Out to Sea
Out to Sea
Date: Tuesday, April 15, 2003 10:50 AM
H-1B and JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
This three part series on outsourcing ended on a sour note. The
journalist, Maria Garriga, comes across as shill for the Indian high
tech lobby group NASSCOM. The last part of this series almost reads
like a promo page for NASSCOM, complete with the usual statements that
extol Indian workers as high-quality intellects. All throughout the
series the educational superiority of Indians is mentioned as a reason
for the outsourcing, but fortunately it is somewhat counterbalanced by
explaining that low wages was a major reason the jobs are leaving.
One of the most disturbing things about this series is that nothing was
said about how H-1B and L-1 visas are used to import foreign workers
into the United States so that they can learn our technology. Without
that critical link outsourcing would be very difficult.
There are enough facts and testimonials from unemployed Americans and
industry spokespeople to make this article a worthwhile read. The most
profound statement of the entire article describes how the globalists
want to average the income of the world's workers to create a new low
wage middle class:
For globalists, white-collar outsourcing represents
an opportunity to wipe out global poverty and usher
in a global middle class.
The WTO and the free traders want a "global middle class" of workers
who bid against each other for work in a worldwide labor pool. It's
very unlikely that the plutocrats of the "New World Order" will allow
these people to prosper as well as the vanishing American middle class.
There is a good online discussion board that can be accessed by
clicking the "discuss the issue" link or by going to:
http://65.18.181.62/discus/messages/417/658.html
http://www.nhregister.com/site/news.cfm?newsid=7697176&BRD=1281&PAG=461&dept_id=7573&rfi=8
U.S. firms sending work to low-wage nations
Maria Garriga, Register Staff April 13, 2003
Vern Williams/Register
Editors note: This is the first of a three-part series on offshore
outsourcing of white-collar jobs. You can discuss the issue in Town
Talk.
Everything that can go digital, wireless or Internet is going overseas:
computer software development, financial analysis, copy editing,
architecture, engineering, human resources, even payroll and other
back-office functions.
The computer guru who solves your software problem may work out of a
call center in India. Your insurance calls could be answered by a
claims handler with an Irish brogue.
India, China and other low-wage countries are drawing information
technology and services jobs out of the state and the nation, and the
consequences could be even more devastating than the exodus in
manufacturing jobs of the 1960s and 1970s, experts say.
"You would not believe the number of people here who have lost their
jobs because they sent the work overseas," said a General Electric Co.
employee who asked to remain anonymous.
American companies hire foreign firms to perform these jobs because
workers overseas earn far less than their U.S. counterparts, and
education and skill levels overseas have improved dramatically in
recent years. The jobs range from computer help desk call takers to
computer scientists.
So after making a wrenching transition from a manufacturing base to a
high-tech economy, Connecticut and the rest of the nation face the
prospect of going through the same type of upheaval all over again.
"First they took blue-collar jobs to China, Mexico and elsewhere. Now
theyre taking middle-class jobs to other countries," U.S. Rep.
Bernard Sanders of Vermont told the Register.
Sanders sits on the House subcommittee on domestic and international
monetary policy and trade. He has long opposed the Export-Import
Banks practice of making loans to corporations to help them expand
outside the United States.
Job losses mount: In 2001, Connecticut lost more than 30,000 jobs to
globalization, including 5,000 service jobs and 2,000 jobs in the
finance, insurance and real estate sectors, according to the Economic
Policy Institute in Washington, D.C.
While its not clear how many of those losses were the result of
offshore outsourcing, economists say the practice will accelerate job
losses in coming years.
Nationally, more than 3.3 million jobs and $136 billion in wages will
be lost to offshore outsourcing in the next 15 years, according to the
Forrester Group, a consulting firm in Cambridge, Mass.
That number will eclipse the 3.2 million jobs lost to global trade
since 1992, based on estimates by Robert Scott, an international
economist at the Economic Policy Institute in Washington, D.C.
"You have to ask yourself, Where is our job base for the future?" said
Charles Johnson, chief executive officer of Trans-pro, a New
Haven-based manufacturer that makes heat-transfer parts for cars and
trucks.
Johnson has traveled extensively in connection with his business, and
he said the outsourcing trend has been made possible by tremendous
educational advances in Third World countries. He said many of his
suppliers are turning to outsourcing.
"Education levels have improved dramatically in the so-called
developing countries," Johnson said. "Our work force will have to be
more creative to remain competitive."
