Out of Control

If illegal immigrants aren't allowed to do certain jobs then employers will raise wages and hire American citizens, right?

Maybe employers will hire robots instead:

With authorities promising tighter borders, some farmers who rely on immigrant labor are eyeing an emerging generation of fruit-picking robots and high-tech tractors to do everything from pluck premium wine grapes to clean and core lettuce.

Such machines, now in various stages of development, could become essential for harvesting delicate fruits and vegetables that are still picked by hand.

...

Mechanized picking wouldn't be new for some California crops such as canning tomatoes, low-grade wine grapes and nuts.

But the fresh produce that dominates the state's agricultural output and that consumers expect to find unblemished in supermarkets is too fragile to be picked by the machines now in use.

The new pickers rely on advances in computing power and hydraulics that can make robotic limbs and digits operate with near-human sensitivity. Modern imaging technology also enables the machines to recognize and sort fruits and vegetables of varying qualities.

"The technology is maturing just at the right time to allow us to do this kind of work economically," said Derek Morikawa, whose San Diego-based Vision Robotics has been working with the California Citrus Research Board and Washington State Apple Commission to develop a fruit picker.

Article here.

Related: Alex Tabarrok explores similar themes here; How soulless "workers" might take jobs from miners, fighter pilots , surgeons, and prostitutes.

Still waiting for Lou Dobbs to take on those job-stealing, wage-depressing robots.

You know it's coming, but from election to election it's hard to tell what form the protectionist panic will take. Will we fret over Japanese buying American property or selling us their cars? Will we worry about China's economy eclipsing ours, about Indians taking our jobs, or Spaniards building our roads?

Perhaps the '08 election will bring us more of this this:

Minnesota has passed ... a new law that goes into effect at year's end requiring every Old Glory sold in state stores to be domestically produced. Violations are a misdemeanor, punishable by up to a $1,000 fine and 90 days in jail.

In Arizona, schools and public colleges were required starting July 1 to outfit every classroom from junior high up with a made-in-the-USA flag. Tennessee requires all U.S. flags bought via state contract to be made here, and similar bills are moving forward in both New Jersey and Pennsylvania.

But how can concerned citizens be sure the flags they fly haven't been made by foreign hands in faraway lands? Enter the Flag Manufacturers Association of America: "the association created a certification program two years ago that bestows a seal-of-approval to flags made with domestic fibers and labor. "

Leonard Read's classic I, Pencil, is relevant yet again. And the essay should give consumers pause. Can the FMAA's seal ensure that flags are really, truly "American"? Checking on the labor seems pretty easy, but what about the dyes, what about the machines and instruments used to make the flags?

Related: i, Pod

Related: Remember the Port Panic?

Just about any kind of interaction with foreigners is enough to get the Lou Dobbs's among us hot and bothered. Pitchfork Lou has compiled a list of "traitorous" companies that make use of offshore outsourcing and countless bumper stickers urge us to "Buy American," often adding an ominous extra prod along the lines of "while there's still time" or "the job you save might be your own."

Leaving aside all the reasons to ignore the "Buy American" imperative, let's say you really do want to buy
stuff made in the good ol' USA. How would you do it?

The buy American crowd probably doesn't care for Toyotas. But what if they're built in Tennessee by Americans? Nothing could be as American as Ford, yet as Adrian and I point out in our 2005 study Offshoring and Public Fear, the guts of a Ford Escort may be more foreign than the guts of a Honda Civic (where 75 percent of parts are made in the USA).

Today we're in the midst of iPhone-mania, and Apple watchers are eager to see if the new gadget will be the next iPod. In a NYT piece Hal P. Varian tries to answer what turns out to be a tough question:

Who makes the Apple iPod? Here’s a hint: It is not Apple. The company outsources the entire manufacture of the device to a number of Asian enterprises, among them Asustek, Inventec Appliances and Foxconn.

But this list of companies isn’t a satisfactory answer either: They only do final assembly. What about the 451 parts that go into the iPod? Where are they made and by whom?

Three researchers at the University of California, Irvine — Greg Linden, Kenneth L. Kraemer and Jason Dedrick — applied some investigative cost accounting to this question, using a report from Portelligent Inc. that examined all the parts that went into the iPod.

Their study, sponsored by the Sloan Foundation, offers a fascinating illustration of the complexity of the global economy, and how difficult it is to understand that complexity by using only conventional trade statistics.

Should we take a $299 video iPod apart and figure out where the most expensive parts come from? Examine the value each nation involved adds to the product? Consider something else?

After walking through some number crunching, Varian gives up--sort of:

Ultimately, there is no simple answer to who makes the iPod or where it is made. The iPod, like many other products, is made in several countries by dozens of companies, with each stage of production contributing a different amount to the final value.

The real value of the iPod doesn’t lie in its parts or even in putting those parts together. The bulk of the iPod’s value is in the conception and design of the iPod. That is why Apple gets $80 for each of these video iPods it sells, which is by far the largest piece of value added in the entire supply chain.

Those clever folks at Apple figured out how to combine 451 mostly generic parts into a valuable product. They may not make the iPod, but they created it. In the end, that’s what really matters.

Related: Are you driving on a foreign road?

Obama can.

He pulled this off during a recent speech in Milwaukee:

"There's also another kind of violence that we're going to have to think about. It's not necessarily the physical violence, but the violence that we perpetrate on each other in other ways," he said, and goes on to catalogue other forms of "violence."

There's the "verbal violence" of Imus.

There's "the violence of men and women who have worked all their lives and suddenly have the rug pulled out from under them because their job is moved to another country."

For more, including audio of the speech, go here.

Salary was one of the least important requirements of a dream job, cited by just 12 percent of respondents in [a new] survey by CareerBuilder.com, an online job site, and The Walt Disney Co, which is holding a contest in which winners can get a chance to work at a Disney theme park job for a day.

Having fun at a dream job was cited by 39 percent, with 17 percent saying making a difference in society was most important, the survey showed.

Even “hours worked” is a rather unreliable measure. According to a Money Magazine/Salary.com survey:

The hours category showed a real shocker -- that extremely satisfied employees are putting in a lot more time at work than others. The most satisfied reported averaged 56 hours a week -- 11 hours more than the least satisfied group. Almost without exception, as satisfaction rose, workers reported putting in longer hours.

In this overview of telecommuting trends (pdf), I point to other surveys where workers say they prefer perks like flexible schedules to more pay.

Sounds like good news, but look at the title of this MSNBC article: Most U.S. Workers Not Living the Dream

Overall, 84 percent of respondents said they are not in their dream jobs, the study found.

OK most workers aren't living the dream, but what's more interesting is what the framing of this issue says about our elevated expectations. From a historical perspective the fact even a sizable minority of respondents has a dream job is something that should spur Cruise-like fits of couch-jumping joy. It wasn’t long ago when the vast majority of the workforce toiled away in the fields. The fact that we even think that a job should be more than something that gets us food, clothing and shelter reveals enormous progress.

Like many frustrated-but-not-surprised libertarians, the GOP’s congressional reign failed to meet my very low hopes. I took a “serves ‘em right” attitude toward the R’s recent defeat, and if I can muster any hope now it’s for the effects of gridlock, not for the other team.

A case in point comes from How Free Trade Hurts, a recent WaPo oped by Senators Byron Dorgan and Sherrod Brown:

The result [of free trade agreements] has been a global race to the bottom as corporations troll the world for the cheapest labor, the fewest health, safety and environmental regulations, and the governments most unfriendly to labor rights. U.S. trade agreements paved the way for this race: While rejecting protections for workers or the environment, they protected investors and corporate interests.

Worker activism, new laws and court decisions changed all that during the past century.

Greg Mankiw reacts:

That last sentence is striking. There is no doubt that most Americans have seen dramatic improvements in living standards and workplace norms over the past century. But should we really give most of the credit to "worker activism, new laws and court decisions?" I don't think so.

I would give most credit to economic growth, which in turn is driven by technological progress, a market system, and a culture of entrepreneurship. As the economy grows, the demand for labor grows, and workers achieve better wages and working conditions.

Economic studies of unions, for example, find that unionized workers earn about 10 to 20 percent more by virtue of collective bargaining. By contrast, real wages and income per person over the past century have increased several hundred percent, thanks to advances in productivity.

Similarly, working conditions are poor in less developed countries today because productivity is low there. The key to improving lives in those nations is economic growth, not "worker activism, new laws and court decisions."

The Sens included the requisite “race to the bottom” canard and also continue to whip up fears about the trade deficit. Apparently Americans should yearn for the days when our nation boasted a trade surplus.

