labor unions are all about the idea that
workers don't stand a chance if they are battling other workers" misses
the
true purpose of a union: to create a cartel of labor for the purpose of
forcing above-market compensation for the relatively few members of that
union. It's a good deal for members of the cartel, but bad for everyone
else. There's nothing progressive about the concept.
John Charles
Here's the other shoe dropping. Used to be that when we set up
manufacturing
"off-shore" we didn't move cutting-edge process and technology or R&D.
But now companies in many of our high-tech industries (telcom for
example)
are shutting down state-of-the-art process centers in the U.S. and
moving
them to China. We are also doing cutting-edge R&D globally. These are
management decisions made for a variety of reasons, not just the "race
to
the bottom" revolving around cheap labor.
This current process is more than just job creation, and taking the
lowest
bid. This process is really industry building in a form it hasn't been
done
before, at least in the high-tech world.
The result? Among others, some of the newest startups with "spin-off"
technology show up in these regions as the engineers and managers take
what
they know and begin to build new ventures. Now "we" no longer control
the
decision-making processes for that next generation of investment.
So the question for Mr. Ellison (and the rest of us) is, "What are the
drivers for you, when you invest big capital bucks and move cutting-edge
technology to other regions of the world? And do you think (or even
care)
about the consequences five years down the road?"
The underlying assumption in Mr. Ellison's current position is that he
is in
control of the process, and thus can afford to be a good global citizen.
The
fact is that the process itself will change the locus of control and his
successors may very well find themselves on the other end of the
decision
process.
And now for extra credit my real question, "What will the U.S. economy
look
like in 10 years, given the way things are going?" I've tried to
research
this, but can't find anyone working on the issue, so ... please stand up
and
identify yourselves.
Robert Gelber
You've certainly identified the focus of extreme anxiety on the part of
every U.S. IT worker. It's no coincidence that hundreds of thousands of
IT
workers have lost their jobs over the past few years, far beyond any
contraction due to Y2K build-down (the reductions due to the dismantling
of
extensive Y2K efforts) or the implosion of the dot-com bubble.
I can assure you that American businesses are dumping their domestic
workers
as fast as possible (but not so fast as to seem greedy -- it looks like
about 10%-20% year after year) in their rush to lower expenses. Of
course
there is no similar rush to trade our high-priced domestic top
management
for a lower-priced foreign brand.
A similar thing occurred a few decades back, when America's blue-collar
workers found their jobs moving south of the border in droves. One
difference between then and now is that many (but not all) of the blue-
collar workers had unions to prevent entire industries from moving
outside
the U.S. . No such similarity exists in the case of IT workers. About
the
only guarantee that any IT jobs will exist in this country will be the
positions that require U.S. citizenship (the FBI is not likely to
recruit
foreign nationals to rebuild its IT infrastructure), and they represent
only
a tiny fraction of all the IT work performed for U.S. entities.
Is this a good thing for U.S. businesses? In the absence of regulatory
strictures (ugly as they are), yes. The competitive advantages cannot be
denied, and the financial incentives are enormous. I question how strong
a
domestic IT capability we will have in a very few years, in exchange for
a
significantly higher level of corporate profitability and commensurate
loss
of control.
A similar threat is ongoing in the hardware end of things -- EE and
computer
engineering is moving quite rapidly to the Far East, with domestic
computer
manufacturers merely bolting together components designed and built
offshore.
There are certainly extenuating factors beyond the discrepancy in wage
rates, such as the failing American educational system. Nonetheless, the
major driving force in this is profit, and not superior capabilities
elsewhere.
With all of these displaced workers -- blue collar, IT, engineering
talent -- they eventually find replacement jobs, but always at
significantly
lower pay levels. Since we rely on our work force to provide the funding
for
our many social programs, it becomes increasingly difficult to see how
we
will be able to prevent the collapse of Social Security (if anyone
really
believes that they will get anything out of that particular pipeline),
or
even sustain our economy. If that part of the American workforce
responsible
for producing products moves outside the U.S., can we survive as a
nation of
people in customer support?
David Lentz
When I started Rent A Coder (only nine months ago), I had no idea that
it
would become a global marketplace. I had envisioned it as a way for
programmers like myself to be able to pick up jobs and get rid of their
day
jobs. However, within a week of turning the site 'on', I quickly saw
that I
simply couldn't compete economically with the Indian and Romanian
coders.
What to do? There was quite a backlash at the time as well. I received
lots
of angry e-mails from U.S. coders sold on the same idea I originally had
...
that they could get rid of their day jobs. People told me I should ban
non-U.S. coders, put surcharges on coders from certain countries, etc.
This
would result in higher profits for Rent A Coder, they argued, because
bid
prices would rise 10-12 times, to U.S. rates.
It took another week for me to decide not to go the "protectionist"
route
and go with the flow of the "invisible hand" you mentioned ... which
drew a
lot of criticism. So it was, in a way, gratifying to read your article
and
think that I had been able to correctly tap into a global trend (even if
that trend has both negative and positive aspects as you pointed out) .
Ian Ippolito
Creator of RentACoder.com
Lee writes: After the column ran, I was chatting (using IM, over the
Internet, naturally) with Mani. I told him, somewhat apologetically,
that
the piece had very definitely been written from an American point of
view. I
was, after all, worried about what effect the Internet, globalization
and
the like would have on the standard of living of me and my friends. From
our
point of view, it all seems like a threat. From Mani's, though, it sure
looks like an opportunity.
At least for the time being, that is. Banagalore, where Mani lives, is
one
of the most prosperous cities in India. I can't help but wonder how long
it
will take for programmers in other parts of India, or in China, to begin
underbidding Mani and his friends, all of whom are already somewhat
yuppified.
Great for them, of course. In fact, a number of readers thought I
somehow
had something against Mani doing what he was doing. Hardly; who can
oppose a
rising global standard of living?
I think the issue, though, is the extent to which there is Full
Disclosure
about who is winning and who is losing from all this. This doesn't
involve
Mani; it involves American companies. It is very clear from the letters
that
many Americans don't think the burdens of this new round of
globalization
are being shared equally. Manufacturing workers from the 1980s were
often
heard to say that when plants were closed, the bosses always made out OK
while working people always paid the price. Now, it's the turn of
white-collar workers to make the same observation. One wonders what the
social and political fallout of all this might be; one of the nice
things
about free capitalist economies is that people can band together to work
on
behalf of their best interests.
One other point, about the workers on Cesar Chavez Street. I don't doubt
that they are probably better off here than they were in Mexico,
something
many readers pointed out. That doesn't mean, though, that one can't also
wish for an even better situation for them, one that treated them with
more
dignity and allowed them a fair, livable wage for all their hard work.
Finally, I wanted to give Mani the last word in all this. I told him to
think about anything he'd like to say to Journal readers, and to send it
to
me in an e-mail. This is what he sent:
Hi,
I spent some time thinking what to say ... I do not know what to say ...
What I understood from my interactions with people from the U.S. is:
* Respect for others
* Expect perfectness and promptness
* Never hesitate to appreciate good work
What I learned in my life: Patience and perseverance are the path to
success.
Thoughts? Write to Lee Gomes at lee.gomes@wsj.com
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