by Randolph T. Holhut
American Reporter Correspondent
Aug. 13, 2004
IT'S THE POST-INDUSTRIAL ECONOMY, STUPID!
DUMMERSTON, Vt. -- So now, even journalists aren't immune from the outsourcing juggernaut.
Reuters announced this week that it was cutting 20 editorial positions in the U.S. and Europe. They will be replaced by up to 60 people in Bangalore, India.
According to Reuters, the Indian journalists won't be doing any actual reporting or writing bylined stories. They will be responsible for doing the scut work of financial reporting - compiling tables, writing short research alerts based on analyst reports and polling analysts for earnings forecasts.
Reuters won't say how much money they will save by using lower-cost Indian journalists to do work once done in the U.S. and Europe, but the company says it is committed to reducing its workforce to stay profitable and keep pace with its chief rival in the financial news field, Bloomberg.
In a column for Editor & Publisher's Web site, Reuters Global Managing Editor David Schlesinger wrote that "work gets done where it can be done most effectively and efficiently" and that outsourcing "helps because it frees up people and capital to do different, more sophisticated work. ... Every person, just as every corporation, must tend to his or her own economic destiny, just as our parents in the mills, shoe shops and factories did. That means continually upgrading skills and staying alert to emerging opportunities. ... The question shouldn't be 'Why?' It should be 'What can I do now that I don't have to do the work that's gone abroad?' and it must be 'What can you, my company, do to help me make a fresh start?'"
If you are fortunate enough to have skills to do different, more sophisticated work, or have the means to acquire those skills, there will be opportunities. My question for Schlesinger is this: most workers are employed by companies that sees their employees as something disposable to be thrown away when they are no longer useful. In a world where more and more jobs are going to the lowest bidder, are we ready to be a post-industrial society? Are we ready to trust our lives to the whims of the marketplace?
These are questions that need to be asked of our business and political leaders as well. The manufacturing sector of the American economy has been all but wiped out. Now, the back-of-the-house professional jobs are starting to disappear. Outsourcing is a big reason why, despite faint signs on an economic recovery, there is little new job growth in the U.S.
Some economists think there is little advantage to the U.S. hanging onto what they call "low-value" businesses. If workers in Bangalore can process insurance claims or operate a telephone call center cheaper than American workers, why bother to keep those jobs in the U.S.? Better we should concentrate on businesses like publishing and entertainment, which accounts for 5 percent of the Gross Domestic Product and is the biggest single sector of the U.S. economy.
But how many Americans are going to find jobs in the entertainment industry? And can we build a national economy where the U.S. specializes in entertainment, banking and technology while we farm out the rest of our economic functions to India or China?
For now, America has the upper hand. The U.S. economy is eight times the size of China's. While Chinese factories are not as technologically advanced as U.S. factories, Chinese workers are efficient, disciplined and plentiful. They can build products by hand or with equipment that would be considered obsolescent in a U.S. factory, and build those products with comparable quality for a lower price. Few U.S. companies can compete with Chinese factories and their low labor costs.
While there is an economic benefit - cheap consumer goods - for Americans, the tradeoff is the loss of good-paying jobs that enable workers to afford those goods.
When manufacturing jobs started flooding out of the U.S., two decades ago, we were told not to worry, because the "knowledge economy" would create the jobs that would take their place. Now, even those jobs are going to other countries where the work can be done cheaper. Can America survive when the biggest employer is Wal-Mart and the career options available to the average worker involve low-paying service jobs that aren't enough to support a family?
Some say education is the answer - investing in the human, social and cultural capital of America to insure we have the most creative, innovative and highly skilled workers in the world. India certainly is doing that - its colleges and universities are turning out more than 40,000 computer science graduates each year, and the enrollments in those programs are rising while U.S. colleges struggle to fill their science programs. And China produces more 325,000 engineers each year, or five times more than the U.S.
Even if there is a massive investment in U.S. science education on par with what the federal government did after Russia launched their Sputnik satellite in 1957, companies will still turn to Indian and Chinese engineers and techies because they will be able to do quality work for less money than their U.S. counterparts.
While the "war on terror" is dominating the presidential campaign, I believe that the effect of globalization and outsourcing on the U.S. economy is an equally important issue. Americans feel uneasy about the future and see a swiftly changing economy that doesn't seem to have room for most workers.
The American economy is eliminating hundreds of thousands of jobs each year as workers and resources get redirected to other industries. The average worker who finds a job to replace the one he lost earns about 13 percent less at his new job. People are being asked to work harder and longer for less money and labor under the constant threat of their job being sent to another country. And while it may be reassuring to know that your job may be safe if you are a plumber or carpenter, a health care worker or a teacher - in other words, skilled jobs that require physical proximity - everything else seems up for grabs.
This is a problem without an easy solution. It will take money, creativity and a commitment to putting the needs of the people ahead of the needs of the market. The alternative is watching the U.S. become a second-rate economic power.
Randolph T. Holhut has been a journalist in New England for more than 20 years. He edited "The George Seldes Reader" (Barricade Books). He can be reached at email@example.com.