A while ago Don Boudreaux (no link) offered an important reminder:

… in 102 of the 120 months of that most economically depressed decade, the 1930s, the U.S. ran trade surpluses. On an annual basis, America had a trade surplus for nine of the ten years of the 1930s (with 1936 being the only year of a trade deficit). For the whole of that decade, the U.S. ran a significant trade surplus. Exports over those dreary ten years totaled $26.05 billion while imports totaled only $21.13 billion.

Clearly, just as a trade deficit is no sign of economic malaise, a trade surplus is no sign of economic vitality.

Related: Dismantling another Dorganism

Speaking of economic biases held by the general public, there also seems to be a bias in favor of tangible things. If a nation builds cars and refrigerators that’s “good,” but if it shifts to providing services that’s “bad.”

In his takedown of Sen. Byron Dorgan, Daniel Griswold also takes on those who long to return to an economy based on making tangible stuff:

As a nation grows wealthier, the share of the workforce in agriculture invariably falls and the share in the service sector rises. The share in manufacturing typically rises and then falls. According to the World Bank, countries with the lowest share of the work force in the service sector include Uganda, Vietnam, Romania, Sri Lanka, Indonesia, and Mongolia. Countries with the highest share in the service sector include, along with the United States, Sweden, Switzerland, Canada, Hong Kong, Japan, and Luxembourg. The first group is among the poorest nations, the second among the richest. Apparently one goal of Dorganomics would be to shift America from the rich group to the poor group.

Griswold piece here.

And, of course, it’s just not true that we don’t make anything anymore.

Via Don Boudreaux, here’s Daniel H. Pink in Wired:

Almost three years ago, Scott Kirwin was Wired's pissed off programmer ("The New Face of the Silicon Age," issue 12.02). Tossed from his job and raging against globalization, he had launched the Information Technology Professionals Association of America to lobby against offshored work and imported workers. These days, Kirwin still works with computers. He's just less pissed: In June, he shuttered the ITPAA. "I don't view outsourcing as the big threat it was," he says. What changed? Well, Kirwin found better work as an analyst and software architect. And he noticed that the talents that make him valuable – open-mindedness, a willingness to take risks, flashes of ingenuity – couldn't be reduced to a spec sheet and emailed to Hyderabad. If more Americans develop such abilities, Kirwin believes, the use of Indian programmers could even improve our economic outlook. Outsourcing isn't going away, he says. "But in the end, America may be stronger for it."

Related: More happy endings

Related: Even more happy endings in this study by Adrian Moore and me (see p. 18)

Related: When outsourcing was going to destroy America

One day he’s Mr. Wall Street, the next Lou Dobbs has morphed into Pat Buchanan (who himself went through a similar change).

Here’s Luke Mullins on CNN’s rollin’-up-the-sleeves populist.

Related: DobbsBot-3000

Jared M. Diamond became the darling of PBS with his book Guns, Germs, and Steel, and his thesis that the secret to economic development could be found in factors like geography and the availability of domesticated animals.

Tyler Cowen reviews a book with a different take:

In “A Farewell to Alms: A Brief Economic History of the World” (forthcoming, Princeton University Press,) Gregory Clark, an economics professor at the University of California, Davis, identifies the quality of labor as the fundamental factor behind economic growth. Poor labor quality discourages capital from flowing into a country, which means that poverty persists. Good institutions never have a chance to develop.

…
A simple example from Professor Clark shows the importance of labor in economic development. As early as the 19th century, textile factories in the West and in India had essentially the same machinery, and it was not hard to transport the final product. Yet the difference in cultures could be seen on the factory floor. Although Indian labor costs were many times lower, Indian labor was far less efficient at many basic tasks.

For instance, when it came to “doffing” (periodically removing spindles of yarn from machines), American workers were often six or more times as productive as their Indian counterparts, according to measures from the early to mid-20th century. Importing Western managers did not in general narrow these gaps. As a result, India failed to attract comparable capital investment.

Professor Clark’s argument implies that the current outsourcing trend is a small blip in a larger historical pattern of diverging productivity and living standards across nations. Wealthy countries face the most serious competitive challenges from other wealthy regions, or from nations on the cusp of development, and not from places with the lowest wages. Shortages of quality labor, for instance, are already holding back India in international competition.

More here.

Related: Ron Bailey on Diamond

Does it decrease inequality?

Yes and yes, say authors of a new study:

The working paper titled “The Globalization of Household Production,” challenges many existing theories about the economic impacts of immigration. Co-authors Michael Kremer and Stanley Watt examine how immigrant household workers are affecting other labor trends, and how those trends are affecting the overall economy.

The authors document the rising numbers of women who are increasingly crossing international borders to work as private household workers. In Singapore and Hong Kong, for instance, foreign workers in private households comprise around 7% of the total labor force or more. The percentages are even higher in some “new rich” gulf countries.

Kremer and Watt argue that as more immigrant women serve in household positions, more high-skilled native women are therefore available to join the labor market, driving down relative wages among high-skilled workers and reducing the disparity in wages between low- and high-skilled workers. In addition, Kremer and Watt contend that as more native women return to the workforce, they contribute more tax dollars to the general coffers. This provides “a fiscal benefit for the population, even without considering the taxes paid by the migrants themselves,” they write. Assuming immigration levels of 7% of the total labor force, relative wages of native low-skilled workers are increased by 3.9%, and native welfare overall is increased by 1.2%, they claim.

Summary here; study here.

Harvard economist Greg Mankiw has a pretty tranquil life these days, at least compared to what he went through a couple of years ago.

As chairman of Bush’s Council of Economic Advisors he uttered the completely mainstream comment (mainstream among economists, that is) that international trade is a good thing that tends to benefit all nations involved. He said that offshore outsourcing is merely a new kind of trade in which exports come to our shores via the internet or our phones, instead of by ships and planes.

Many reporters simply yawned at what was then regarded as an uneventful press conference. Then the LA Times ran a story titled “Bush Supports Shift of Jobs Overseas.”

What followed was a (cliché alert) political firestorm. Our nation worried that the teachings of Adam Smith and David Ricardo no longer applied to our new economy. Speaker Hastert called for Mankiw’s head and Candidate Kerry had himself a great issue. He railed against “Benedict Arnold CEOs” and outrageous tax policies that supposedly encouraged this kind of traitorous activity. Politicians penned more than 200 anti-outsourcing bills, mostly at the state level (although few were passed).

Today the panic has largely subsided, at least for now.

In this paper Mankiw looks back at that loopy time. Pretty interesting stuff.

Related: A study Adrian Moore and I wrote on the topic

Related: My pre-election take on Kerry-Edwards’ rhetorical strategy

BTW, later on Kerry backed away somewhat from his infamous line:

Asked about outsourcing and his use of the "Benedict Arnold" epithet, Mr. Kerry replied: "The Benedict Arnold line applied, you know, I called a couple of times to overzealous speechwriters and said, 'Look, that's not what I'm saying.' Benedict Arnold does not refer to somebody who in the normal course of business is going to go overseas and take jobs overseas. That happens. I support that. I understand that. I was referring to the people who take advantage of non-economic transactions purely for tax purposes — sham transactions — and give up American citizenship. That's a Benedict Arnold. You give up your American citizenship but you want to continue to do business and deduct and do everything else. That's what I'm referring to."

Actually, it seems this explanation isn’t entirely accurate.

But more importantly--does Ben Affleck still think outsourcing is "criminal"?

An Ohio carpenters union targets contractors and property-management companies, which it says don’t pay carpenters a standard wage of $22.50 an hour, pick up health-insurance premiums or offer pension packages. So they picket these establishments and engage in all the usual activities: they holler, hold signs, and pass out fliers.

But union members don’t actually do the rabble-rousing themselves. They’re too busy working, so they outsource the jobs to low-wage workers:

The Ohio and Vicinity Regional Council of Carpenters has hired more than 160 central Ohioans who are down on their luck, homeless or between jobs.

Somehow the traditional union scorn for part-time, low-wage, zero-benefits jobs (not to mention outsourcing) disappears. The union hires these workers for 10 hours per week, at 8 bucks an hour, and apparently no benefits.

This isn’t the first time this has happened. In Henderson, Nevada the UFCW recently targeted Wal-Mart and outsourced the picketing duties. The temporary workers protested in 104 degree heat, earned 6 bucks an hour and received no benefits. The “exploited” workers inside Wal-Mart enjoyed higher pay, benefits, and air conditioning.

This kind of union outsourcing happens fairly often, says Jim Graham, a Whitehall councilman who oversees the carpenters council’s organizers.

