At the present time, most jobs that are being exported to cheaper wage countries such as India or China are fairly low-skill jobs such as call-centre services and factory assembly work. But, in the not-too-distant future, these will be automated anyway. If those, such as the trade unions, who are calling for these jobs to be retained in their host countries, were successful then this solution would only be a temporary measure. In the short term, trade unionists might possibly be saving jobs (albeit at the expense of higher consumer prices to their friends and neighbours), but they are destined to disappear anyway. What trade union officials ought to be doing for their members is that, before their members lose their jobs, they should be offering training courses in higher skills. This is what trade unions and working men's associations were very good at a century and a half ago, but then, as prosperity gathered pace, yielded the task to the state.
But it's the higher skill jobs that is the rub -- in the medical, accountancy, architectural, and perhaps legal, professions that are mentioned below. (And, probably, many more to be added in the coming years.) Yes, these professionals in India and elsewhere in Asia have lower fees than those in the west, but it wasn't this factor in the first place that caused these jobs to go abroad. It was that employers needed more of these jobs than the home country could supply. There just aren't enough of these higher-skill people in the west. And once the out-sourcing habit started then it was a great deal easier to keep it going rather than having to try and recruit talent at home. This is a case where, seemingly, the highly efficient talent selection procedures of national educational systems (whether state or private) can't supply enough individuals of sufficiently high ability to run the economy. So employers have to go abroad to cream off the talent there. This, once again, can't really be blamed on globalisation. It is, quite simply, the only way that western countries can now keep going. In England, for example, the National Health Service couldn't operate unless there a stream of qualified doctors, nurses and technicians continues to come from abroad, draining their own countries of badly-needed personnel.
It's all a very worriesome business, but it's a problem that's much deeper than the temporary matter of the globalisation of jobs. It lies at the very heart of the type of growth economy that western nations have been driving forward during the past two centuries.
KSH
<<<< SERVICE INDUSTRIES GO GLOBAL: How high-wage professional jobs are migrating to low-cost countries
Dan Roberts and Edward Luce
Clutching her side in pain, the woman with suspected appendicitis who was rushed to a hospital on the outskirts of Philadelphia last week had little time to ponder how dependent her life had become on the relentless forces of globalisation. Within minutes of her arrival at the Crozer-Chester Medical Centre, the recommendation on whether to operate was being made by a doctor reading her computer-aided tomography (CAT) scan from a computer screen 5,800 miles away in the Middle East.
Jonathan Schlakman, a Harvard-trained radiologist based in Jerusalem, is one of a new breed of skilled professionals proving that geographic distance is no obstacle to outsourcing even the highest paid jobs to overseas locations. The migration of white-collar work has moved up the value chain from call centre operators and back-office clerks to occupations such as equity research, accounting, computer programming and chip design.
The trend -- still only a trickle at present -- may look to some like a temporary fad pursued by companies seeking to cut costs. For trade unions in the US and Europe, it heralds a fundamental restructuring of rich-world economies, akin to the globalisation of manufacturing in the 1980s and the outsourcing of unskilled service jobs in the 1990s.
At present, only 35 patients' scans are transmitted each day from US emergency rooms to Dr Schlakman's small team of doctors in Israel. But with senior radiologists costing up to $300,000 a year to hire in the US and many emergency cases arriving at night, the use of medical expertise based in a different time zone and earning less than half US rates is almost certain to rise. "It's much more expensive to use night staff in the US because they need time off the following day," says Dr Schlakman. "Radiography is probably the best area to start with because a lot of it is based on computer imaging, which you don't need to be physically present for."
In Thailand, a team of 50 architects is working on behalf of 16 UK architectural practices that have outsourced some of their technical drawing and three-dimensional computer-generated design work. Trieu Nguyen, technical and compliance manager at Atlas Industries, used to teach architecture to university students in Ho Chi Minh City. Today, his days may be spent checking technical drawings for a new secondary school in the English home counties. Typical pay at Atlas is about $6,000 net a year. This is high by local standards -- Vietnam's average per capita income is about $400 -- but a fraction of what comparable workers receive in the UK.
Like Jerusalem's radiographers, Thailand's architects use broadband internet connections as a link to their markets; but occasionally customers will make the journey themselves.
During the past year, Singapore's Changi airport has begun receiving empty aircraft from the US. A growing number of US-based airlines are sending their fleets to Asia for maintenance. Lower wage rates for skilled aerospace engineers more than compensate for the $60,000 it can cost to fly across the Pacific.
At the centre of this service revolution is India. Just as China is fast becoming the new workshop of the world for light manufacturing, India has its eye on the globe's professional services.
A growing clutch of Indian companies provide computer-generated animation and special effects services for the western film industry. Reuters, the financial and media group, is preparing to open a production facility for preparing and analysing the financial data it sends to screens in investment banks -- threatening some of the 1,150 staff currently doing the work in the UK and US. And there are signs that India will take a slice of offshore fund management and other financial services in the next few years.
"There is no economic limit to what can be outsourced to India," says Tarun Das, head of the Confederation of Indian Industry. "The only limit that we can see is a political backlash in the west against the migration of jobs to India and elsewhere."
