Tuesday, November 22, 2011

US Firms Add Jobs in India & China, Cut at Home

American corporations created 453,000 jobs in India, a whopping 642% increase in a decade that saw the same corporations cut 846,000 jobs at home.

Overall, US multinational corporations added 1.5 million workers to their payrolls in Asia and the Pacific region from 1999 to 2009, and 477,500 workers in Latin America, according to US Commerce Dept data as reported by the Wall Street Journal.

From 1999 to 2009, the multinational companies also reduced capital-investment spending in the U.S. at an annual rate of 0.2% and increased it at a 4.0% annual rate abroad. This occurred in spite of huge Bush era tax cuts for the rich.

Bulk of the increase in overseas investment and hiring by U.S. multinationals has been in the service sector where most of the American middle class jobs have been lost. Among U.S. multinational firms in manufacturing, about 60% of employment is still in the U.S. But the manufacturers cut their U.S. payrolls by 2.1 million in the 2000s and added 230,000 workers overseas.

While the U.S. multinational manufacturers employ 6.9 million workers in the U.S. and 4.6 million abroad as of 2009, the trend clearly indicates the balance shifting in favor of overseas jobs at the expense of jobs in America.

The irony of it is that the vast majority of average citizens of nations like India where jobs have been created by American corporations have not benefited either. After the decade of job creation by US multi-nationals, India still remains home to the world's largest population of poor, hungry and illiterates. Bulk of the benefits of globalization have gone to a few dozen powerful Indian oligarchs in "the world's largest democracy".

Looking at this jobs data, it's clear to me that the foolish and short-sighted actions of the American MNCs are undermining the very system that has nurtured and enriched them by creating middle class American consumers and voters whose jobs they are killing.

It's the middle class America that has supported the system of American democracy and free markets; destroying middle class America by taking their jobs overseas will only lead to rising instability that will threaten the very foundations of this system....the growing "Occupy" movement across major American cities and university campuses is only the tip of the iceberg of rising discontent.

It's time to save democracy and capitalism from the American capitalists!

Related Links:

Haq's Musings

Will American Capitalism Survive?

Imran Khan Inspired by Iqbal

Occupy Wall Street Anti-Semitic?

India-World's Biggest Oligarchy

Comparing Oligarchies in India and Pakistan

Pakistan Tops South Asia Job Growth in 2000-2010

India is Home to World's Largest Population of Poor, Hungry & Illiterates


Ashmit (India) said...

A few observations.

Firsty, as you have dedicated your last 3-4 years to establish the obvious - a large chunk of indian population is poor. Mpi puts it at about 54 percent, which roughly translates into about 500 million. If that is the case, how is it 'ironic' that half a million jobs didnt benefit half a BILLION people?!

Secondly, whats ironic is your unsolicited commentary on poverty in india, when clearly on most undp indices and sub indices pak again lags behind india. For instance, despite your tall claims of hunger in india, all un bodies, without exception, show that undernourishment is higher in pak.

Thirdly, the jibes at democracy in india do appear legitimate given our track record. But certainly not from pak. Certainly not while memogate is playing out. Certainly not from a country where military coups have been the norm, and elections the exception. Certainly not from country that has lawlessness in not just frontier but running wild in the 'largest city in the world' - karachi. Certainly not while pak rangers engage in ethnic cleansing in balochistan. Ever heard of the house of glass?

Fourthly, to juxtapose any development in india against the OBVIOUS poverty, and then to dismiss it, is a useful trick if ur trying to con 8 year olds. While it is sad that poverty exists, it is also true that india has achieved a lot from aircraft carriers to the first and only formula 1 race of the subcontinent - things that pak knows none of.

Another irony is that while you are comfortably parked in the comforts of the silicon valley, you speak of of how pak is better to live in as compared to india. The funny part is u've been selling 'pak shinnnig' at india's expense, but judging from comments to ur blog, other than the occasional 'riaz bhai', no one seems to be buying it.

Why don't you put your money where your mouth is!? And instead of quoting william darymple, why don't you make a move to say gun slinging karachi, or the law less nwfp, or better yet a stay at an ethnicaly cleansed balochistan? Maybe then you could hope to enjoy some credibility.

Anonymous said...

Many Arabs want to see Pakistan as the world’s sole super power.

According to the 2011 edition of the annual "Arab Public Opinion Survey" conducted by Shibley Telhami of the Brookings Institution:
“Asked if there could be only one superpower in the world, which country they would prefer it to be, China: 23 % –
Germany: 15%
Russia 12%
France (10%),
Pakistan: 7%
US: 7%
The survey, which was conducted during the last half of October, was based on detailed interviews of some 3,000 respondents from urban centeres in Egypt, Morocco, Jordan, Lebanon, and the United Arab Emirates (UAE). It also included Saudi Arabia, the results from which, however, arrived too late to be weighted with the other five countries.



Anonymous said...