"This really isn’t unusual. It’s been done in Baltimore, Denver, San Diego, Miami, Atlanta, Louisville and Indianapolis." [See Russell Roberts for more of the same.]

As the practice spreads, some people question whether the union’s tactics are any better than the companies it criticizes […]

"How can they justify paying just above minimum wage when they’re demanding more than $20 an hour for their members?" asked Dewey Phares, a 37-year-old carpenter from Hilliard who works at one of the picketed buildings on Capitol Square.

"Shame on them. They should look in the mirror."

To be fair the union is paying well over minimum wage, but to borrow a common union refrain: “You can’t support a family on 80 bucks a week!”

"We’re not taking advantage of anyone," Graham said.

"They’re giving people who are underemployed, unemployed or simply unemployable because of an addiction, disability, mental illness or other problem, a leg up," said Kent Beittel, executive director of the Open Shelter. "At the very least, our clients are making enough money for basic needs such as food. At the most, they’re saving enough money to move into apartments or getting enough experience to move to better jobs."

In a 1995 court case a group called ACORN gave a very good summary of why mandated wages are a bad idea:

According to ACORN, this adverse impact will be manifested in two ways: first, ACORN will be forced to hire fewer workers; second, its workers, if paid the minimum wage, will be less empathetic with ACORN's low and moderate income constituency and will therefore be less effective advocates.

BTW, as you may know, ACORN is one of the nation’s most outspoken proponents of living wage legislation.

More on that here; via Russell Roberts.

Ohio article here; thanks to my colleague Geoff for the tip.

Forbes gives snapshots of various jobs that humans will eventually surrender to machines or, in the case of miners, bacteria:

Bacteria like Thiobacillus ferooxidans can be used to extract metal from ore. If there are further advances in the science of biomining, expect the guys with coal-darkened faces to take above-ground occupations.

Those of us who’ve fumbled our way through automatic checkouts at grocery stores won’t be surprised to find cashier on the list:

In fact, all jobs dealing with paper money, including bank tellers and toll booth operators, could be obsolete in two decades, as we rely more on credit and digital money.

Some other jobs on the list: CD store manager, construction worker, union organizer, and even the job so closely tied to outsourcing fears: call center rep.

Apparently, machines will also muscle out Maverick, Goose, Ice and other fighter pilots. Once again, The Simpsons was ahead of the times. Six years ago the military school Commandant (voice by Willem DaFoe) said this at a graduation ceremony:

The wars of the future will not be fought on the battlefield or at sea. They will be fought in space, or possibly on top of a very tall mountain. In either case, most of the actual fighting will be done by small robots. And as you go forth today remember always your duty is clear: To build and maintain those robots.

And how about Forbes slowly morphing into US Weekly? The "Hottest Billionaire Heiresses" list is here.

In this 2005 study (pdf), Adrian and I point out that, although people think of poor developing nations when they think of offshore outsourcing, U.S. companies actually invest more in Ireland, than in China and India combined.

And now more of the same:

IBM, the world's biggest computer services provider, will invest 46 million euros ($58.6 million) in its Irish technology campus over the next three years and create 300 new jobs, Ireland's Minister for Enterprise said on Thursday.

Micheal Martin said the investment would help IBM, which has operated in Ireland for 50 years, grow its Dublin-based software development operations, establish a Business Incubation Center and improve the company's supply chain capacity.

IBM employs more than 3,200 people in several operations around Dublin, including manufacturing, sales and marketing, software development, consultancy, customer support and treasury.

Article here.

Turns out companies rather like places with low taxes and light regulations. After years of liberalization, Ireland now has the world’s third freest economy:

Ireland's modern, highly industrialized economy grew by 80 percent during the 1990s. The country has one of the world's most pro-business environments, especially for foreign businesses and investments, and Prime Minister Bertie Ahern, whose Fianna Fail party governs in coalition with the Progressive Democrats, has maintained this impressive inheritance.

Read the Heritage Foundation's profile on Ireland here.

The world's most populous nation, which has built its economic strength on seemingly endless supplies of cheap labor, China may soon face manpower shortages. An aging population also poses difficult political issues for the Communist government, which first encouraged a population explosion in the 1950's and then reversed course and introduced the so-called one-child policy a few years after the death of Mao in 1976.

That measure has spared the country an estimated 390 million births but may ultimately prove to be another monumental demographic mistake. With China's breathtaking rise toward affluence, most people live longer and have fewer children, mirroring trends seen around the world.

Those trends and the extraordinarily low birth rate have combined to create a stark imbalance between young and old. That threatens the nation's rickety pension system, which already runs large deficits even with the 4-to-1 ratio of workers to retirees that it was designed for.

Although it’s sort of chilling to consider what passes for liberalization, there are signs that the Chinese government is loosening up somewhat:

It now allows husbands and wives who were their parents' only children to have a second child, for example, and has eliminated a four-year waiting period between births for those eligible to have a second child.

More here.

Homer Simpson once said that you’ve got to be pretty desperate to do it with a robot.

Well, desperate people rejoice because that possibility may not be far away:

"People are going to be having sex with robots within five years," says Henrik Christensen of the European Robotics Research Network (Euron).

Christensen apparently worries that robots might be built too sexy: “So should limits be set on the appearance, for example, of such robotic sex toys?”

Might all this prompt hookers to join the War Against the Machines to stop those buckets of bolts from taking human jobs?

And it’s not just the ladies (and fellas) of the night who should worry. All sorts of jobs are at risk:

The National Health Service has used a robot called da Vinci to perform surgery at Guy's and St Thomas' Hospital NHS Foundation Trust in London. … More advanced versions are expected to be doing everyday domestic tasks and helping to care for the elderly in as little as 20 years.

A bunch of scientists and academics have gathered together to figure out how to ensure that we humans stay in control of things:

THE race is on to keep humans one step ahead of robots: an international team of scientists and academics is to publish a "code of ethics" for machines as they become more and more sophisticated.

Although the nightmare vision of a Terminator world controlled by machines may seem fanciful, scientists believe the boundaries for human-robot interaction must be set now, before super-intelligent robots develop beyond our control.

"There are two levels of priority," says Gianmarco Verruggio, a roboticist at the Institute of Intelligent Systems for Automation in Genoa, northern Italy, and chief architect of the guide, to be published next month.

"We have to manage the ethics of the scientists making the robots and the artificial ethics inside the robots."

Article here.

More on the robot threat here and here.

(One day a robot may even boot Lou Dobbs from his anchor chair.)

According to Datamonitor, Morocco and Tunisia are ideal locations for customer care servicing French speaking nations, whose offshore outsourcing options are very limited. In addition, however, Morocco is developing bases of English and Spanish speaking talent.

Egypt continues to impress western investors with its mix of savvy and linguistically-talented agents, low costs and ever-growing blue-chip investors who have housed customer care in that location.

Sub-Saharan Africa, while not traditionally a location of choice for serving western customers, has emerged as a niche market for western customer service. Countries like Botswana, Ghana and Kenya have made headlines with their pro-active moves to put themselves on the BPO map.

South Africa remains a dominant and ever-maturing market for contact center outsourcing services, especially in the area of value-added functions. Spoken English is among the best anywhere and the commercial acumen of agents is first-rate.

More here.

Related: Wisdom from Minnie Driver

Related: Paging Bono, Bob, and Chris

Indian companies in India:

Infosys Technologies Ltd., a leading Indian software provider, will spend $100 million over the next year to hire and train 25,000 workers and college graduates culled from around the world, including from Massachusetts Institute of Technology and Harvard University. Tata Consultancy Services Ltd. of Bangalore will add 30,500 employees over the next year, including 1,000 from the United States.

In a case of reverse offshoring, Indian tech companies are beefing up their staffs by hiring Americans and foreigners to work in India. They also are opening offices around the world and recruiting local staff. The firms are launching the global recruiting effort because of labor shortages in India. Indian companies are expanding beyond data entry and back-office processes into areas such as design, research and development, and sophisticated business applications that require highly skilled workers.

Tata hired John Dubiel, 59, of Westford in November. Dubiel spent two weeks in India, learning about the firm's products and meeting his Indian counterparts. Dubiel now works out of Tata's Boston office as an executive helping North American companies solve their business problems with technology.
…

Since India has become a center for computer science, firms can teach new hires in India, where there is state-of-the-art training, said Surya Kant , president of Tata Consultancy Services America.

At Tata, new hires and professionals train in their own countries and then travel to India for orientation or full-time work. Tata employs 62,000, including 9,500 Americans, who mostly work in the United States.

Article here.