Ramesh Sharma, head of Moving Pictures India, a Delhi-based company that makes documentaries and provides animation and special effects services for western production companies, says that his advantage is exactly the same as that of Indian information technology or call centres. The same cost advantages that attracted General Electric, banks such as HSBC and Standard Chartered, and BT Group, a UK telecoms company, to relocate back-of-office and treasury operations to India are prompting others to see what the country's 1.5m English-speaking graduates are capable of.
"Our animators are just as qualified as most western animators," says Mr Sharma, whose company has won out-sourcing work from Dutch, Italian and British production companies. "The key- lement here is that they provide the same quality service for roughly a quarter the price."
Moving Pictures has been sending film crews around the world to make documentaries for western broadcasting companies. "We make a documentary for $25,000 when it would cost $100,000 in the Netherlands," Mr Sharma says. The only limit he can imagine is the extent to which foreign companies can shoot their films at India's large film studios in Bombay and Hyderabad: "You would have to fly in all the extras if you wanted them to be white."
Ajay Lavakare, chief executive of RMSI, an Indian "geographic information services" company, says India is now a world leader in this niche sub-sector. By analysing maps and satellite images, RMSI helps insurance companies assess whether their risks are too concentrated, it helps ordnance surveys in creating sophisticated maps (in the UK and Japan) and it provides computerised road maps for vehicles.
"Which western company can assemble a project team of 200 people including qualified geologists at the drop of a hat?" asks Mr Lavakare. "The advantage is not just in our lower costs -- it is in the easy availability of highly qualified English-speaking technicians."
The cost advantages are even more striking in healthcare. Naresh Trehan, director of Escorts Heart Institute in New Delhi, says that an increasing number of foreigners is coming to India for heart bypass operations. The average cost, including air fare, is about $7,000 -- roughly a quarter of what it would be in the UK private sector. And there are no waiting lists.
"Last year we did more than 4,000 heart bypass operations -- the highest of any single institute in the world," says Dr Trehan. At 0.8 per cent, Escorts' mortality rate was comparable with international standards. I
ndian companies in almost every sector are beginning to wake up to the commercial logic of such arguments. "What is to stop Indian legal companies from providing legal services to the UK, which also has a common law system?" asks Omkar Goswami, a leading economist. "If it can happen in accountancy and the medical profession, why not law?"
But there is also growing awarenes in India of the potential for a popular backlash in the west against the "loss" of jobs. "Protectionism can take on very sophisticated guises," says one Indian executive. "We believe that India will increasingly become the target of such arguments and we must act to defend ourselves."
One consequence is that Indian companies now play down their success; western journalists are increasingly refused access to call centres in Madras, Hyderabad, New Delhi and Bombay. More importantly, India's government is adopting a strikingly new trade negotiating position, hoping to secure a market access agreement for service professionals in the Doha round of global trade talks. This contrasts markedly with India's traditional suspicion of open markets. "India has finally struck economic gold," says a senior trade official. "We have to adjust our policies accordingly."
Another policy change involves heavy lobbying by Indian trade associations in Washington, DC, where US politicians are under pressure to react to the impact of overseas outsourcing on the still-struggling technology industry. In New Jersey there has been pressure to ban outsourcing of public sector contracts to offshore processing centres such as India.
The sensitivity is well understood by technology companies but many feel compelled to look at moving jobs to lower-cost countries because, as one Microsoft executive put it recently, "our competitors have already got this religion".
A internal presentation by a human resources director at International Business Machines obtained by union campaigners at the Washington Alliance of Technology Workers summed up the problem: "One of our challenges is to balance what the business needs to do with the impact on people and -- this is one of those areas where this challenge hits us squarely between the eyes. Our competitors are doing it. so we have to do it."
Marcus Courtney, a campaigner at the Washington Alliance, says the result is a hollowing, out of the US IT industry at all levels. "When you have a software developer with postgraduate level qualifications having to train his replacement in India, you realise this not about skills," he says. "This is about a global economy that is increasingly based on the lowest-cost labour, and multinationals are beginning to exploit that."
Europe, too, fears a repeat of the job losses that hit manufacturing in the 1980s and 1990s. "It's just a trickle right now but we're very worried that higher-skills jobs are beginning to go too, such as information technology,"says Peter Morris, policy adviser at the Communication Workers Union in the UK. "In theory, there is no limit: any job which can be done remotely could disappear abroad."
While unions in the US and the UK argue that India's advantage in service industry outsourcing lies in its "sweatshop" wages and working conditions, few Indians take such descriptions seriously. Working conditions at India's call and IT centres -- whether directly managed by western companies or by Indian-owned contractors -- are considered among the best of any type of employment. Wages are high by Indian standards. And in spite of an average 50 per cent annual growth rate in revenues -- expected to continue indefinitely -- India's business processes out-sourcing sector still employs fewer than 200,000 people. That number is certain to rise rapidly.
Additional reporting by Andrew Bibby
Financial Times 20 August 2003 >>>>
Keith Hudson, 6 Upper Camden Place, Bath, England, <www.evolutionary-economics.org>
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