Dear Riaz,

the jobs are created in India to save money and improve profits. One more benefit is Indians are more competetive and efficient at work, comapred to their neighbours. Even China had become a 5 day week country. Only in India, we are working 6 day week. Also the people here dont take frequent breaks for prayers. they are professionals at work. There are more than 200,000 americans working in India. Mostly at top positions. Its usually win-win. I dont think America is bleeding.

India remains home to the largest amount of poor and hungry, you say. If you dont work, you go hungry. Simple rule. If you have more kids, then u will not have enough food. I know of a mullah in my city with 11 kids. This days it is expensive for even one kid. let alone 11. Not anybody's fault except his.

Anonymous said...

All western MNCs are outsourcing but the middle class is not dying in scandinavia,Germany and other European countries.

These are 2 unrelated things.The principle reasons of decline in US is:

1.An idiotic tax system skewed to favour the top 1%.Warren Buffet pays less tax than his secretary.
In scandinavia the rich get taxed 70%.

2.Lack of educational opportunity due to unaffordable engineering, medical and other professional education for all but the most brilliant who get scholarships.In scandinavia education is FREE and entry is on your entrance exam scores only.No alumi babies,no extra curriculars etc just one tough national exam.

3. Very poor training for the bottom 50% of the population.In Germany the blue collar worker has apprenticeship and a rigorous skills program and earns a good salary,nothing similar in the US.

4. Financialization of the economy.

It is completely unfair to blame MNCs for going to other places for talent if the price/benefit calculus is more favourable.

Why shouldn't they turn to Indians to write basic code for applications when the labour costs are 1/10 ?
Why not get shirts made in China if they caan be made at 1/20 the price?

This is economics 101.US needs a sputnik moment style skill enhancement program coupled with a ruthless ending of Finance, Healthcare,Arms and other special interest lobbies...

It does not need a mob lynching of world class companies like GE,Pratt and Whitney,Boeing,Apple etc for making quality products the whole world wants and respects US for.

Anonymous said...

Multinationals have no loyalties. If the American middle class shrinks, they will simply find consumers elsewhere.

Riaz Haq said...

Anon: "Multinationals have no loyalties. If the American middle class shrinks, they will simply find consumers elsewhere."

That's true, although the pace of such change and the preferences of consumers in other nations are questionable. And if the process shakes up the foundations of the US system the rest of the world is copying, then there could be yet another global financial crisis spelling doom for US style capitalism and democracy.

Riaz Haq said...

Goldman Sachs' Jim O'Neill, who coined BRIC, says India's performance most disappointing, according to Economic Times:

LONDON: Growth in all four BRIC economies has surpassed expectations in the decade since the term came into existence but India's record on productivity, FDI and reform has been the most disappointing, the chairman of Goldman Sachs Asset Management Jim O'Neill said on Tuesday.

O'Neill, who coined the term, BRIC, in December 2001 to jointly describe the four biggest developing economies, Brazil, Russia, India and China, was speaking at the London leg of the Reuters 2012 Investment Outlook Summit.

"All four countries have become bigger (economies) than I said they were going to be, even Russia. However there are important structural issues about all four and as we go into the 10-year anniversary, in some ways India is the most disappointing," said O'Neill who oversees almost a trillion dollars in assets at Goldman.

Just this week, India's government caved in to opposition pressure and put on hold a landmark reform of the retail sector that was seen opening the doors to billions of dollars in foreign direct investment in the supermarket sector.

The long-awaited measure, passed earlier this month, had been hailed as ending the government's economic reform paralysis that is widely seen as the root cause of high inflation, shrinking capital inflows and a wider current account deficit.

"India has the risk of ... if they're not careful, a balance of payments crisis. They shouldn't raise people's hopes of FDI and then in a week say, 'we're only joking'," O'Neill said. "India's inability to raise its share of global FDI is very disappointing," he said.

United Nations data shows that India received less than $20 billion in FDI in the first six months of 2011, compared to more than $60 billion in China while Brazil and Russia took in $23 billion and $33 billion respectively.

The glacial reform pace has hit India's hopes for double-digit economic growth, O'Neill said, adding: "India is as bad as Russia is on governance and corruption and, in terms of use of technology, Russia is in fact much higher than India."

On the other BRICs, O'Neill said Brazil's main problem was an overvalued currency which puts the country in danger of "Dutch disease" - a term first used to describe how North Sea oil discoveries in the 1960s triggered a surge in Dutch energy exports but also in the Dutch currency, pummelling much of the country's manufacturing. China's challenge was to effectively manage a transition to a higher-consumption economy with slower growth, he said.

O'Neill remains positive on Russia but said much depends on what Prime Minister Vladimir Putin can deliver in terms of reform following an election at the weekend that left his ruling party with a much reduced parliamentary majority.


Riaz Haq said...

Here's a summary of Call Center bill intriduced in the US Congress, as published by Huffington Post:

Saying they hope to stem the tide of jobs heading overseas, legislators introduced a bipartisan bill Wednesday in the House that would punish American corporations for offshoring their telephone call centers, making such companies ineligible for grants or guaranteed loans from the federal government.