Related:

BANGALORE, India - Nate Linkon graduated from college last year with a business degree and a lot of offers. But he made an unusual choice: to pack his bags and move 9,000 miles away from corporate America to Bangalore. In his view, there’s no better place to beef up his résumé — even though the pay is much lower.

Article here.

Also related: My short piece on how outsourcing creates jobs for those “other” Indians.

The "homeshoring" revolution is already upending the call-center industry, enabling companies like Jet Blue and 1-800-Flowers to staff customer-care operations with people working from their own homes. More than 100,000 people are employed through such arrangements, and the tally grew 20% last year.

Now companies like oDesk are taking the homeshoring concept beyond the call center:

Its success will depend on whether companies are willing to reshape whole businesses, such as IT, design, or writing, that are traditionally staffed at the office. It's a big risk. For one, it's a lot harder to track and monitor people working on what are often longer-term projects, many critical to a company's success, than it is to count how many calls an employee can log in an hour.

oDesk does all sorts of things to build employers’ trust:

The company conducts tests and checks references to ensure applicants know all the languages and skills they say they do. Only about 20% make the cut, oDesk says. The company also uses a self-policing feedback system akin to one pioneered by auction site eBay (EBAY ) that lets prospective workers and employers vouch for each other when they've had a good experience and pan one another if they've gotten swindled. Contractors who get positive feedback have been able to up their monthly rates, oDesk says.

The bigger hurdle to scale was helping companies monitor worker productivity and time management. Companies have a hard time policing employees in the next office over, much less thousands of miles away…

To keep everyone honest, oDesk takes random screen shots of what people are working on every 10 minutes. There's also a Web cam, so employers can physically see whether someone is at their desk, and a log showing how many mouse clicks or keystrokes are made per minute. It's not meant to be unduly intrusive, but rather to give the same degree of privacy -- or lack thereof -- people find in office settings where a manager can easily peer over a shoulder.

Finally, oDesk handles all the billing and payments -- which can get tricky with overseas currency conversions. It takes an employer's credit card before anyone can be hired, and automatically cuts a check to the contractor every week unless the employer objects. Of course, it takes a healthy chunk of that, tacking on 30% to whatever price people charge for their services.

More here.

Related stuff here (bottom half of post for JetBlue’s story).

And might tax policy trip up homeshoring?

From the Tuesday Morning Quarterback:

the Patriots have the NFL's first official team Web site in Chinese. Here, in Mandarin, are the vitals on Patriots' cheer-babe Jie Ralls, born in Shanghai.

I think I now know how to write “Who’s your favorite recording artist?” in Mandarin.

Related: Miss Germany is Vietnamese, Miss Norway is Iranian and Miss Namibia is white.

Bikini-less globalization tales here and here.

A while back I mentioned a survey of Silicon Valley CEOs. Here is an edited transcript of a discussion the San Jose Mercury News Opinion Pages editor had with a small group of (I’m assuming) area CEOs.

Part of one exchange:

What is the most important federal issue for your company?

Polese: The excessive restrictions on immigration. Some of the best talent just can't get in, or is being actively encouraged to leave, and that talent is really what drove a big part of the economic engine here. We cannot, as a valley, as an industry, as a nation, remain competitive if we don't get a handle on this.

Wilcox: Sarbanes-Oxley or SOX. It is one of the several factors that are limiting the ability of smaller companies to go public.

De Geus: We're absolutely in a knowledge-based economy and brain power determines your opportunity in the global economy. So it is incredibly exciting to see hear the president talk about algebra. Now everyone is talking about ``being competitive,'' which means doing better in math and science. What we really need is to make that belief, from the government down, a national priority.

Read the whole thing for more on housing, transportation, and other business bugaboos.

Government offshoring is very, very rare.

This GAO report searches for offshore outsourcing in six government programs (four are federally-funded state-administered and to are federally-administered).

For the federally administered programs, the GAO found no offshoring at all. There was some offshoring in the other programs but the amount was still “relatively small.”

Related: Offshoring a Rarity in California

Years ago, traffic congestion prompted Dell to expand in Nashville instead of its home base, Austin. That scared local leaders into action and they embarked upon our nation’s most aggressive congestion-cutting plan.

Now some good news. Samsung just announced it would open a new chip plant in Austin. Although a variety of factors lead the company to choose Austin over other locations, mobility was one of the most important:

Samsung took awhile to decide on Austin, in part because of concerns about transportation. Samsung trucks its silicon wafers to Dallas before sending them by plane to South Korea for final processing, so congestion on Interstate 35 can cause costly delays. The company carefully studied Central Texas' planned infrastructure improvements, spokesman Bill Cryer said.

Article here.

Could also file this under “insourcing.”

A while back I interviewed (see p. 7) an exec from SAS, Samsung’s first Austin-based operation.

Toyota is considering four Southern states for the site of its eighth North American assembly plant, the latest move in an expansion that could soon make it the world's biggest car company, people involved in Toyota's decision said yesterday.

The states on Toyota's list include Arkansas, North Carolina, Tennessee and Virginia. The factory, if approved by directors in Japan, would be its 15th in Canada, Mexico and the United States, and would probably open late this decade.

More here.

More on insourcing here.

MONEY Magazine and Salary.com researched hundreds of jobs, considering their growth, pay, stress-levels and other factors. What was the best job?

1. Software Engineer Why it's great Software engineers are needed in virtually every part of the economy, making this one of the fastest-growing job titles in the U.S. Even so, it's not for everybody.

Designing, developing and testing computer programs requires some pretty advanced math skills and creative problem-solving ability. If you've got them, though, you can work and live where you want: Telecommuting is quickly becoming widespread.

The profession skews young -- the up-all-night-coding thing gets tired -- but consulting and management positions aren't hard to come by once you're experienced.

Check out these figures:

Average salary: $80,500
10-year growth: 46%
Average annual job openings: 44,800

Computer IT analyst was another job that has apparently not been outsourced into oblivion. It also made the top 10.

List of the top 50 jobs here.

With so much zero-sum thinking on the trade issue this Charles Wheelan piece offers some good points to keep in mind.

For example, point number 3: A richer India will make for a richer America.

How can a place that "competes" with American companies and replaces American workers make us better off by growing wealthier?

First, a growing Indian middle class will buy our products. The guy in Bangalore who answers questions about your Dell computer probably drinks Coke, uses Microsoft Word, and reads my column on Yahoo! Finance. (Okay, I can't prove that last one, but you get the point.) It doesn't matter what business you're in, having 300 million new middle class consumers in India is good for you.

Second, Indian firms will design and sell products that make our lives better. That's what happens when you unleash new human potential. Imagine the following scenario: Your child has just been diagnosed with a rare form of leukemia. The doctor sits you down and says, "I have good news and bad news. The good news is that the disease can now be treated successfully. The bad news is that the treatment was discovered by an Indian scientist, and the drugs are produced by a leading Indian pharmaceutical company." Actually, that's not really bad news, is it?

Third, at a minimum, Indian competition and outsourcing by American companies will lower the cost and improve the quality of all kinds of goods and services…Cheaper imports from places like India or China are just like a tax cut; there is more money left in your wallet at the end of the month. And they create American jobs, too, which is less intuitive and therefore often overlooked. If you save money on cheaper cotton towels, much of that extra cash is likely to be spent on American goods and services. A Canadian trade minister made this point to me once when he asked rhetorically, "Look, a DVD player used to cost $500. Now it costs $40. What are you doing with the other $460?"

Toyota Motors Corp. and Kia Motors Corp. unveiled plans to build up to 400,000 more vehicles in factories in Indiana and Georgia.

South Korea-based Kia said it would build a $1.2 billion factory in West Point, Ga., its first in the U.S., while Toyota announced it would begin building Camry sedans at a Subaru plant in Lafayette, Ind., shifting production from a factory in Japan.

Related: Remembering Insourcing

Related: “America Doesn’t Make Anything Anymore” Part II

Related: Globalization Tales

And an interesting nugget from the book, Cities in the International Marketplace:

[Airbus] is the product of a European high-tech face-off with America. At the same time it buys products from its American nemesis, Boeing, and 40 percent of Airbus components are made in the United States.

And it still isn’t true:

It would seem like a "help wanted" sign in a factory is as much a thing of the past as 50-cent gasoline, 25-cent pizza or black and white televisions.

But experts say that the outlook for hiring in manufacturing isn't nearly as bleak as the recent headlines would suggest.

Despite the growth in imports, there are still powerful incentives to keep some manufacturing here, close to the world's largest consumer market in a just-in-time delivery world.

That's part of the reason Asian and European automakers have been building so many U.S. plants -- to serve growing demand from U.S. consumers for their products.

