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JohnBull

Here in the UK many companies have reversed the outsourcing due to the awful standards of the Indian companies used.
Many banks & insurance firms use this in their advertising; this isn't racism but simply an acknowledgement that you get what you pay for & the language skills of many aren't of a sufficient standard to deal with the myriad of consumers that call.
The same has happened in software development, in which I work.
Laudably India is prospering from it's native initiative & entrepreneurialism; much better than relying on the West.

GK

JohnBull,

That is partly true. A call-center job is considered an entry-level job in India, and the best employees quickly move on to better opportunities. Thus, they are not so inexpensive any more.

Many of the best Indians do still end up coming to America, where 10-15% of Indian families are millionaires, and many of those who aren't are simply too young and will get there eventually.

mishu

GK,

It's interesting that you point out that labor costs have increased at 12% a year in India. When this issue was hyped a few years ago, I was assuming that the law of comparative advantage would remain in India's favor due to her large population. I didn't realize the educated labor pool was that small in comparison to the general population. The media seemed to portray the opposite.

GK

mishu,

The number of college-educated people in India is large, (2 million new college graduates a year, of which 600,000 are engineering, science, or accounting) but the demand is even larger.

Note first that outsourcing to India is not only from the US but also from Western Europe, Japan, Canada, and Australia. All that in aggregate is a very full plate.

Secondly, consider that when people say "companies can lay off an $80,000 engineer in the US and hire a $15,000 engineer in India", they fail to consider that the same Indian engineer could also come to the US and get an $80,000 job (as thousands do every year). Why should he settle for only $15,000? You must have noticed that the number of Indians under the age of 30 running around in the US seems a lot higher than 10 years ago.

Third, also consider the high domestic growth in India that is creating many jobs. This also draws away workers from the outsourcing labor pool. Of the 20 largest economies in the world, it is the second-fastest growing, and would be first if China allowed its currency to float freely like India does.

mishu

I hadn't considered the other countries outsourcing as well. Thanks for pointing that out.

Steve

Hadn't seen it from that angle before.

kamil

All that is true, but there was/is still a problem.

If vast majority the entry level jobs were outsourced and dissapeared at least for a period of a few years, where will the next generation of highly skilled engineers come from?

Kamil

GK

Kamil,

But that has not happened by now, so probably won't. Entry level graduates in the US are currently getting jobs easily.

muckdog

Good post. I think outsourcing has held down US wages some, but that the low unemployment rate and tight labor market is starting to pressure wages as companies compete for workers.

kentuckyliz

A downside of offshoring is the potential for America to drive off into a ditch. Young people are choosing careers that aren't offshorable. They avoid unskilled labor and professional jobs that aren't hands on! They want high skilled jobs that require a physical presence to interact with a person or machine. Young folks could flock away from what is being offshored...then the US loses capacity in that profession in general.

I'm not predicting that will happen, it's just a possible "unintended consequence."

Our labor markets are so tight. We need to maximize our existing human capital to its full potential and import more. I'd rather import an Indian, Chinese, Russian, or Eastern European engineer or scientist or software programmer than to offshore to them. Let's have the giant sucking sound be the USA sucking global talent here.

Tushar D

Good idea, kentuckyliz.
Now if only they will give me a Green Card after seven years of waiting. The word is that it will take a few more years at current pace.

GK

A total failure of US immigration policy is that the *least* skilled people from Mexico - not even educated Mexicans - can easily come here by the millions without adhering to any laws or processes, while people like Tushar have to literally wait for years just to get a greencard, and 5 more years to become a citizen.

America should be actively finding ways to bring more Tushars over here (ideally at least 300,000) and make it easy for them to stay and switch employers based on market forces, while simultaneously preventing the least-skilled people from Mexico from coming here and diluting the educational level of the workforce.

Jay

The greatest gift that the selcaur West has given to posterity is the world’s first universal language – science! Also a culture of free, sceptical inquiry and open political discourse and accountable governance. The English language too. Indians have grasped it all with both hands. I’m English and I’m absolutely delighted and wish them all the very best! Sorry you’re dropping our accent.

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