Protecting Your Livelihood

Kim du Toit
January 1, 2004
1:14 AM CDT

One of the topics which has been gaining ground since, well, forever, has been that of jobs moving outside the United States. Here’s the most recent occurrence:

In one of the largest moves to “offshore” highly paid U.S. software jobs, International Business Machines Corp. has told its managers to plan on moving the work of as many as 4,730 programmers to India, China and elsewhere, Monday’s Wall Street Journal reported.

The unannounced plan, outlined in company documents viewed by The Wall Street Journal, would replace thousands of workers at IBM facilities in Southbury, Conn., Poughkeepsie, N.Y., Raleigh, N.C., Dallas, Boulder, Colo., and elsewhere in the U.S.Already, the managers have been told, IBM has hired 500 engineers in India to take on some of the work that will be moved.

IBM calls its plan, first presented internally to some midlevel managers in October, “Global Sourcing.” It involves people in its Application Management Services group, a part of IBM’s giant global-services operations, which comprise more than half IBM’s 315,000 employees.

I recall Ross Perot’s “great sucking sound” warnings about NAFTA, and the predictable shrieking of the protectionists like Pat Buchanan when manufacturing jobs did, in fact, start moving to places like Mexico, the Philippines and so on.

And a great number of people said, “Well, yes—jobs have moved to cheaper bases because the same jobs here are over-priced”, and to a large degree they were right. A low-skilled assembly-line worker earning a union-guaranteed $75 / hour was always going to be at the mercy of foreign competition paying $15 / hour for the same work.

It’s a classic case of the market setting the actual value of the job—except, of course, where the foreign manufacturing plant was subsidized by the local government to enable it to be profitable while only paying its workers $15 / hour.

But I’m not going to get into one of these macroeconomic arguments here, for two reasons: a.) I’m at a disadvantage because I always used to fall asleep during Economics class, and b.) in any case, the number of variables in even the simplest economics discussion makes my head ache.

There are other people more qualified than I to debate all this, and they’re welcome to it (great link, by the way; worth reading in its entirety). And NRO seems to think that job destruction is a Good Thing.

However, there is an interesting wrinkle in the Great Sucking Sound Debate, and that is that it was all very well when it was “low-skilled” jobs moving offshore—“Learn a new job” was the heartless (albeit correct if not always appropriate) response.

Recently, however, there’s been another kind of job movement going on, and this time it’s not so easy to pass comment on. Now we have a situation where knowledge-based jobs are being moved to places like India: jobs like computer programming, help desk functions, and even R&D.

The reason this is getting more attention is that while manufacturing jobs were being displaced, they were blue-collar jobs. Without using class-warfare rhetoric, nobody cared if textile workers in Alabama lost their jobs to a sweatshop in Bangladesh, because their impact on the country, even as a group, wasn’t that great.

You see, when a job goes offshore, there’s a lot more economic impact than the actual salary leaving the United States. All the economic activity associated with that salary: government tax revenue, investment (eg. in a house) and consumer spending disappears with it; and it will all reappear in New Delhi.

While this disappearance of low-paying salaries was deplorable, however, it wasn’t that important (in the macro sense only; it was important to the people who lost their jobs). It was particularly true if the erstwhile textile worker found a job as a truck driver or store clerk; or, if that worker took the time to be trained for another job, as a computer repairman.

When white-collar jobs started being “outsourced” (ie. shipped overseas), the economic drain was painful enough, but the intellectual effect was, and is, debilitating for the country as a whole.

We can’t, as the joke goes, become a nation of pizza deliverymen.

Or can we? One of the besetting problems of discussions of this nature is that people equate “service economy” to McJobs; but the service sector of this country is far more diverse, and offers far more opportunity, than just driving hot pizzas around town. Let’s look at some creative options.

There are two ways for Americans to combat this Great Sucking Sound, and bear with me as I explore both. The first involves people who are at risk to losing their jobs by having the function exported to a foreign country. The second involves people who are going to be entering the workforce within the next five to ten years.

As I said earlier, the danger to an American worker is that your job will be outsourced to a cheaper workforce—and it was always a fact of life here in the United States: American Airlines and J.C. Penney didn’t move their respective headquarters out of New York to Dallas because of the weather, after all. But as the jobs are moved out of the country, it behooves American workers, especially those in the knowledge-based industries like programming or R&D, to understand why this is happening.

All things being equal, American employers would employ Americans (with one caveat, as I’ll discuss in a moment). But the uncomfortable fact of corporate life is that employers are not judged by their employment practices, but by the bottom line.

So if your company is making noises about “streamlining”, you’d better understand it’s for one, and pretty much only one reason: salaries are getting too expensive.

What does that mean for you?

Well, think about your own expense line for a moment. If you live along Boston’s Digital Corridor on Route 128, your own living expenses are high—unreasonably high—because of taxes, real estate costs, and the cost of living in general. The same, by the way, is going to be true of your coworkers, and this is why Nashua, New Hampshire, is turning into Massachusetts Lite. Interstate commuters may still have to pay income taxes in the state in which they work, but at least their housing costs are lower.