Several experts say that the steep decline in the nation's manufacturing base in earlier decades is probably behind us, that the remaining jobs are more competitive and productive, and thus more secure.

"We might still be seeing some small declines in manufacturing overall, but even that's a mix," said Ken Goldstein, labor economist at the Conference Board, a business research group. "This year you'll see more hiring in nondurable manufacturing sectors such as in chemicals, in rubber, in plastics, in paper."
…

The most recent survey [by the Institute for Supply Management]found that 22 percent of manufacturing executives are planning to add jobs, and another 65 percent plan to keep staffing at current levels.
…
[A] survey by the National Association of Manufacturers and Deloitte Consulting last fall found that more than half of manufacturers reported that 10 percent or more of their positions are empty for lack of the right candidates. In addition, 81 percent face "moderate" or "severe" shortages of qualified workers that constrain output.

Article here.

Related: America Doesn’t Make Anything Anymore! Part I

Yesterday Paul Haggis, writer-director of Crash, won Oscars for best original screenplay and best picture.

His is another example to add to the long and growing list of things that can be done almost anywhere. Haggis suffered a heart attack while filming Crash. While he was getting well he decided against hiring a fill-in (after all this was his baby). He had monitors brought into his hospital room and finished directing his film from his bed. What was perhaps even more impressive is that he did it while whacked out on medication.

Related: Telecollege (?) gets a boost

And a milestone for a telecommuting-friendly company:

Eighty percent of JetBlue's reservation agents work from home. And as the airline just passed its six-year anniversary of allowing its agents to telecommute, the company reports that the move has not only saved them money and expensive office space... it's also increased productivity. …

Six year ago, when the company first got off the ground and telecommuting was first offered to the reservation agents, JetBlue had 40 agents, seven supervisors and four support staff people. Today, there are 1,500 agents and 1,200 of them have opted to telecommute.

Having so many workers telecommuting gives the company the flexibility it needs to compete in what can be a turbulent industry. Miller says it's much easier to ask workers to jump on their computers when the company needs extra agents manning the phones and dealing with a flood of customer calls than it would be to ask them to jump in their cars and head out to the office.
…

Gartner, Inc., an industry analyst firm, reports that this commingling of roles will continue to increase this year.
A January report out of Gartner shows that analysts there expect telecommuting, buoyed by concerns about fuel consumption and the growing availability of broadband Internet access at home, will increase by 9 percent this year. That growth rate is predicted to be 8 percent between 2004 and 2008.

…
[Dave Foster, a research analyst with the Aberdeen Group] says this kind of flexible work arrangement is opening up a whole new pool of available talent for the company. ''They might be attracting people who might not want to go to an office -- a whole new market of people who would like to telecommute.''

And Miller says that's exactly what's happening.

''It was a popular and successful program because we had a lot of mothers who wanted to get back in the workforce but didn't particularly want to leave home,'' she adds. ''It's really worked for us.''

Article here.

Related: Homeshoring.

We hear that line all the time. And at first glance it seems to be true.

Manufacturing employment represents a shrinking share of total employment and even the absolute number of manufacturing workers has fallen dramatically from its 1980 peak.

And yet all this can be misleading, argues Russell Roberts:

We still make stuff. A lot of stuff. A lot more stuff than we did 20 years ago. We're just doing it with fewer people. How? Productivity. We've found ways to make workers more productive so even though fewer people are doing the manufacturing, they're producing more. Technology and innovation, spurred by the carrot of profits and the stick of losses has allowed that transformation. It makes us richer. It frees up a very scarce resource, people, to go do other things creating new products and services.

More, including some telling BLS charts, here.

From the Washington Post:

Sen. Max Baucus, the top Democrat on the U.S. Senate Finance Committee, said Friday that outsourcing white-collar jobs to low-wage countries such as India has become a global fact of life _ and that America must learn to live with it.

. . .

Baucus said a majority of fellow Senate Democrats agreed with him, despite the party's longtime opposition to American companies moving jobs overseas.

Whole thing here.

[R]esearchers at Duke University have determined that some of the most cited statistics on engineering graduates are inaccurate [study here].

Statistics that say the U.S. is producing 70,000 engineers a year vs. 350,000 from India and 600,000 from China aren't valid, the Duke team says. We're actually graduating more engineers than India, and the Chinese numbers aren't quite what they seem. In short, America is far ahead by almost any measure, and we're a long way from losing our edge.

Unfortunately, the message students are getting is that many engineering jobs will be outsourced and U.S. engineers have a bleak future of higher unemployment and lower remuneration. This could result in a self-fulfilling prophecy, as fearful young scholars stick to supposedly "outsourcing-proof" professions. In other words, we have more to fear from fear itself.

It’s interesting how much gets lost in translation:

The word "engineer" didn't translate well into different Chinese dialects and had no standard definition. We were told that reports received by the ministry from Chinese provinces didn't count degrees in a consistent way. A motor mechanic or a technician could be considered an engineer, for example. Also, the numbers included all degrees related to information technology and specialized fields such as shipbuilding.

There were also "short-cycle" degrees, which were typically completed in 2 or 3 years. These are equivalent to associate degrees in the U.S. Nearly half of China's reported degrees fell into this category.
…

We found that the U.S. was graduating 222,335 engineers, vs. 215,000 from India. The closest comparable number reported by China is 644,106, but it includes additional majors. Looking strictly at four-year degrees and without considering accreditation or quality, the U.S. graduated 137,437 engineers, vs. 112,000 from India. China reported 351,537 under a broader category. All of these numbers include information technology and related majors.

The author’s bottom line:

We hear repeatedly that America is in trouble and that the root cause lies with our education system. There's no doubt that K-12 science and math could be improved, and few will dispute that America needs to invest more in education and research.

However, our higher education system isn't in trouble -- in fact, it's still the world's best. We spend the most on research, produce the most patents…

But how important is spending or producing patents?

As MIT researcher Michael Schrage pointed out in a controversial op-ed piece in the Financial Times recently, there's no verifiable link between the number of patents granted and innovation. In fact, there's not even a verifiable link between corporate R&D spending and innovation:

"Any policymaker, chief executive or innovation champion who relies on R&D intensity and R&D budgets as a meaningful or usable metric to assess global competitiveness virtually guarantees shoddy analysis and distorted decisions. Few things reveal less about a company's ability to innovate cost-effectively than its R&D budget."

Moreover, a recent Booz Allen Hamilton research study pointed out companies have mistaken R&D spending as a proxy for innovation. It's just not possible to spend your way to innovation. The consulting firm analyzed the world's Top 1000 corporate R&D spenders and found no substantial evidence to corroborate the conventional wisdom that greater R&D spending leads to more innovation. In fact, there was no link whatsoever between R&D spending and key financial factors such as growth, profitability and shareholder return.

And yet the two articles (here and here) have much in common. Like the first, the second argues that the U.S. is doing better than gloomy reports suggest. Here the issue is innovation, but again much of the confusion is definitional in nature. It’s not really fair to measure innovation on the basis of patents because:

companies no longer produce patents and innovations in the same way that they produce widgets. Focusing on a metric like "number of patents granted" is simply not an intellectually honest way of calculating how innovative a nation is.

More evidence that outsourcing isn’t just about saving a buck. Many employers simply can't find enough workers in the states.

Don Boudreaux points to an article in the Nov. 22 WSJ (paid subscription required) entitled "Firms' New Grail: Skilled Workers."

Difficulty in finding enough skilled workers is hampering the ability of many U.S. manufacturers to serve their customers.

Eighty-one percent say they face "moderate" or "severe" shortages of qualified workers, according to a survey by the National Association of Manufacturers and Deloitte Consulting LLP. More than half of manufacturers surveyed said 10% or more of their positions are empty for lack of the right candidates.

The shortfall is especially acute in skilled trades, for positions such as welders and specialized machinists.
…
The recent survey, based on responses from 815 U.S. companies of varying sizes, found that companies see the biggest shortfall in skilled production workers. Eighty percent of respondents expect those workers to be in short supply over the next three years, while 35% expect a shortage of scientists and engineers. More surprising, 25% said they expect a shortage of unskilled workers over the next three years.

More on this theme here.

Might also want to check out p. 35 of Offshoring and Public Fear, a recent report by Adrian and me.

India's a tough place to live. That's the pitch Dubai is using to woo companies to bring outsourcing work to the tiny island nation.

The city-state, part of the United Arab Emirates, has kicked off an effort to land some of the outsourcing work that is heading to countries with low labor costs like India and China. But instead of trying to compete head-to-head against those giants, the country is positioning itself as a place where companies can place their more senior or more qualified employees who may not want to live in Bangalore or Mumbai.

