The boom years of Silicon Valley will not be returning. Thriving new companies will be founded there, but they won’t create many jobs, because so many white-collar jobs are now being outsourced to India. In future, these jobs may also go to China, Russia, or other countries that have technically-educated workers willing (so far) to work for lower wages than their US-based peers.
To take a typical case: Technical support has long been a problem for high-tech companies. It’s something that customers complain about when it’s bad, but don’t appreciate when it’s good – at least, they rarely appreciate it enough to want to pay for it. Profit margins on software and hardware tend to be slim, and a single support call can eat up the entire margin on a sale. At Silicon Valley salaries, it’s hard to provide support cheaply. But you can’t pay people there less, because they can’t afford to live on less in that very expensive part of the world.
Long ago, discussing with colleagues the costs and difficulties of providing technical support from Silicon Valley, I suggested having email support done from India, which has a huge pool of people who write better English than the average American. (At the time I assumed that phone support could not be outsourced to India, because Americans often have trouble understanding Indian accents.)
A few years after my (then radical) suggestion, this was exactly what began to happen at many companies, for both email and telephone support. Indian third-party support companies solved the accent problem by training their people to speak with American accents and even chat about American topics (discussing baseball from Bangalore? weird). Basic nuts-and-bolts programming has also been shipped off to India – cheaper than the previous solution of importing Indian programmers (on H1 visas) to the US.
By sending jobs offshore, American companies are simply doing what businesses are supposed to do: reduce costs and increase profits. This keeps companies healthy and stockholders happy, and reduces the cost of goods and services purchased by Americans in America. Attempts to “protect” American jobs are likely to – and should – ultimately fail. American businesses are part of a global economy, and will stand or fall by their ability to compete globally. Forcing them to compete on unequal terms, with companies who can obtain essential high-tech services more cheaply, would hamstring them in that battle.
How do we reconcile this with jobs for American workers? Individual American workers are part of a global job market, in which we compete for jobs with people who have lower salary expectations, and often better education, than we do. We can compete by lowering our salaries, or by improving our education.
American education at the highest levels is doing just fine: the scientific and technical programs at American universities are the best in the world. But American citizens are proportionately few in the top-flight PhD programs in physics, mathematics, computer science, etc., because few Americans are adequately prepared at the primary and secondary level to pursue these subjects higher up. Other, much poorer, countries manage to provide such preparation for many of their citizens. How is it that the wealthiest country in the world fails to do so?
The American system of public education has long been cause for shame, and the consequences are now becoming clear: we are failing to prepare our children to compete in the global economy. One of the issues of this presidential election is likely to be offshoring jobs; the first moves towards protectionism are already being made. I’d like to see a presidential candidate address the underlying issue that may ultimately save or ruin the American economy: education to global standards, for all of our citizens.
Unfortunately, some parts of America are heading stubbornly in the opposite direction:
Georgia may shun ‘evolution’ in schools – Revised curriculum plan outrages science teachers, By MARY MacDONALD , The Atlanta Journal-Constitution
Georgia Takes on ‘Evolution’ By ANDREW JACOBS, January 30, 2004, The New York Times: “Sarah L. Pallas, an associate professor of biology at Georgia State University, said, “The point of these benchmarks is to prepare the American work force to be scientifically competitive.” She said, “By removing the benchmarks that deal with evolutionary life, we don’t have a chance of catching up to the rest of the world.”
May 3, 2004
The New York Times provides the follow-up to this one: U.S. Is Losing Its Dominance in the Sciences By WILLIAM J. BROAD, May 3, 2004
Also see a New York Times column by Thomas Friedman.
A recent article in the Economist also talks about the globalization of innovation (you may not be able to reach this story unless you are an Economist subscriber – which I heartily invite you to become! It’s one of the world’s best and most internationally-balanced news sources.)