Jobs Migrating Overseas, but It’s a Two-Way Street

Rep. Michael Castle spoke for many Americans last week when he complained about U.S. jobs “going overseas” and grilled Federal Reserve Chairman Alan Greenspan about what this country was going to do about it.

“Even skilled workers face competition from people in India and elsewhere who have technical skills and can work via the Internet,” the Delaware Republican said at a hearing, demanding that the Fed chief explain how the tens of thousands of high-tech jobs that have been lost to foreign countries in recent years are going to be replaced.

Greenspan’s answer? It was, in essence: I don’t know, but something will turn up. It always does in this country, with its adaptable labor market and availability of finance and what might be generally cataloged as creative juices.

And as unreassuring as many found that reply, Greenspan was right -- though he could have gone even further.

He could have said, correctly, that the congressman and other Americans shouldn’t worry about the seemingly great overseas job migration, because not only can we not stop it, we probably don’t need or even want to.

As Harvard economist Robert Z. Lawrence puts it, “The assumption is that if they make software in India, they will make less of it here. But that is not a valid assumption.”

In other words, this country doesn’t lose if there is development and business expansion in other countries.

Quite the opposite -- we gain from it, especially when it comes to India, as a couple of examples demonstrate.

First, the case of Oracle Corp., the world’s largest maker of database software, which announced recently that it would hire 6,000 software developers in India. The hires will be made because Oracle landed a major contract, along with Hewlett-Packard Co., to create a database for all the medical records and many other governmental functions in a country of about 1 billion people.

Not only the 6,000 in India will be working on the database. They’ll be joined by the 9,000 developers at Oracle headquarters in Redwood Shores, Calif., and at other Oracle work centers in Waltham, Mass., and in countries other than India around the world. In short, the India contract is a tidy bit of new business for all of Oracle’s 41,500 employees.

“We are proud to be a partner in the Indian economy,” Oracle CEO Larry Ellison said this month in New Delhi as he accepted the contract. He’s proud that Oracle is in the midst of a lot of economies: The company gets 28% of its $9.5 billion in annual revenue from India, China and other emerging economies and 26% from industrial countries such as Japan and Britain and most of Western Europe; 45% comes from the United States.

Second, consider Cradle Technologies Inc., a 5-year-old software maker in Fremont, Calif. Cradle’s software is a substitute for the difficult and expensive etching and manufacturing of highly complex silicon chips. It has 25 employees in Fremont and 28 in India.

Those in India are largely software developers, which makes sense. “Costs of developing software in India are one-third to one-fourth of what they would be here in California,” says Satish Gupta, a co-founder of Cradle who heads its business development efforts at its Fremont headquarters. An immigrant from India, he worked as an IBM executive and helped build two other Silicon Valley companies before setting up Cradle with venture capital from U.S., Indian and Chinese investment funds and individuals.

So why didn’t Gupta launch Cradle in India rather than in the U.S.?

“The company is here because it is this country that has the enterprise culture, the infrastructure of legal, financial and business management talent that exists nowhere else,” Gupta says. “That’s my perspective on it.”

Indeed, perspective is needed to quell all the fears about high-income jobs decamping for India and other foreign lands. First of all, the net number of jobs supposedly going overseas is overblown. The most thoughtful assessment is that 80,000 jobs will go overseas this year and 120,000 next year, says John McCarthy, a director of Forrester Research in Cambridge, Mass.

But no one calculates how many jobs actually will be created in this country because of economic development in a poor country such as India.

Perspective also is needed on India.

It is a vast country, but its economy is small: Its annual gross domestic product is about $550 billion, which is less than the annual economic output of the five-county area of Los Angeles, Orange, San Bernardino, Riverside and Ventura.

Properly, India is relying on its supply of university educated people to develop its economy. But like all poor countries, it has a long way to climb. Fewer than half its young people (and only 39% of its teenage girls) go to secondary school.

Considering how far it has to go, there is enormous promise for the U.S. economy and for U.S.-based jobs in India’s pursuit of economic development. India is getting a hand up on the ladder of development from companies in the U.S. That amounts to the cultivation of tomorrow’s business, not the destruction of today’s.

On his recent U.S. visit, Pakistani President Pervez Musharraf openly asked for the kind of foreign investment that is helping India. He was hosted at a gathering in this region by Safi Qureshey, an Irvine-based entrepreneur who has founded several companies here. One of Qureshey’s ventures is Avaz Networks Inc., which produces sophisticated management control semiconductors with work shared between Pakistan and Irvine.

“We have 10 employees here and 30 there,” Qureshey says, with the 10 in Irvine earning more than all the employees in Pakistan.

And the jobs in Irvine might not exist were it not for those in Pakistan. The emerging world economy contains many such two-way streets.

Still, some will argue, wouldn’t it be better if American workers made all the software here and exported it? Possibly you could try that, economist Lawrence allows. But you might not be competitive with rivals in India or China, which are going to develop their economies no matter what you do.

That’s why, Lawrence says, “it’s a better idea for us to be part of the action, not out of it.”

James Flanigan can be reached at jim.flanigan@ latimes.com.