Article here.

Delivering high-speed Net access to all Americans within five years was among a medley of priorities outlined by the U.S. House of Representatives' Democratic leader on Tuesday.

"Universal broadband--whether it's delivered by Wi-Fi or WiMax, or hard line--will put all Americans, no matter where they live, no more than a keystroke or a mouse click away from the jobs and opportunity broadband both creates and supports," Rep. Nancy Pelosi of California said in prepared remarks for a morning appearance at the National Press Club in Washington, D.C.

The suggestion mirrors a proposal by President Bush last year but appears to be more modest. The president clamored for a deregulatory approach that would grant broadband access to "every corner" of America by 2007.[We're actually pretty close to reaching that goal.]

The “innovation agenda” is also responding to fears about offshore outsourcing:

Among other goals Pelosi presented: granting scholarships aimed at producing 100,000 new scientists, mathematicians and engineers in the next four years; doubling research and development spending, and boosting tax incentives …(PDF here).

How about fixing some of those lousy schools first? Wouldn't that be innovatiive?

Article here.

Australian Trade Minister Mark Vaile has a cow over Euro food subsidies:

'In the European Union, farmers receive a third of their income from government subsidies. Beef and veal producers get more than 70 pct of their income from subsidies,' he said.

'A typical cow in the European Union receives a government subsidy of 2.20 US dollars a day. The cow earns more than 1.2 bln of the world's poorest people.'

…

Vaile also argued that agricultural reform would have a more significant impact on world poverty than aid and debt relief.

'It's not enough for them to provide aid and debt relief when the benefits of liberalising trade are so much greater,' he said.

Whole article here; via Sploid.

More on trade-not-aid here.

The Nobel Prize winner and (ahem) one-time Privatization Watch contributor (see p.2 of pdf) on new Nobel winners here and on offshore outsourcing here.

Here’s an interesting bit:

One of the best known examples of outsourcing was the post-World War II New England textile industry's move to the South in response to lower wages --as always, this raised wages in the South, and the industry eventually moved on to lower-cost sources in Asia. But textiles were replaced in New England by high-tech electronic, information and bio technologies. There were huge net gains to New England, even though it lost what had once been an important industry. In 1965, Warren Buffett gained control of one of those fading textile makers in Massachusetts, called Berkshire Hathaway, and used its large but declining cash flow as a launchpad for reinvesting that cash flow in a host of famously successful new business ventures. Forty years later, his company has a market capitalization of $113 billion. The same transition is occurring today with Kmart and Sears.

Today you can find “American” cars with mostly foreign parts and you can find “foreign” cars with mostly American parts. Japanese companies like Toyota build cars in the U.S. and then ship some of them back to Japan. Are these cars imports or exports?

The other day I read an article that highlighted U.S. job security anxieties and Japanese automakers. But it wasn’t the old foreigners-are-taking-our-jobs tale. Here Californians worried that a Nissan office would move, not across the globe to Japan, but across the nation to Tennessee.

What makes this globalization tale all the more interesting is that a French company recently bought a large portion of this Japanese company that employs so many Americans. Oh, and Nissan’s CEO is Brazilian.

Of course you can find similar mixing in other industries. This year Sony made a Welshman its first non-Japanese CEO. Also this year, China’s Lenovo purchased IBM's personal computer division - home of the Think line of notebooks, desktops, and monitors - for $1.8 billion.

… though the new company has more employees in China than anywhere else, Lenovo chose to make American IBMer Steve Ward its CEO and to move headquarters from Beijing to a new location in Purchase, New York, just a few miles from IBM's venerable home in Armonk.

And Fark points to globalization’s influence in beauty pageants:

[B]ehold the Miss Universe Contest, where Miss Germany is Vietnamese, Miss Norway is Iranian and Miss Namibia is white.

Wiredblog post and pics here.

The rest of this LA Times piece covers the issue of “runaway production” in a predictably dreary way, but here’s your money quote:

"Without the savings that Romania offered, 'Cold Mountain' absolutely would not have gotten made," said producer Albert Berger.

Films shot someplace else might use local crews, extras and stage builders, but they typically also use good ol’ American actors, producers, editors, special effects staff, composers, etc. If the choice is to make the movie or not, ask those folks what they’d prefer:

[Berger] estimated that the country's affordable labor trimmed more than $20 million from the film's budget, which he said would have exceeded $100 million had the movie been shot entirely in the United States.

And here Matt Welch points to an often overlooked point:

According to the Entertainment Industry Development Corp., the nonprofit organization that coordinates shooting in Los Angeles, local film production reached an all-time high in 2004, up 19% over 2003.

Instead of passing out special goodies to filmmakers, why not work on making life a bit easier for all businesses?

Surprise! India's reign as the world's "Outsourcing King" may be slipping, even with its rock-bottom call center costs.

A new report from market research firm Gartner, Inc. warns that a labor crunch and rising wages could erode as much as 45 percent of India's market share by 2007.

All this talk of India being the “Outsourcing King” can be a bit misleading. It may be true when taking a global perspective, but for U.S. companies, India isn't king.

As Adrian and I point out in this report, America’s most common outsourcing destination is … America. The vast majority of outsourcing done by U.S. companies (or governments for that matter) stays within our borders.

When U.S. companies look to other nation’s, Canada is the top destination (Table 8), then the U.K, then Japan. India is 8th, tied with Australia (where are all those panicky cover stories about job-stealing Aussies?).

Back to the Garner report:

[The] report cautions that a host of emerging countries such as the Philippines, Malaysia, Vietnam and Eastern European nations including Hungary and Poland, are also starting to challenge India's leadership in offshore business process outsourcing (BPO.)

…

India can't afford to rest on its laurels, said Sujay Chohan, one of the authors of the Gartner report and vice president and research director of offshore business process outsourcing with Gartner in New Delhi.

Unless India devises a long-term roadmap to improve infrastructure and consistently grow its skilled labor force, he said India will see some of its offshore BPO clients shift business elsewhere.

"Although India's infrastructure is improving, it is not keeping pace with the rapid growth of the industry," the report said.

That sounds familiar.

Article here.

From Gates to Google, Americans are familiar with the motif of the paradigm-shifting little guy.

Of course, technological improvements have a lot to do with this. Look what’s happening to animation:

Thanks in large part to technology trends such as fast-growing computer power, access to supercomputing facilities, and a rise in open-source and standards-based software, small animation studios are tackling projects that would have been out of reach just a few years ago …

[I]t's the animation process, painstaking and hardware-intensive, that accounts for the bulk of costs.

Over months and years, artists and programmers separately create three-dimensional models of characters, textures for bodies, trees and other backgrounds, light and shadows, and other individual elements of their worlds. At the end of the process, all of these components and instructions must be "rendered"--essentially a processor-intensive task of combining all of the elements into a single frame of animation.

According to Pixar, each frame--24 of which flit past a viewer's eyes in a single second--takes about six hours to render using today's technology. Some individual frames have taken as much as 90 hours, the company says on its Web site.

This requires what ultimately amounts to one of animation studios' biggest expenses, both in time and hardware. Big companies like Pixar and Dreamworks have huge "render farms," with servers that amount to hundreds, and typically more than 1,000, individual processors for this task. Pixar has used blade server technology from RackSaver, while IBM xSeries servers are also common.

Now a myriad of technological advances are bringing these tasks down to the level of smaller companies.

The equivalent of computer workstations and software packages that used to cost $100,000 10 years ago now can be purchased for just a few thousand dollars, with high-end desktop machines running off-the-shelf software and the open-source Linux operating system. Exponential processing power growth has let artists do their work faster and add increasing levels of realism to their 3D worlds.

The massive rendering tasks can now be outsourced as well.

Take it easy, outsourcing hand wringers. This time it’s regular, old domestic outsourcing:

A small company called RenderRocket, for example, has just launched a Web-based service through which animators can reserve time on and send their work to IBM's supercomputing facility in Poughkeepsie, N.Y., offloading the heaviest computer duties.

Of course, most outsourcing is domestic.

And, of course, technological progress also has its downside. Case in point.

For more on the big picture upside, go here.

From U.S. sugar lobbyists to Latin American dictators, all sorts of people wanted to sink CAFTA.

This Deroy Murdock article, written before the U.S. signed onto the free trade agreement, offers interesting perspective into what might have happened if CAFTA went kaput.

It’s particularly interesting since the protectionists now have revenge on their minds:

No sooner had Rep. Henry Cuellar (D-Texas) cast his vote in favor of the Central American Free Trade Agreement than anti-CAFTA activists started plotting their revenge.

