June 15, 2003


The white-collar crowd was concerned, but they knew that those three forces would also help get the American economy humming. And they did. Now that trust has come back to haunt them. Technology has allowed companies to handle rising sales without adding manpower. Gains in productivity mean one white-collar worker can do the work that would have taken two or three of his peers to do ten years ago. All that has led to slower wage growth. Back in 2000 wages for professional and technical workers were growing by nearly 5% annually–today they’re rising by less than 2% a year.

The scariest blue-collar parallel, however, is only just beginning to be felt in the white-collar world: overseas competition. Like automakers that moved production from Michigan to Mexico or textile firms that abandoned the Southeast for the Far East, service firms are now shifting jobs to cheaper locales like India and the Philippines. It’s not just call centers anymore. Indian radiologists now analyze CT scans and chest X-rays for American patients in an office park in Bangalore, not far from where Ernst & Young has 200 accountants processing U.S. tax returns. E&Y’s tax prep center in India is only 18 months old, but the company already has plans to double its size. Corporate America is quickly learning that a cubicle can be replicated overseas as easily as a shop floor can.

None of this bodes well for the jobless white-collar workers who are hoping that a more robust recovery will bring the next paycheck. The numbers of those who are searching are staggering. Of the nine million Americans out of a job, 17.4% are managers or specialty workers, according to a study of Labor Department data by Hofstra University economist Irwin Kellner. During the 1990-91 recession only 10% of that group was unemployed. Even after the much deeper recession of the early 1980s, just under 8% of unemployed workers were white collar. Sure, there are more white-collar workers today, but joblessness among them has risen faster than their share of the overall job market.

“White-collar workers and college graduates are in a state of shock,” says Kellner. “It appears these job losses are permanent. They’re not necessarily coming back when the economy does.”

At the bleeding edge of the blue-collarization trend are techies–not just the twentysomethings who jumped on dot-com jobs either, but people like Jim Klinck, a 52-year-old IT exec out of West Windsor, N.J. . . . This phenomenon is still in its infancy, but it’s already sending ripples through the service economy. E&Y’s Bangalore tax-preparation center has been operating full-time for only 18 months. Yet already it’s paying off. “There’s no question [the office] has allowed us to lower prices in the U.S. and capture market share,” says Alan Kline, E&Y’s Americas director of tax operations. “We’re not H&R Block. Each return we do is a custom job. But this has allowed us to lower prices and be much more competitive. We’re getting new jobs because of India.” E&Y’s Bangalore office is the mirror image of a similar center in Indianapolis, says Kline, and the firm uses the same metrics to evaluate the performance of the 200 chartered accountants (the local equivalent of a CPA) in Bangalore as it does with the 200 CPAs in Indiana. “The work product is almost identical,” raves Kline. “You cannot underestimate the quality of the people. It’s amazing how good they are.”

And how cheap

Read the whole thing. And I don’t care how safe you think your job is — it isn’t. Even if you’re a tenured professor like me — at least, I can’t help but feel that higher education is in line for a shakeup in the not too distant future. What’s funny is that it’s lefties — who are supposed to be in favor of helping people in poorer countries, at the expense of better-off people in richer countries — who seem most upset by this job-export stuff. Could it be because the phenomenon is just now hitting the kinds of jobs lefty opinion leaders, or at least NPR donors, tend to hold? At any rate, I think the politics of this stuff are likely to play out in interesting and unpredictable ways.

I wrote a bit more on this subject here. I don’t claim to really understand this phenomenon, though, and I don’t think that anyone really does.

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