IT jobs drying up: The economic recession that is driving companies to
send work offshore also makes it harder for laid-off workers to find
jobs in the United States, especially in the information-technology
arena.
And that could have a long-term impact on Connecticuts economy.
"If you are taking a software engineer out of a job because you are
replacing him with someone out of the area, you are taking him out of
the work force. He goes on unemployment, he cant pay taxes, he
cant spend money.
It affects the entire economy," said Mike Haburay, owner of Madison
Technology Resource, an employment agency in Madison.
But U.S. corporations say they cant afford to stand by while
competitors take advantage of the availability of low-wage workers
overseas.
Michael Critelli, chief executive officer of Pitney Bowes in Stamford,
said he may end up with little choice in the matter.
"We do not have a specific plan to move Fairfield County jobs offshore,
but we have to look at all our options," Critelli said.
Pitney Bowes so far has limited work done by international workers to
parts that will be used by Pitney Bowes for goods sold within those
countries.
One New Haven-based employment firm sees the trend happening one
employee at a time.
Donald Kaiser, chief executive officer of Kaiser-Whitney, said he was
asked to find an Ecuadoran manager for a Quito, Ecuador, site instead
of an American.
"We can get several people here, but we have to pay them $80,000 a
year," he said. Hiring someone from Ecuador means finding a manager now
earning $20,000 and paying them $35,000, he said.
Wage pressure hits home: To stay competitive, U.S. employees will have
to accept lower pay, especially in the information-technology fields,
economists say.
Globalization already has forced American wages down an average of 15
percent to 20 percent in some sectors, according to economist Jared
Bernstein at the Economic Policy Institute.
Bruce Morgan, managing partner of Cententia, an employment agency in
Glastonbury, said he routinely sends IT workers out to jobs where they
earn half of what they did four years ago.
He said they rarely turn down the work because of low pay.
"Employers know there is a surplus of IT talent out there, and
theyre pushing back what they will pay," Morgan said. "Its a
combination of a bad economy, better technology and offshore
outsourcing."
As corporations seeking better bottom lines outsource white-collar
jobs, there is no guarantee that Americans who lose their jobs will
find better or equivalent jobs here, said Transpros Johnson.
"You may see lots of people with high education levels doing jobs they
never thought they would do," Johnson said.
The other side: For globalists, white-collar outsourcing represents an
opportunity to wipe out global poverty and usher in a global middle
class.
"Im convinced thats the only way the world can work everyone has
to be in the game," said Awo Quaison-Sackey, founder of AQ Solutions, a
New Haven-based outsourcing company with 30 software developers in
Accra, Ghana.
Global outsourcing is playing a strong role in boosting the gross
domestic product of developing countries such as India and China.
"Job by job, its bad for Connecticut," concedes David DeRosa, an
international economist at Yale University.
"But there is a perpetual problem what do you do about countries that
are laggards in growth and drowning in poverty?"
Other supporters say the United States will ultimately benefit, as
well.
"As countries like Ghana and India get more of these jobs, they are
able to buy more from the United States because it creates jobs in
other industries," said Dan Griswold, associate director of the Center
for Trade Policies at the Cato Institute, a Washington, D.C., think
thank. "Our economy is not shrinking, but it is changing."
With its huge English-speaking and technologically adept work force,
India dominates offshore outsourcing, with up to an 85 percent share of
the worldwide market.
Tens of thousands of people work for outsourcing companies in India
such as Wipro, Satyam, EXL and Infosys, which win contracts to perform
IT work for U.S. companies.
Software and business process outsourcing alone will add $54 billion to
Indias economy each year by 2008, one Indian software association
estimates.
In turn, Fairfield-based General Electric dominates the Indian
offshore-outsourcing market.
Indian newspapers have referred to GE as "the grandfather," because the
$126 billion company was an early participant in the Indian outsourcing
industry.
GE boasts a work force of 310,000 people in 100 countries, including
7,608 in Connecticut.
Thats up from 6,513 in 1998, said GE spokesman Peter Stack.
Stack declined to say how many people work for GE in an outsourcing
capacity overseas.
However, David Jensen, a spokesman for GE Capital International
Services, said at least 13,000 Indians work in India directly for GE
Capital International Services.
Thousands more work on contracts handed out by GE to two or three
vendors in India, he said.