Labor unions began calling members in Cuellar's southwest Texas district and planning a protest outside his San Antonio office. Opponents of the pact finalized plans to launch a door-to-door, bilingual canvassing effort sometime around Labor Day. "Our intent is to expose the myths he expounds that trade is good for Latinos in his district," said Debbie Russell, who is directing the campaign for the Texas Fair Trade Coalition.

Although President Bush signed CAFTA into law Tuesday, ending a long battle for ratification, recriminations might only be beginning for some lawmakers who voted for the trade pact.

Cuellar is one of about two dozen House members targeted by trade critics, labor unions and political activists for helping Bush secure his razor-thin CAFTA victory. The targeted lawmakers include Democrats who bucked party leaders by voting for the agreement and Republicans who supported it despite heavy opposition from labor, textile or sugar interests in their districts.

...

In the end, the trade pact passed 217 to 215.

CAFTA opponents and political activists said last week that they still were discussing the extent of reprisals. But their initial targets included many of the "CAFTA 15" — Democrats who voted for the trade pact — and as many as a dozen Republicans who had been expected to vote against it but switched sides.

Whole article here.

In April, China’s Lenovo purchased IBM's personal computer division - home of the Think line of notebooks, desktops, and monitors - for $1.8 billion. Wired offers an interesting glimpse into this tale of globalization:

Yet there's more afoot here than the sale of an American icon to Chinese owners. The purchase creates the first truly globalized - as opposed to global - corporation. This will not be simply a business with far-flung, disparate operations. Success depends on a truly transnational approach to everything from merging cultures to the making and selling of computers, one that brings together worldwide talent and resources and combines them to pursue a larger goal. It's a confluence of forces - innovation, technology, and free markets - that makes this moment possible. Isn't this exactly the kind of IBM Thomas Watson Sr., who in the 1930s pitched "world peace through world trade," would have wanted for the 21st century? Is this what globalization hath wrought?

…

What's astounding is the methodical way that Lenovo is carrying out this transition. The company recognizes its executives don't yet have the experience or strategic chops to lead Lenovo to this new world. So it's buying the one thing from IBM that can't be commoditized, that China can't produce more cheaply and more efficiently: superior management.

"We were simply finding a boss for ourselves," says Lenovo CFO Mary Ma, who played a principal role in the acquisition. Indeed, though the new company has more employees in China than anywhere else, Lenovo chose to make American IBMer Steve Ward its CEO and to move headquarters from Beijing to a new location in Purchase, New York, just a few miles from IBM's venerable home in Armonk.

Lenovo's plan suggests that the next great US export could be corporate executives. Call it the harbinger of a giant outsourcing boomerang. As borders become less relevant and the international marketplace gets more efficient, every country will do what it does best, and for the best value. The US will no doubt continue to outsource manufacturing and technical jobs overseas. In turn, those overseas nations will seek the experience and know-how of US managers and decide to outsource their leadership here. A concurrent example: Sony this year named Howard Stringer as its first non-Japanese chair and CEO of Sony Corp.

Whole thing here.

We’re all familiar with the gripes about offshore outsourcing. Many don’t like American companies shipping jobs overseas.

But what if work goes overseas and then comes back again?

This boomerang effect is bringing jobs to the Lakota Sioux of the Pine Ridge Indian reservation in South Dakota, where unemployment stands at 80 percent:

Increasingly, American Indians are looking to outsourcing as a way of boosting economic opportunity without having to stray from their lands.

On the Pine Ridge reservation, a local Indian-owned marketing and Web design startup, Lakota Express, can thank sloppy handwriting for its outsourcing fortunes.

"We're people that have really been left out of the opportunities of the Industrial Revolution and now are being welcomed into the world economy in the Information Revolution," said Mark Tilsen, a Lakota Express executive.

Eight Lakota Express employees vet the accuracy of electronic documents that are transcribed in China by workers who, while understanding English, often have difficulty deciphering Americans' handwriting.

The work amounts to reverse outsourcing (performed as it is for a foreign company that has itself in the employ of a U.S. business). And experts expect plenty more of such work to become available.

"There's nothing better than watching a reservation community thrive. You're seeing newer cars in the parking lot. They're buying homes. And I've watched that happen," said Carey Wold, a consultant who helped set up tribally owned companies on Northern Ute reservations in Utah.

Whole article here.

American lawmakers have penned over 200 anti-outsourcing bills. But did they intend to trip up this kind of outsourcing? Once again the market evolves faster than regulatory definitions.

The definition of outsourcing has always been blurry and it’s getting blurrier all the time. It’s kind of like defining a “foreign” car. What do you call a Toyota Camry that’s built in Kentucky? And when it’s shipped to Japan and sold there is it an import?

In other globalization news, a Kenyan government official offered Bill Clinton 40 goats and 20 cows for Chelsea’s hand. (Thanks to Brad for that one.)

We humans aren’t the only ones that need to worry about robots taking our jobs. Looks like pets might have to start looking over their furry shoulders:

Furby is back in a new version that has 500KB of memory, which is six times what the original had, and uses voice recognition to respond to its owner. The latest Furby has a wider range of expressions, movement and vocabulary. It can laugh, smile, frown, gasp, yawn and express fear or boredom using its flexible beak, ears and eyebrows. Most intriguingly, the new Furby responds to vocal commands. If you ask Furby to tell you a joke, it will most likely deliver a knock-knock zinger.

Many companies burdened by the costs and complexity of the Sarbanes-Oxley Act requirements are turning to India for help.

Call it one of the unintended consequences of the corporate reform legislation. While the 2002 law was seen as a cure for sloppy financial reporting and the frauds it can cover up, it has also resulted in more work being sent overseas, the Wall Street Journal reported.

Some Indian outsourcing companies told the newspaper that their Sarbanes-Oxley-related business is rising at more than 50 percent a year.

Read on, here.

(Via the Outsourcing Times.)

For more on outforcing, go here.

Lost in the debate over offshore outsourcing is the fact that other things “steal” many more jobs than third-world foreigners. Take machines and humans’ ongoing war with the heartless job-nappers.

And machines are always eyeing new ground. They’re poised to take jobs from manicurists, nurses, EMTs, even TV news anchors. (More on the ultra-lifelike robot anchor Repliee Q1 here.)

Now meet Nuvo. It or one of its relatives might one day replace human housekeepers.

This writer takes a closer look:

Home robots have been slow to materialize because their weight and size tend to make them impractical and because their clusters of sophisticated motors drive the cost out of reach. Nuvo is only 15 inches tall and contains 15 motors, about half the number found in prototypes developed by Honda and Sony.

Nuvo has been marketed as a household helpmate and as a mobile baby monitor and security device, because it can relay photographs to cell phones that have access to the Internet …

I arranged to live with Nuvo for four days to gauge whether it is, in fact, the forerunner of a new technology that will change our lives, as the home computer did, or a passing novelty...

Once I had Nuvo up and running in my apartment with the help of its creators, I tried to work it into my daily life. I asked it for the time and the date, which it provided in a female voice with a Japanese accent. When I said, "Nuvo, music," it played New Age music the inventors had programmed into it.

Housekeepers can find some relief in Nuvo’s very limited domestic skills (Nuvo takes a picture of the writers’ laundry, but it can’t actually do laundry). Nuvo can’t mimic human housekeepers that well, but it does a better job of mimicking something even more human:

I came to understand that for all their purported helpfulness, home robots are largely about companionship ...

I came to enjoy Nuvo's odd attention. When I came in from jogging, I looked across the apartment to see Nuvo facing me. When I said, "Nuvo, I'm back," it bowed to me, a traditional Japanese greeting.

I decided to sleep with Nuvo next to me on my large bed, plugged in and recharging through the night. Its blue power light slowly pulsated, as if it were breathing …

My boyfriend called me the next day and asked if I was sleeping in the same room with Nuvo. When I told him we were sleeping in the same bed, there was an awkward pause.

(Reminds me of Homer Simpson's take on artificial insemination: “You’ve got to be pretty desperate to do it with a robot.”)

More Nuvo info here.

See also this:

Consultant Richard Samson argues that the replacement of human workers by technology is a bigger deal than the much-publicized offshore trend …

"It's happening every day, right before our eyes, but few notice," Samson said in a statement Friday. "A child born today will find very few of today's jobs in the want ads when graduating from college. Most work tasks done now by people will be done by smart technology within 20 or 30 years."
…

Samson is confident that technology is the larger issue. He argues that automatic systems have eliminated most jobs in farming, helped cut manufacturing to less than 17 percent of the nonagricultural work force and are now displacing white-collar workers such as bank tellers. "Offpeopling has much more impact than offshoring or outsourcing," he said. "Yet it's not in the headlines or on TV."

