Taking a break from the fully subsidized stock market and returning to the fully subsidized - with money we don't have - economy....
It appears after a few decades of moving first blue collar work outside the country, and now increasingly white collar work [Aug 15, 2008: Cost Cutting in New York's Financial firms, but a Boom in India] we are now at the point where the long awaited payback for such sacrifices by the middle and working class has arrived?
1300 jobs are returning to America via Indian outsourcing firms? And all it will cost the American taxpayer is $19 million in tax credits so Ohio can create said 1300 jobs? Aha! Finally, the seeds of success from sending millions of American jobs overseas to create an army of middle class in those countries ... somewhere academics in a dusty economics office are rejoicing as they whisper I told you so!. I say that with tongue firmly planted in cheek...
p.s. where exactly is Ohio getting $19 million? considering they are raiding my wallet to pay for stimulus ? But I digress.
Or let's put it another way... as the talented class of worker/job leaves the US [Sep 21, 2009: USA Today - More of World's Talented Workers Opt to Leave USA] we are receiving in return the jobs we jettisoned some 20 years ago? And all it takes is bribery ($19M) by already bankrupt state governments? Sounds like a winning formula, indeed! Now just imagine if we can continue to demolish the middle / working class - who after suffering an entire decade of no wage growth (adjusted for inflation) - now yearn for a job, any job - even those that have them going backwards in wage growth. [Sep 4, 2009: Job Seekers Across America Willing to Take Substantial Pay Cuts] No worries though - who needs jobs of any sort, low paying or not - when you have such a generous government, with unlimited pockets? [Jun 5, 2009: 1 in 6 Dollars of Income Now Via Government; Highest Since 1929]
Yes indeed, the growing global pie of prosperity is working wonders - just look around you; things are *so* much better than 15 years ago. :) [Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?] As we see global wage arbitrage play out even faster than I envisioned [Sep 14, 2009: Global Wage Arbitrade at the Micro Level: Marvell Technology] [Nov 5, 2009: Blue Coat Systems - More Global Wage Arbitrage] let me re-introduce my list of questions for those who deal in textbooks or theory (while living in ivory towers), rather than in reality.
- How many years will take place between the displacement of workers today in America and the middle class demanding things in China from America?
- What do we do with those workers in the meantime aside from plugging them into government work or pseudo government (health care)?
- What will happen to the income of said displacements as they move out of jobs from a very good high tech company to... (crickets chirping)?
- What exactly are Americans making today that the Chinese want and need to import excluding large scale industrial weapons / defense?
- What exactly will Americans be making in some day in the future (5? 10? 15 years?) when the Chinese middle class get to a level of wealth and can buy things from us... ?
- Whatever those products are you named in question 5, why can't the Chinese make them internally in 5, 10, 15 years?
Let's turn back to the most recent story... which for VERY long time readers of FMMF is not a new story - we in fact talked about this in January 2008 [Jan 28, 2008 - India Facing a Shortage of... Workers???]
How can a country with 1 billion souls be short of workers? Well it's a certain type of worker of course - and those type are in short supply. When I read the article (whenever it was) last year about how IBM and Accenture were expanding in very big ways and outbidding the Wipro's (WIT) and Infosys' (IFY) for talent, I knew this was not an area to be invested in (these were major darlings of the market in 04-06), even though there is a serious dearth of Indian ADRs to invest in, in the USA. Bidding wars for talent eat at the profit margins.
Keep in mind this fits in very well with my global wage arbitration theme - which simply states for those in the bottom 60-80%, our wages will be falling to a mean, as those who can provide similar/same services throughout the globe rise... until eventually they (near) match. Sounds impossible eh? What if I told you I could get you a loan for 110% of the value of your home, with nothing down and I wouldn't check your income. You'd laugh... if this were 2001.
There is no blame or finger to point here - this is the reality of the truly flat, global economy we are now in stage 1 of. Eventually it will reach the point jobs are outsourced back to the US ..... No wait, that is already happening 'Indian Call Center Lands in Ohio - CNNMoney.com'
That was then... this is now. But oh, the devil in the details - Tata alone has some 125,000 workers, with 50% of revenue coming from North American (read: US) companies. 13,000 of those jobs are in the States (i.e. 10%) which in and of itself would be pretty shabby, but even further of those 13,000... only 1300 are actual Americans (1%). The rest appear to be H1 Visa types. But don't let that stop the ribbon cutting ceremony Governor Strickland - putting 1300 Americans to work for a cost of $19 million is sound economics... and you can tout far more down the road since no one looks under the hood. Oh well, what's $19 million among friends nowadays? It's not even a rounding error on top of a rounding error.
- (Governor) Strickland threw in $19 million in tax credits and invited the Tata Consultancy Services crew to a state dinner at the governor's mansion. The economy is difficult, Strickland says. I will go wherever I can to find jobs.
- TCS said yes, and in November Strickland showed up at the sprawling wooded campus for a ceremony to mark the hiring of the 300th employee at what has become the cornerstone for TCS's North American efforts. Tata has hired some 250 graduates of Ohio State University (I'll supress comment), the University of Cincinnati, and other nearby schools. Soon the facility may employ as many as 1,000 Americans doing back-office and technology outsourcing for U.S. health-care companies and local governments. (I'm laughing at the customer list, and how circular this all is... borrowing money from the government - which is broke - to pay for backoffice work for government and pseudo government companies!)