On the bandwagon: The biggest Fortune 500 companies have followed
GEs tracks to India.
General Motors and Ford Motor Co. both set up their global accounting
headquarters in India.
In November, Bill Gates went to India and announced plans to pour $400
million into India through research and development centers, jobs and
partnerships with Indian schools.
In Connecticut, Pratt & Whitney in Stratford sent 200 engineering jobs
abroad in 2002.
Aetna hired 350 claims representatives in India and 400 in Ireland.
Cigna replaced its consultants in Bloomfield with 83 in India.
Northeast Utilities is exploring outsourcing possibilities in Ireland
and China as well as India, company officials said.
With the exception of state Sen.
Shirley K. Turner of New Jersey, who won a vote to ban offshore
outsourcing in the state Senate, few politicians have directly attacked
the practice. (The New Jersey House has yet to vote on the ban.)
Thats partly because American and Indian corporations have
aggressively lobbied legislators to protect offshore outsourcing,
Turner charges.
U.S. workers who have been hurt by the trend wonder where it will lead.
"One by one, we are outsourcing all our work to Third World countries,"
said Jeri Bauman of Meriden, whose husband was laid off because of
offshore outsourcing. "Those jobs are not being replaced."
Maria Garriga can be reached at mgarriga@nhregister.com or 789-5685.
Coming Monday: The human toll.
http://www.newhavenregister.com/site/news.cfm?newsid=7697177&BRD=1281&PAG=461&dept_id=7573&rfi=6
New Haven software companys workers live in Ghana
Maria Garriga, Register Staff April 13, 2003
A leather rug woven from many pieces hangs on the wall of a
software-development company in New Haven.
Its one of the few signs that the companys executives come from
Ghana.
Welcome to AQ Solutions, a 4-year-old marriage of African ingenuity and
American capital.
Most of the companys employees work out of Accra, the capital of
Ghana, developing computer software for companies in the United States.
More and more U.S. companies are outsourcing information-technology
work to Third World countries with highly educated workforces and low
wage rates.
"Companies cant always hire $100-an-hour workers. This is part of
the solution," said company founder and President Awo Quaison-Sackey.
Quaison-Sackey, the daughter of Ghanas ambassador to the United
Nations in the 1960s, attended elementary school in New Rochelle, N.Y.
She returned to the United States in 1975 as a graduate student and
became a U.S. citizen in 1991.
AQ Solutions employs half a dozen people in Connecticut who market the
companys out-sourcing services to potential U.S. clients. The
companys customers include General Electric and Northeast Utilities.
"We picked it up to increase our investment in minority (owned) firms
and to get a better understanding of offshore software development,"
said Joseph Aivano, director of application development at Northeast
Utilities in Berlin, Conn. "AQ Solutions was more of a pilot test. The
test was successful."
Aivano said NU is now considering outsourcing jobs to India, China and
Ireland, as well.
Quaison-Sackey said the average wage in Ghana is $1.25 an hour, or $200
a month, for information technology workers.
"We pay them almost double the prevailing wage," she said, an average
$2.50 a hour, or $400 a month.
Thats a princely sum in Ghana, where the minimum wage is 76 cents a
day.
"To put that in perspective, the price of a gallon of gasoline is
$2.33," she said.
Quaison-Sackey started AQ Solutions because she wanted to help bring
jobs to her native Ghana.
"In Ghana, people are poor," said Quaison-Sackey.
Since the companys mission fits with the goals of the Ghanaian
government, the government has agreed to loosen certain restrictions on
foreign investment and technologies to allow companies such as AQ
Solutions to operate. The government also kicked in some tax breaks.
"Information technology is the fastest-growing industry (in Ghana),"
said Edward Ansa, a team leader at AQ Solutions.
"The government is trying to move the focus from traditional exports
like cocoa, coffee and gold."
For AQ Solutions 30 programmers in Ghana, the jobs are a dream come
true, Quaison-Sackey said. She said she hopes to build a workforce 500
strong in Ghana by 2005.
"If India can do it, so can we," she said.
India has a decade-long track record in information-technology
outsourcing.
Quaison-Sackey said she also plans to pitch her company as a
subcontractor to larger Indian companies handling software development
for American companies.
Quaison-Sackey said some of the challenges of overseas outsourcing
include long distances, major time differences and a lack of personal
contact.
She said she flies her Ghanaian managers to the United States to meet
clients and lets clients phone the programmers in Ghana directly.
