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Why it's good to send US jobs to India
Gary Hamel | September 16, 2005
When white collar jobs can be exported as easily as blue collar jobs were in the previous century, should society pick up the tab, asks Gary Hamel, one of America's leading management thinkers.
Here he offers a radical view on the ongoing BPO slugfest between India and the United States.
Currently in the US, the issue is about how all jobs in the country are potentially going to India or somewhere else in the world. Twenty years ago we accepted that this could happen to manufacturing jobs -- but we did not consider that it could also happen to service jobs.
Now we have to get our minds around the concept that business process outsourcing is happening and will continue to happen in high wage, highly skilled jobs.
Grab the white collar
For example, a stock analyst in New York earns approximately $100,000. Now if that job could be done in India for $20,000, that stock analyst in New York is basically asking society to subsidise him to the tune of $80,000. It's interesting, because if you think about some of these jobs, ten or twenty years ago they were not globally mobile.
Here is another example. What would a reasonably skilled hairdresser make in New Delhi? For argument's sake, let's say $100. So for one cut, he would charge $1. Now the same haircut, with the same level of skills, in the US could cost $35.
Why does that job cost $35? Because it cannot be exported -- yet -- and people still need to get their hair cut. And so the hairdresser gets $35, and society subsidises him by $34 merely for the fact that that job is geographically bound.
Let me give you another example. Unlike the hairdresser, I compete in a global economy. My income comes from countries all over the world where I speak. So I am selling something that is globally traded, just like a Unix engineer is selling a skill that is globally traded.
Many people do not sell skills that are globally traded. Such people, if they are earning more than the cheapest possible rate anywhere in the world, are literally being sub-sidised by those people whose skills are being traded in the global economy.
Citizens or consumers
What the US is discovering now, as more service jobs are exported, is that there are parts of the economy that are basically being subsidised in a hidden way. Now as more such jobs are exported, the US will have another very interesting conversion, as a society.
On one hand, if a service can be done cheaper somewhere else, then that is exactly what US consumers will want. On the other hand, citizens will also be concerned about the long-term consequences that the economy will face if it cannot create enough new jobs to make up the difference.
If the solution is to stop subsidising people and send their jobs offshore, then how does one redeploy these individuals? This is a difficult challenge.
A grand canyon
Finally, today, there are in Britain, in France, in Germany, and in the US, a reasonable number of individuals whose jobs over time will be done, more cheaply somewhere else. As these jobs become tradable, and move offshore, it will result in increasing income disparity in these countries.
There will be greater income differences between people because there will be more income pressure on the less skilled people and those whose skills can be traded in the global economy. This is exactly what is happening slowly in the US.
In the long term, the income distribution of these countries may begin look more like it does in developing countries like India.
Gary Hamel is Founder and Chairman of Strategos, a consulting firm focussed on strategy innovation. He is also visiting professor of strategic and international management at the London Business School.
Published with the kind permission of The Smart Manager, India's first world class management magazine, available bi-monthly.