- With the economy growing again—but unemployment stuck at double-digit levels—states and municipalities across the U.S. are scrambling to woo anyone with hiring plans—even if that means going, hat in hand, to the same bunch that have been responsible for hundreds of thousands of jobs going overseas.
- Dallas, Atlanta, Minneapolis, and Tallahassee have all been actively courting Indian tech outfits. Wipro Technologies (WIT) in March inaugurated a center in Atlanta, which now has 350 employees—nearly 300 of them Americans, including senior managers recruited from U.S. tech rivals.
- Infosys Technologies (INFY), meanwhile, is planning an operation in Dallas to target some of the $52 billion the U.S. government will spend on outsourcing work in 2010. (again it is so sickingly circular... the main growth engine of America now is government and its key offshoot via Medicare - healthcare. The shell game when you sit down and think about it, is amazing)
Now one might ask why, unlike every sector of corporate America, the Indian firms must actually hire locally rather than take the work back to their domicile?
- For Indian companies, U.S. facilities can mean more work on government and health-care projects—areas where laws prevent the transfer of data overseas.
Too bad... otherwise this charade would not be necessary, and the work could be done back in Mumbai.
But since we do love our charades, and America is no longer about actual solutions but all about political face saving - all we truly have is a political stunt and an almost Trojan Horse strategy to get to American taxpayer money by foreign firms, all so local politicians can say I'm doing something! Re-elect me!.
- Some critics say that the new centers offer little more than political cover and do little to boost employment in the U.S. One reason they are doing this is for public relations, says Ron Hira, an expert on offshoring at Rochester Institute of Technology. They want to send the message, 'We're creating jobs for Americans.'
Amazingly, we see the EXACT same thing by the
sellouts politicians when it comes to the Chinese firms in alternative energy. After it came to light that Senator Schumer was unhappy that a Chinese firm was getting a huge wind order turbine bid, on the back of the US taxpayer [Nov 2, 2009: Lack of Green Energy Manufacturing Capability in US Means 84% of Stimulus Goes to Foreign Firms] - within weeks a plan to open a plant by this company (which we once invested in, and is currently one of the hottest stocks in the market) in the US was announced! Problem solved; controversy averted - full access to US stimulus funds all for a mere pittance of a cursory amount of US employees.. And we see the exact same thing with Chinese solar firms - opening their one off plant in the US to say we're here to create jobs! Even if 99% of our workforce remains in China, we can give your politicians a wonderful ribbon cutting ceremony at that new solar assembly plant. Now give us all your stimulus money! (insert Cookie Monster munching sound here) It works in Ohio, so why not Arizona [Nov 17, 2009: China Pushes Solar, Wind Development]
Those outside of the Matrix are only left to roll their eyes.
But who are we to complain? We've decided we are not a nation who needs to actually build such lowly products so we're happy to let other countries do 99% of the work, while foreign companies open a plant here or there to showcase they are all in with the Americans. Which they are especially eager to do when taxpayer money is being thrown around in a free for all.
- It's true that the jobs Indian companies have created in the U.S. are a rounding error compared with their overall workforce.
- And TCS has more than 11,000 Indians working in the U.S. on temporary visas, while Wipro has 7,000.
Ah, details... details. 1300 for us, tens of thousands for those on temporary visas...
- Offshore outsourcers' wonderful profitability has largely been on the back of labor arbitrage, says Peter Bendor-Samuel, CEO of Everest Group, a Dallas consulting firm that advises companies on outsourcing strategies. Those profits surely would take a hit if the Indian companies start hiring more Americans.
Ooohh, I love when terms I've been using for years (labor arbitrage) begin hitting the mainstream. I really need to start trademarking some of this stuff years in advance.
- TCS already had to delay opening the Ohio center for almost six months during the recession in the U.S. Wipro says its Atlanta operation isn't yet profitable. Both say American facilities are unlikely to create huge numbers of new jobs in the U.S. soon. (by not soon, they mean never - what business sense would there be? You get full access to US taxpayers monies in exchange for a few hundred jobs, and said ribbon cutting ceremony - no need to expand past that)
- For several years, at least, (translation:. for decades, until Americans start earning $4.50/hour) the vast majority of work will continue to be done in India and other low-cost countries, according to Surya Kant, North America president for TCS.
Just to be clear this is not a rant against Chinese, or Indians or in fact the inevitable march of globalization. Capital will dominate and labor will be interchangeable among countries - this is the path of the past 20 years, and it only accelerates from here. The piece is simply is to highlight the reality behind the press releases and photo ops. Americans should be asking (and this is not protectionist) why they are layering on so much more debt simply to have much of it shuffled to places far, far away. Which ironically is where much of the money was borrowed from in the first place. (can you follow which shell the peanut is under?) But inside the Matrix we don't ask these things, instead we refer to convenient dogma... let me check my bullet point. Ah yes, its free market capitalism. ;)
And with that, the first soap box of 2010 is in the books....I will assume one or more might follow this year. ;)