"There are no barriers," she beamed.
Maria Garriga can be reached at mgarriga@nhregister.com or 789-5685.
New middle class being created in Third World
Maria Garriga, Register Staff April 15, 2003
Does outsourcing help the economy?
Editors note: This is the last of a three-part series on offshore
outsourcing of white-collar jobs.
Offshore outsourcing may represent a threat to white-collar
professionals in the United States, but in many Third World countries
it promises to create a new middle class.
Now that countries such as India, Mauritius and Malaysia have more
educated work forces to go with rock-bottom wages, knowledge jobs are
no longer the exclusive province of more developed countries such as
the United States, Japan and Australia. "Offshore firms, particularly
firms in India, have a very long track record of providing high-quality
service at a significantly lower cost," said Anthony Branco, a
spokesman for Cigna, which is expanding its offshore operations.
Sunday's stories:
Countries such as Brazil, Jamaica and Sri Lanka also will develop into
offshore powerhouses in information-technology services, said Ravi
Aron, professor of operations and information management at the Wharton
School of the University of Pennsylvania. India has 80 percent of the
market for offshore outsourcing of software and technology services
from the United States. In India, the information-services industry
employs 650,000 people, up 24.4 percent from 522,250 in March 2002,
according to the Indian software trade association NASSCOM. Of that
amount, 205,000 work in software exports while just 25,000 work in the
domestic software market. The rest work in call centers, data entry,
claims processing, customer service, engineering and other fields.
According to a joint study by McKinsey & Co., a New York consulting
firm, and NASSCOM, 1.1 million people in India will work for companies
based in the United States by 2009, and U.S. dollars coming in by way
of this outsourcing will add up to more than $18.6 billion. An economic
boon: Praful Mehta, a student at the Yale School of Management, said
offshore outsourcing is helping to transform his native India. Unlike
manufacturing, which could only offer low-wage jobs and long hours in
factories, white-collar workers get a foot on an economic ladder, he
said. "The information-technology revolution in India started before
globalization," he said. "People realized that services, manpower,
intellect can be a global power. Its the competitive advantage India
has in terms of low-cost and high-quality intellect." Mehta said he
considered starting his own outsourcing business before deciding to
attend Yale. He hails from a region an hour north of Bangalore, a city
quickly emerging as a global powerhouse in information technology. Last
month, General Motors announced plans to invest $60 million and hire
260 engineers over the next three years to design the cars of the
future in Bangalore. "Its still a developing country, but you have
pockets of excellence in India and you have high quality of life,"
Mehta said. He points out that the research and development parks rely
on their own generators; the state-run power companies that provide
electricity to the cities often subject the residents to inadvertent
rolling blackouts. That happens daily, according to Argun Lal, another
Indian student at the Yale School of Management. But the growth of the
knowledge-export industry, barely 10 years old, means Indians today may
have a better life tomorrow. "The Indian middle class is growing
because a lot of multinational companies have started operations (in
India)," said Lal, a native of New Delhi. The $10,000-a-year managers
in India have nice cars, nice homes and can send their children to
private schools, he said. "You see a lot more people out spending money
on wining and dining, movies and videogame parlors," Lal said. If
people have money to eat out in restaurants, then more people will open
restaurants, which means more jobs, he added. Offshore outsourcing will
make up 7 percent of Indias gross national product by 2008, up from
3 percent today, according to NASSCOM. The downside is that when
American companies lay off workers, foreign employees are often the
first casualties, because American companies tend to hire and fire
there first. Education, investment: For decades, governments in
developing countries have been overhauling their educational systems.
Many of their students opt to study in the United States, often for
advanced degrees. Fred Carstensen, a professor of economics at the
University of Connecticut in Storrs, said many foreign students today
show an impressive depth of technical knowledge. Sangeeta Gupta, vice
president of NASSCOM, said India has been graduating nearly 120,000
information-technology professionals annually in recent years.
Microsoft Corp. Chairman Bill Gates visited New Delhi in November and
pledged to pour $400 million into education, partnerships and the
Microsoft Development Center. Microsoft plans to set up 10 Microsoft IT
Academy Centers and to create partnerships with 2,000 school labs. "The
emergence of Indias IT industry as a global player is testament to
the countrys commitment to technology development and innovation,"
Gates said. "Today India is of strategic importance to our business and
will continue to be so as its developer and skill base continues to
grow."
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