Introduced by Rep. Tim Bishop (D-N.Y.) and Rep. David McKinley (R-W.Va.), the protectionist legislation would also put some aggressive mandates on call-center operations. Not only would customer service representatives working overseas for U.S. corporations have to disclose their locations upon request, they would also have to offer callers the option of being transferred to call centers back in America.

"Outsourcing is one of the scourges of our economy and one of the reasons we are struggling to knock down the unemployment rate and reduce the number of Americans who are out of work," Bishop said in a conference call with reporters. "We can't prohibit it, but we can certainly discourage it."

Although some call-center jobs have trickled back into the U.S. in recent years, the long-term trend has shown thousands of American-based customer service positions being outsourced to India and the Philippines, where workers come considerably cheaper. The Philippines' call-center industry recently surpassed India's as the largest in the world, according to a report in USA Today.

The call-center bill has strong backing from the Communications Workers of America, a union representing 700,000 workers, more than 150,000 of whom are customer service reps. Ron Collins, CWA's chief of staff, said that Americans have been losing decent-paying call-center jobs so that large corporations can save on labor costs. He praised AT&T for its decision to bring 5,000 customer service jobs back to the U.S. as part of its merger with T-Mobile.

"When I talk about this, I talk about it from experience," said Collins, a former Verizon call-center worker. "This bill is a very important step forward -- for jobs, for workers and for customers."


Riaz Haq said...

Here's a Daily Times report on some of the German multinational companies in Pakistan:

ISLAMABAD: The German embassy in cooperation with the Pakistan German Business Forum (PGBF) and German-linked companies and institutions active in Pakistan held an exhibition titled ‘Germany on the Road’ in Multan. Germany on the Road has been designed to present the multitude of linkages between Germany and Pakistan by giving German companies, Germany-linked companies and German institutions the opportunity to display their activities in Pakistan in a concise and vivid manner. During the exhibition up-to-date information about Germany as well as appealing give-away were handed out and a buffet dinner was offered. The event was sponsored by BASF Pakistan, CEI Logistics, EXCEL Group/PrintSol, GWE German Water and Energy, KSB Pumps, K├╝ppersbusch/Teka Pakistan, MAN Diesel Pakistan, METRO Cash and Carry Pakistan, Nordex SE Germany, SAAS Synergie/Alno and SAP Pakistan.

I am surprised that Siemens Pakistan is not at the event.


Mina Jackson said...

Well I certainly noticed that. I called several customer service, Cisco, Time Warner, Dell, etc and I'm always speaking with an Indian guy! I always wondered why they have to outsource services when there are lots of jobless Americans.

Margaret Tijerina said...

What's good about US is that they always ask for India and China's assistance when it comes to the BPO industry. I believe some of the inbound call center software are even provided by US companies who need BPO assistance.

Riaz Haq said...

Here's an NPR report on the abuse of H1b visas:

If you scroll through the government's visa data, you notice something surprising. The biggest employer of foreign tech workers is not Microsoft — not by a long shot. Nor is it Google, Facebook or any other name-brand tech company. The biggest users of H-1Bs are consulting companies, or as Ron Hira calls them, "offshore-outsourcing firms."

"The top 10 recipients in [the] last fiscal year were all offshore-outsourcers. And they got 40,000 of the 85,000 visas — which is astonishing," he says.

Hira's a professor of public policy at the Rochester Institute of Technology. He's also the son of Indian immigrants and has a personal interest in questions of labor flow across borders.

For the past decade, he's been studying how consulting firms use temporary work visas to help American companies cut costs. He says they use the visas to supply cheaper workers here, but also to smooth the transfer of American jobs to information-technology centers overseas.

"What these firms have done is exploit the loopholes in the H-1B program to bring in on-site workers to learn the jobs [of] the Americans to then ship it back offshore," he says. "And also to bring in on-site workers who are cheaper on the H-1B and undercut American workers right here."

The biggest user of H-1B last year was Cognizant, a firm based in New Jersey. The company got 9,000 new visas. Following close behind were Infosys, Wipro and Tata ‑‑ all Indian firms. They're not household names, but they loom large in tech places like the Seattle suburbs.

Cutting Costs

Rennie Sawade, a software designer with 30 years of experience, grew up in Michigan — watching the decline of the auto industry. And so, he went into computers in search of a more secure career. But that's not how it turned out.

"Basically, what I see is, it's happening all over again," Sawade says.

Programmers like him tend to be freelancers, or contract workers, and the big consulting firms are the competition. Sawade remembers when he almost landed a plum job at Microsoft.

"I remember having phone interviews and talking with the manager, having him sound really excited about my experience and he was going to bring me in to meet the team," Sawade recalls.

And then: nothing. He called his own placement agency to find out what happened.

"And that's when they told me, 'Oh, they hired somebody from Tata Consultancy.' And they actually told me on the phone, the woman I was talking to said her jaw just dropped when they found out how little Microsoft was paying this person from Tata Consultancy to do this job," he says.