However, if the job is truly portable, in that your department’s function can be exported to India or Ireland, then you need to talk to your colleagues, and to your management, to see how you can reach some kind of accommodation together.

If you were to move away from Massachusetts altogether, say to Alabama or Wyoming, your cost of living could probably be supported by 65% of your current salary. This is no exaggeration. It is especially true if you live in a smaller community, and not in another metropolis like Atlanta or Dallas (although even in the cities, you could get by with far less).

Let’s say that your programming department consists of sixteen people (excluding management). If twelve of you take a pay cut and move out of state, the cost of relocating the function offshore (in terms of lost productivity and ill feeling) will more than likely outweigh the cost of keeping the function in the United States.

Yes, it’s a wrenching decision: your friends, or maybe family are all close by, and moving far away severs many ties. It is, however, a decision that should be weighed against having your job disappear completely—and remember, if your company is moving a function offshore, the chances are good that their competitors are doing the same, or contemplating it. Far better to keep your job, and keep the function in the United States.

This is the kind of approach which would appeal to managers, incidentally: a hard-headed approach to a corporate problem, with some give-and-take on both sides. You need to understand a couple of things, though.

1. Do not expect, or hope that this problem will be solved by politicians. Every single dimwit senator or representative will trumpet about fine-sounding legislation that will Solve Your Problem. It won’t. The onus is entirely on you.

2. Do not expect to get a sympathetic hearing if you work for a large company like IBM. I don’t want to sound like an anti-corporate warrior, here, but large companies tend to make these decisions without talking to any of their employees: small- to medium-sized companies are far more employee-friendly. And large corporations have a horrible habit of doing all the preparatory work in secret, and then springing the unpleasant news on their employees at the last moment (eg. IBM above).

There is another solution to the problem of the Great Sucking Sound, and this applies both to people already in the workforce, but more especially to people who are going to enter it in the next few years.

Find, or be trained in a job which cannot be exported.

My father was a civil engineer who had started off life as a boilermaker, and he always cautioned me to find a job which used your brain rather than your hands.

In retrospect, it was the worst possible advice he could have given me.

In fact, the very best thing you can do with your life is to learn a trade as soon as you leave high school: plumber, bricklayer, machine repairman, electrician, and so on.

When a building needs its concrete foundations poured, that can’t be done by someone in Singapore.

When your house’s heater quits, nobody in New Delhi will be able to help you.

We know a young guy of about thirty-five who’s a college graduate, and a skilled CAD programmer. But when the economy started to slip into the toilet back in 1999, he quit and started his own business as a house painter, and later branched into interior remodeling. He employs one other man, and literally has more work than he can handle—when we wanted him to remodel our kitchen, for example, we had to book him three months out, and then only if it was a “bad weather day” when he couldn’t do any exterior painting.

The important thing to realize about this guy is that he’d done the advance work. As a teenager, he worked at a relative’s company on construction sites, learning the various trades—remember that once learned, you seldom forget a skill—so that when he decided to quit CAD and work for himself, he was ready to go (and, as a bonus, over the previous two years he’d bought all the professional-grade tools he’d need for the job, so his start-up costs consisted of having business cards printed).

This all sounds terribly simplistic, but in fact it’s simple rather than simplistic. To all teenagers (or parents of teenagers) reading this, it’s the best advice you’ll ever get: learn a trade. It really doesn’t matter what it is, as long as it’s a function which cannot be transported—and no, computer repair doesn’t count, because PCs are teeny little things which can be shipped easily, or trashed. Learn how to fix steam turbines, or how to rewire a building, or how to pour concrete.

If you want to know where to do this, well, you can always go to a trade school. Myself, I think you should volunteer for the Armed Forces, and learn a trade there. (I recall, by way of illustration, that kids leaving the South African Army with a heavy-duty crane operator’s license had an immediate advantage over all other job applicants in the construction business.)

You can always go to college later, at age 23—you’ll have a head start on all your contemporaries for one thing, in that you’ll be able to find your own ass with your two hands—but the training you learn as a teenager and in your early twenties will make you less likely to face catastrophe when, at age 35, your systems programming job is moved to Sumatra or Hong Kong. You’ll be more self-reliant, and instead of being a corporate drone in the Dilbert environment, you might even be your own boss.

Let’s be frank, here: the Corporation Man died in the 1980s, when layoffs and restructuring became common during corporate mergers and acquisitions. Now, in addition to all that, we are seeing functions exported.

You don’t owe your company anything: not loyalty, not fealty, not anything. And you were not the one who broke this compact: they did it.

What you owe yourself, and your family, is the means to be independent of all that. The time to create that means towards independence, however, is when you’re young, not when you’re forty with a wife, kids and a mortgage.

And in addition, your trade skills will give you a “f*ck you” option when dealing with corporate management: it’s the wild card tucked in your sleeve, and no one can take it away from you.

Stay independent: it’s the American way.