Exporting tech jobs to India?

R. A. Hettinga rah at shipwright.com
Mon Jan 5 11:36:42 PST 2004



Exporting tech jobs to India?
Alan Reynolds (back to web version) | Send

January 4, 2004

Those afflicted with an irrational phobia about international trade used to
confine their raving to manufactured goods, not services. But the United
States is now said to be exporting high-paying service jobs to India,
particularly in information technology.

Worrying about U.S. companies importing services from India is a classic
example of the journalistic inclination to ignore the forest and focus on a
few twigs. The United States is by far the world's biggest exporter of
services, just as the United States is by far the leading exporter of goods.

The United States accounted for 18.1 percent of worldwide service exports
in 2001, according to the WTO, up from 17 percent in 1990. India accounts
for only 1.4 percent of world service exports. India is in 21st place among
world exporters of services and in 30th place for goods. India is running a
trade deficit of about $8 billion, and that country's imports rose 20
percent in 2003. China ranks fifth among world exporters of goods (although
China accounts for 11 percent of U.S. imported goods), and it has a small
and dwindling trade surplus. China's imports rose 40 percent in 2003. Hong
Kong is a significant exporter of services, but it has a trade deficit with
the United States.

The United States had a $64.8 billion trade BEG ITAL) surplus in services
in 2002, despite economic stagnation in Europe and Japan. Services
accounted for 30 percent of all U.S. exports and 43 percent ($3.1 billion)
of U.S. exports to India.

Worrying about job changes among computer professionals is yet another
example of the journalistic inclination to totally ignore any facts about
the big picture and instead generalize from small and local anecdotes.

The Bureau of Labor Statistics categorizes these allegedly vanishing jobs
among "computer and mathematical science occupations" -- i.e., computer
programmers, software engineers, systems analysts, support specialists,
network administrators, etc. These jobs exploded with the tech boom, rising
11.9 percent in 2000 alone, but such panicky hoarding of computer geeks was
no more sustainable than 5,000 on NASDAQ. Even in 2002, however, employment
in these computer-related occupations was nonetheless higher than in 1999,
and so were salaries.

In 1999, there were 2,620,080 jobs in these computer-related professions at
an average wage of $26.41. In 2002, there were 2,772,620 such jobs at
$29.63 an hour ($61,630 a year). Figures on that specific job group are not
available for 2003, but professional business service payrolls were up 2.3
percent by November, when compared with the year 2000, and jobs in
information industries were up 4.9 percent. Jobs in the subgroup of
"computer systems design and related services" are down slightly from last
year but have risen steadily for the past three months.

The notion that service jobs are being lost to India is paradoxical because
similar complaints about China or Japan invariably involved disparaging
U.S. service jobs as "McJobs" -- inferior to working with a sewing machine
or wrench. In the case of India, however, even the most menial computer
service chores -- such as tech support and handling health insurance claims
-- are now being glorified as "high-wage" jobs.

Past stories about "exporting jobs" also assumed those jobs had moved to
countries with trade surpluses, such as Japan and Germany. But India has a
sizable trade deficit, and it even had a deficit in services until 2002.
This is not to suggest, however, that previous stories about trade
surpluses being a sign of economic strength made sense. On the contrary,
from 1990 to 2001, employment grew by 1.2 percent a year in the United
States, but by only 0.3 percent in Japan and 0.1 percent in Germany.

Trade phobia has lost any sense of direction. The United States is now said
to lose jobs to countries with trade deficits as well as to countries with
trade surpluses, and to lose jobs in services as well as manufacturing.
Some even suggest the United States will lose most service jobs to India
and most manufacturing jobs to China. But without jobs, how could Americans
keep buying all those imports?

A New York Times report claimed India is attracting a lot of direct
investment from multinational corporations. Yet Morgan Stanley reports:
"Private corporate investment (in India) is estimated to have declined to
4.7 percent of GDP in 2003 from 9.6 percent in 1996. ... In April to
September 2003, FDI investments have declined by 63 percent compared to the
same period last year."

The United States has always imported and exported services as well as
goods. So what? Even if we ignore this country's huge and growing dominance
of world service exports, it would still be delusional to speak of
importing services as equivalent to exporting jobs. The notion that
"exports create jobs" (every commerce secretary's favorite slogan) is
neither more nor less true than the idea that imports create jobs. Work is
involved in all creation and marketing of goods, services and financial
assets. Work is also involved with the extra investment resulting from a
net inflow of foreign capital, otherwise known as a "current account
deficit." Growth of employment is related to growth of the economy, not to
imports or exports or the gap between them.

If the United States was really losing more jobs than it was gaining, then
employment would be falling. But employment is rising. There were 138.6
million civilians with jobs in November, up from 136.5 million a year
earlier. The number of U.S. jobs doubled in fewer than 40 years. If the
rapidly expanding number of jobs were inferior to the ones that preceded
them, then incomes would be falling. But incomes, too, are rising. Real
hourly compensation kept rising even in the recent recession and is now up
more than 26 percent since 1980. Real disposable income (which excludes
stock market gains) rose at a brisk 3.9 percent annual rate cent from April
to November.

The media blitz about imported goods or services resulting in the best jobs
being relocated to some variable list of countries -- first Japan and
Germany, now India and China -- has never been anything more than
unadulterated hogwash.


Correction: In my last column, the figures on profits per share of S&P 500
firms should not have been preceded by a dollar sign -- those figures are
cents per share, not dollars.

R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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