[lbo-talk] Offshoring Study

qualiall at adelphia.net qualiall at adelphia.net
Wed Dec 7 20:18:20 PST 2005


Companies continue to be attracted to hiring employees abroad at wage and salary multiples sharply lower than at home. Payroll clerks in the U.S. earn $15 an hour but only $2 in India. While call center employees in America have an average annual salary of $28,000, it is $2,000 in India. The average programmer in San Jose, California, earns $78,000, but the salary for the same job in India is $11,000. A financial researcher/analyst, a post that commands a salary of $33 to $55 an hour in the United States, can live a very comfortable lifestyle on $6 to $15 per hour in India.

Employers don’t have to worry about overtime pay in India because employees are paid a flat monthly wage. So stark are the wage disparities that offshoring critics in the U.S. warn that the mere threat of moving administrative jobs overseas can depress wages and any potential increases in income at home.

Offshoring is clearly much more than an American phenomenon. European companies are flocking to Poland, Bulgaria, Romania, and other countries where software engineering wages can be as low as $6,500 a year. Such migration may lead to a new era in Europe—resulting in weaker unions, more flexible labor rules, and greater competition.

“It will likely also result in rising social tensions as a consequence of job losses and longer working hours,” Heijmen says.

In addition to having a substantial population of low-skilled workers, China produces three times as many engineers with Bachelor of Science degrees each year as the U.S. Russia, China, and India together produce about three times the number of engineering and natural science graduates as the U.S.

Despite the increase in the number of highly-skilled workers in China, India, and other countries, serious educational constraints—high illiteracy rates, the lack of language proficiency, inadequate higher education, etc.—could easily dampen growth and reduce the attractiveness of certain offshore locations.

The Conference Board study points to another trend. The number of U.S. citizens pursuing science and engineering degrees has fallen, while the number of jobs requiring such training is growing. Also, well-educated foreign workers have had a hard time entering the country because of a reduction in the number of work visas issued in the past few years.

Source: Aligning the Organization: Management and Human Resource Concerns Report #1370-05-RR, The Conference Board

http://www.conference-board.org



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