White-collar Asia feels outsourcing
pinch By David L Llorito
SAN JOSE, California, and MANILA,
Philippines - The global outsourcing trend, which
first made political waves about job losses in the
United States, is now starting to cause similar
ripples across high-wage-earning Asian countries.
Corporate America's drive to cut costs by
shipping service-related jobs to lower-cost
developing countries has raised hackles with labor
groups, exacerbated structural wage-price
discrepancies
and
caused unprecedented economic and financial
insecurity in the US. Now, many white-collar Asian
workers are starting to feel a similar pinch.
Largely because of corporate outsourcing,
the average American worker now has a one-in-six
chance of seeing his or her income drop by 50% or
more from one year to the next, according to some
US economists' estimates. In 2005, 90% of US
taxpayers saw a year-on-year real decline in their
wages. Since 2000, the US economy has lost about 1
million service-industry jobs overseas, the same
economists estimate.
As globalization
spreads, economic theories about wage-price
equalization - where through greater economic
integration rich countries' wages fall and poor
countries' rise - are fast becoming a reality.
First witnessed in the relocation of manufacturing
jobs, now a growing range of white-collar service
jobs are being exported from rich to poor nations,
often with the ease of a computer keystroke.
That includes sectors that only recently
seemed immune to what started as a call-center
trend, including accounting, software development,
news reporting and editing, legal services,
architecture and engineering design, insurance
claims, radiology, financial analysis, and
Hollywood-style animation.
Yale University
economist Alan Blinder forecasts that about 40
million service jobs could be moved from the US to
developing countries over the next 20 or so years.
It's a trend that promises to come under sharp
political scrutiny in the years ahead - not just
in the US, but also in well-to-do Asian countries.
To be sure, economic statistics show that
outsourcing pushes developed-market labor up the
value-added ladder and the greater efficiencies
(and profits) outsourcing achieves for
corporations simultaneously helps create
higher-paying jobs in new, often unforeseen,
business sectors. However, recent economic
statistics also show that not all white-collar
workers who lose their jobs are so easily
reabsorbed into the national workforce.
Ron Hira, an engineer and assistant
professor at the New York-based Rochester
Institute of Technology, contends that most US
workers who lose their jobs to outsourcing end up
worse off. He says that as many as one in three
remains jobless indefinitely and that three in
five are forced to take substantial pay cuts to
land another job.
That's presenting a
growing policy challenge for US lawmakers, one
that some Asian policymakers are just now starting
to confront. The US has put in place various
social safety nets, mostly in the form of trade
adjustment assistance (TAA) programs, which
specifically cater to US companies that have gone
under because of cheaper foreign competition and
include scholarship programs for displaced workers
to attend training programs for as long as two
years.
So far, however, the programs have
failed to help white-collar personnel who worked
for companies that outsourced their jobs and are
still going concerns. Those familiar with the TAA
scheme claim that more than 40% of those who apply
for the program are ruled ineligible, as the
scheme was initiated to deal with the loss of
blue-collar jobs.
Eroding Asian
wages Those same sorts of economic and
social pressures are just now starting to build up
in Asia's high-wage-earning countries. Take, for
instance, Singapore, one Asia's richest countries
in terms of gross domestic product per capita. In
the 1980s and 1990s, the island state was a
showcase example of a rapidly growing newly
industrializing country (NIC).
Fueled by
manufacturing-oriented foreign direct investment
(FDI), Singapore almost overnight became a major
global production center for electronics and
semiconductors and in the process emerged as one
of the highest-wage-earning countries in the
world.
More recently, foreign electronics-
and semiconductor-producing companies have moved
to lower-cost locations such as China, Thailand,
Vietnam and the Philippines, forcing Singapore Inc
to move up into more services and government
policymakers to rethink the national economic
strategy.
Now the global outsourcing trend
is putting pressure on white-collar jobs,
including in the crucial finance and engineering
industries. While the Singaporean economy is still
growing outwardly at a healthy rate, the official
employment figures mask a mounting loss of
white-collar jobs. That includes scores of highly
trained engineers, many of whom now drive taxicabs
to make ends meet while they look for new
employment.
"The shelf life for the NIC
model is becoming shorter by the day," said Dieter
Ernst, economist and senior research fellow at the
East-West Center in Honolulu, Hawaii.
He
said that while China's emergence as the world's
low-cost factory floor has eroded regional
manufacturers' competitiveness, outsourcing is now
enabling a handful of developing countries -
including most notably India - to leapfrog the
development process straight into high-value-added
service sectors for highly discounted wages.
That's causing fear and trepidation in
high-wage-earning places such as Australia. Emma
Connors, senior information-technology writer for
the Sydney-based Australian Financial Review, said
that Australian unions are now campaigning
aggressively to ensure that white-collar jobs are
not outsourced overseas. And, she said, they have
achieved some success by raising the bogey that
outsourcing frequently compromises data security.
"What the unions want are new laws that
would make offshoring difficult," said Connors.
"They think banks and others should have to obtain
customer permission before data [are] sent
offshore. Such laws are anathema to those who
believe offshoring is simply the latest step in
the natural progression [in globalization]. But
can they hold back the tide?"
So far
Australia's unions and politicians have applied
enough pressure to coax a number of high-profile
companies to rethink decisions about outsourcing
their data-sensitive operations. But there are
countervailing views in Parliament, Connors
maintains, that if Australia fails to keep pace
with the outsourcing trend, the country's global
competitiveness wanes.
"We have to be
careful we're not protecting current Australian
jobs to the detriment of future Australian jobs,"
David Murray, former chief executive of the
Commonwealth Bank of Australia, was recently
quoted saying. "Everyone knows the value of free
and open trade. The opening up of this economy in
the 1980s is the only reason we're performing so
well now."
Japan is another country
starting to grapple with the rising outsourcing
tide. Until recently, Japan's corporations had
resisted the outsourcing temptation and maintained
research and development (R&D) jobs at home
for its various technology products through a
secretive process known as "technology
blackboxing".
Now, Internet-enabled
reverse engineering and pirating of Japanese
technology products, particularly by China, is
fast eroding Japan Inc's ability to pass on the
high cost of local R&D-related salaries to
consumers. That market-losing trend will likely
continue until Japanese corporations make the
tough decision to outsource more of their
innovation functions.
Either way, Japan is
likewise set to lose more white-collar jobs as
outsourcing gathers pace and Japanese policymakers
will soon face the same employment challenges
cropping up in the US and other developed Asian
nations.
David Llorito is a
researcher at The BusinessMirror, a Manila-based
daily newspaper. Research for this article was
conducted as part of the 2007 Jefferson Fellowship
program sponsored by the East-West Center in
Hawaii and funded by the Freeman Foundation.
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