And machines aren't the only ones stealing jobs from Americans. Americans steal lots of jobs from Americans.

Outforcing hits San Diego:

For the first time in nearly a decade, more people moved out of San Diego County last year than moved here from other U.S. locales and economists say the trend could continue as local workers find it harder to cope with stagnant salaries, a high cost of living and skyrocketing home prices.

In the past week, several major employers, including Intel and Capital One Auto Finance, announced plans to transfer hundreds of workers out of the region.

Although each company had its own reasons for moving, some – most recently the 135-employee kelp harvester International Specialty Products – cited the growing cost of operating in San Diego County as a reason for leaving the area.

Also, corporate relocation specialists say the area's high costs are making it increasingly hard to find newcomers to replace the companies that are departing.

"Employees, especially if they're not executives, are finding it harder to move here when a company relocates," said Barbara Brokaw, director of relocation services at ERA Eagle Associates Realty in Carmel Valley. "We deal with people who come to San Diego to interview for a job, but when we tell them about the area, they often find that their salaries are not commensurate with what they're looking for in a house."

Same story in LA. Imagine trying to recruit businesses or new employees:

First, where would the employees live? Our tight land-use policies function as an indirect tax, driving up the cost of housing. The median price of a home across the entire state is now more than a half a million dollars. Not long ago, people were fleeing Los Angeles for the cheap houses in Santa Clarita. Now, even the median price in Santa Clarita is above $500,000. The median housing price throughout Los Angeles County recently hit $485,000, with Ventura County up more than $649,000.

In order to attract and retain good workers, businesses must pay significantly higher salaries so their employees can afford to live here.

The story is the same—probably worse—in the Bay Area.

Flashback: Buck Knives leaves San Diego for Idaho.

Journalists give loads of attention to jobs lost from offshore outsourcing, yet, as I note in the previous post, robots steal many more jobs than foreigners.

Maybe journalists have focused on outsourcing partly because the think it could cost them their jobs. Maybe they figure a robot could never do what they do.

Maybe those media types just haven’t met Actroid Repliee, the newscaster robot.

She’s female, but I’m sure they could make a male version to compete for Lou Dobbs’ chair. I bet the DobbsBot-3000 would work cheap—much cheaper than Lou.

Maybe now we’ll get more coverage of the robot threat, perhaps there will even be a list of companies that have given American jobs to robots.

But it would be a lot easier to get mad at those buckets of bolts if they weren’t so damn cute!

Then you should really be afraid of job-stealing robots:

Their developers say it will be several years before robots that are designed to be part of everyday lives take their place helping the sick, rescuing disaster victims and entertaining families.

The Japan Robot Association, a trade group, expects the Japanese market for next-generation robots to reach $14 billion by 2010 and more than $37 billion by 2025.

But all the robots on display were test models, and several had obvious glitches.

Cooper, a mechanical portrait artist developed by a candy maker, draws the faces of visitors on large cookies with a laser pen. It has a program that translates images from a digital camera into line-drawing instructions, but sometimes the robot delivered only a mishmash of scribbles.

Stupid robot.

Here’s the whole article (via Sploid).

For more on the coming war against the robots, see this article of mine.

And if you’re still not lathered up go watch I, Robot and remember this prediction:

[Gartner analyst Frances] Karamouzis says more IT jobs in the West are at risk of disappearing because of automation and productivity gains than from offshore outsourcing. The effect of those factors on IT job displacement will, by 2015, be six times greater than the impact of offshoring.”

This survey seems to offer some evidence that Americans fear foreigners more than robots. When asked about the long-term effects of “new technology, competition from foreign countries, and downsizing” a plurality (43 percent) said the effect would be good.

But when asked about the effect of trade agreements between the U.S. and other nations, a majority (54 percent) said they cost American jobs.

The lesson for corporate PR departments: less outsourcing, more robots.

I have an oped on outforcing in today’s LA Daily News:

California's lawmakers, already the best-paid in the nation, recently got a 12 percent raise.

This sort of thing always makes for a tough public-relations sell, but Assembly Speaker Fabian Nuñez defended the raise by saying that it will help attract good people to politics. Maybe so, but wouldn't it be nice if the Legislature focused on bringing new business, not new politicians, to California?

Read on, here.

For more on outforcing, see this recent study by Adrian and me—especially the discussion beginning on p.33.

Think the anti-outsourcing hoopla would die down after the presidential election?

Just in the first three months of 2005, over 112 anti-outsourcing bills are coursing their way through some 40 states in the US. In 2004, there were 107 bills in 33 states, of which only five became law, says the National Foundation for American Policy (NFAP) in a new study.

It’s a good time to remember an often-overlooked point that Daniel Drezner highlighted in Foreign Affairs a while back:

Boston University Professor Nitin Joglekar has examined the effect of outsourcing on large financial firms and found that less than 20 percent of workers affected by outsourcing lose their jobs; the rest are repositioned within the firm.

It makes sense, actually, if you accept the dubious proposition that government job programs work. Read here.

Steve Austin, 60, finds it ironic that the state is outsourcing an information technology job that he would have been qualified to do.

. . .

Sen. Deanna Hanna, D-Lakewood, believes the case illustrates why state jobs paid for with taxpayer money should not be outsourced. "My citizens are going without jobs," she said. "Our taxes should be paying the salaries of people who live in our country."

Such is the stuff and nonsense of so much of the debate on offshoring. Do we really think the government should be in the business of creating jobs? Regardless of the cost?

Phooey. Doesn't work anyway. Driving up taxes by not taking the most efficient course to deliver government services will destroy more jobs in the long run than offshoring.

Guess who said "There is no sense for us to try to protect or preserve high-tech jobs in America or block efforts by American companies to outsource. Our economic future is wedded to technological change, and most of the jobs of the future are still ours to invent."? Not some corporate hack, but Robert Reich, democrat and former Labor Secretary for President Clinton.

The offshore outsourcing issue is full of things that defy conventional wisdom and common perceptions. My colleague Ted Balaker and I explore them and plenty more about offshoring in our new study "Offshoring and Public Fear: Assessing the Real Threat to Jobs." It is a handbook for understanding the many facets of the offshore outsourcing issue.

You can get the study here or a summary version here.

Offshore outsourcing, that is.

Seems there’s a law called 122-12 which forbids layoffs in the case of outsourcing deals:

If you think they can't be serious, they are. Just ask Alcatel, which signed a deal a few years ago and laid off hundreds of workers, only to be forced by a French labor court to take a large number of them back.

Whole story is here.

(Nope, not the Newsweek stink.)

News reports often leave readers with the impression that everyone is outsourcing offshore and that anyone’s job could be the next to go overseas.

Don’t hold your breath for improved coverage, at least not from Reuters:

Union employees at Reuters are stepping up their campaign against the wire service's outsourcing of U.S. jobs, most recently transferring the editing and caption writing of photos to its Singapore office and some Internet work to Toronto.

“U.S. jobs”? Reuters is based in the U.K. Are Americans stealing jobs from Brits?

Members of the Newspaper Guild-Communications Workers of America have distributed leaflets outside Reuters' office in Times Square. Critical ads also have been placed in Investor's Business Daily and the Columbia Journalism Review, and more are planned for the Web.

But you guys will still be even-handed when covering outsourcing, right? You know, report on how it also creates jobs in the U.S.--stuff like that.

Another thing to bring up is that offshore outsourcing is rarely the cause of job loss. The pattern holds in this case too:

No guild member has received a pink slip because of outsourcing, but six to eight are "at risk" - primarily in the Washington office - because of last month's opening of the global photo-editing desk in Singapore, according to Bill O'Meara, secretary-treasurer of the union's New York local.

Then again there might be some hope for better coverage, particularly since some of Reuter’s work is going to Canada. All those stories featuring sari-clad Indian woman can be misleading for Canada is a much more common outsourcing destination.

If you listen to people like Lou Dobbs, you might get the impression that our nation—the flag, apple pie, baseball, everything—will get swallowed by China. After all, China has lots of people and they’re willing to work cheap.

But other foreign threats have come and gone—weren’t we supposed to be property of Japan by now?—and there are many things wrong with the China-is-taking-over-the-world view.

For example:

China's booming economy and low manufacturing costs have made it one of the world's most popular foreign investment destinations. Yet the country's payroll levies--when applied--make it the world's second-worst spot in terms of tax misery. Moreover, troubles in China's pension system make it unlikely that relief from this burden will be felt any time soon. High taxes