Why So Many Jobs Have Wanderlust

As I watched from his side, Praveen peered intently at his computer, his face bathed in the bluish glow from the screen. He furrowed his brow, seemingly perplexed by the information arrayed before him on the display. Using his mouse, he clicked to a different view and ran a finger along the screen, tracing a row of numbers. His eyebrows rose. “Got it,” he exclaimed.

A few more clicks and the screen informed him that the transaction was complete and another invoice had been approved for payment on behalf of his client. He returned to the queue and selected the next invoice from the hundreds awaiting attention. And so it went for the rest of the night.

The work itself is unremarkable, as is the young man performing it. His is an office much like any in corporate America, a warren of cubicles, neatly aligned, brightly lighted, staffed with other workers just like him, staring at a computer screen just like his. It could be anywhere in the United States, but it is far removed.

Praveen is a citizen of India, his employer an Indian corporation, his office one of many in a bucolic, campus-like setting in the southern Indian city of Bangalore. The invoices he processes are those of a major multinational American corporation, one of many such clients serviced by his company. The phenomenon is called “outsourcing” or, in reference to the geographical distance between client and provider, “offshoring.”

Soon, Praveen and his co-workers will be handling similar responsibilities for my employer, and that was the reason for my visit from half a world away. Though my own job is not affected (thankfully), many of my less fortunate co-workers cannot say the same. Over the next few months, hundreds of them will have packed their family pictures and other desktop memorabilia and left the company parking lot for the last time.

Why are American companies turning their own workers out into the street?

Answer: Because the Darwinian nature of capitalism demands it. Companies that do not pursue competitive advantages will soon find themselves competitively disadvantaged. And disadvantaged companies eventually become failed companies.

Labor costs in India can be less than 10% of those in the U.S., and there is a huge pool of young and eager English-speaking college graduates looking to outsourcing as their ticket to the middle class. Praveen, the accounts payable clerk, is a good example of this so-called wage arbitrage. He will earn roughly $3,000 per year in India, performing the same work for which my employer pays about $35,000 in the U.S. Even after the company I work for pays benefits, taxes and overhead in India, the expected savings are still more than 50%.

However, there is a second and perhaps much more significant benefit beyond the simple “lift and shift” of jobs. The Indian outsourcing companies use a business model that aims to professionalize jobs considered simply clerical in the United States. Jobs for which American companies would hire a high school graduate are performed by a college graduate in India, often by one with an advanced degree and/or post-graduate professional certification.

By professionalizing the work, the outsourcers can offer an additional service to their clients: an extremely high degree of accuracy and reliability coupled with a commitment, usually embodied in the service contract, to continually improve the client’s business processes. The Indian employees are expected to not only perform the work at or above the level of their American counterparts but also develop improvements with which to constantly raise their levels of productivity and efficiency.

Can a program that causes so much upheaval among American workers be considered a good thing? That’s a matter of perspective.

At the microeconomic level, for companies like mine, it is a faster-better-cheaper way to get things done. Profits will increase, providing more capital to reinvest in other projects and initiatives. That is certainly a net positive and also leads to macroeconomic benefits: healthier companies create economic growth, and growth is the proverbial rising tide that lifts all boats.

For companies that provide outsourcing services in countries like India, the benefits are many: jobs for people such as Praveen, profits for their employers, economic growth and foreign exchange for the country and a rising standard of living for its citizens, to name a few.

Yet from the perspective of American workers, including many of my colleagues who are facing the loss of their jobs — some not for the first time — outsourcing is just another corporate synonym for unemployment.

Yet it is part of the natural gravitational pull that creates the rising tide that will, in the long run, lift all boats. The unfortunate downside is that it also causes the least seaworthy to founder. Many will ultimately right themselves and sail on, but a few will sink to the bottom.

It is progress for the many at the expense of the few, for the currents of capitalism are merciless.