A friend e-mailed me this today and it set me to wondering if it was possible to `eat' electrons?
Spreading Work Around Leaves Other Work to Do
By ROGER COHEN International Herald Tribune
WYE RIVER, Maryland Pramod Bhasin, the Indian chief executive of Genpact, is hiring about 1,200 people a month. The new hires are graduates, most of them aged 22 to 25. "The global war for talent is just beginning," he says. "And we see ourselves unleashing that talent to industries across the world."
Genpact is booming. Founded in India in 1997 with a staff of 350, it now employs more than 19,000 people. Most of them are "process engineers."
More succinctly, if it can travel great distances over a wire how long will we continue to do such work in the expensive here?
For the answer to this we can look a little deeper in companies like Genpact.
WARNING: Loooong Diary!
What, you may ask, are process engineers? They're smart young things who do stuff quicker, better and cheaper so that corporations using them make more money.
What kind of stuff? Oh, just about anything a company wants to outsource. Run global supply chains. Provide accounting and collection services. Manage hospital data. Tailor information technology. Do all the back-office work for an investment bank. Analyze marketing strategies.
"Media outsourcing is going to be big," Bhasin, who worked for many years at General Electric, predicts. "Take Hollywood. We can do all the pre- and post-production work. You've got 60 hours of footage and need it cut to a half-hour show. No need to do it in Los Angeles. We'll do it."
This got me to wondering just how `vulnerable' our economy was given that IT jobs were supposed to be safe...or so said the promoters of globalization.
The BLS provides this current data on how many of our 130 million citizens work in what field and how much the mean wage is in each.
May 2005 National Cross-Industry estimates of Employment and Mean Annual Wage for SOC Major Occupational Groups:
Management:
emp: 5,960,560; wage: $88,450
Business and Financial Operations:
emp: 5,410,410; wage: $57,930
Computer and Mathematical:
emp: 2,952,740; wage: $67,100
Architecture and Engineering:
emp: 2,382,480; wage: $63,910
Life, Physical, and Social Science:
emp: 1,185,730; wage: $58,030
Community and Social Services:
emp: 1,692,950; wage: $37,530
Legal:
emp: 986,740; wage: $81,070
Education, Training, and Library:
emp: 8,078,500; wage: $43,450
Arts, Design, Entertainment, Sports, and Media:
emp: 1,683,310; wage: $44,310
Healthcare Practitioners and Technical:
emp: 6,547,350; wage: $59,170
Healthcare Support:
emp: 3,363,800; wage: $23,850
Protective Service:
emp: 3,056,660; wage: $35,750
Food Preparation and Serving:
emp: 10,797,700; wage: $17,840
Building and Grounds Cleaning and Maintenance:
emp: 4,342,550; wage: $21,930
Personal Care and Service:
emp: 3,188,850; wage: $22,180
Sales and Related:
emp: 13,930,320; wage: $32,800
Office and Administrative Support:
emp: 22,784,330; wage: $29,710
Farming, Fishing, and Forestry:
emp: 443,070; wage: $21,010
Construction and Extraction:
emp: 6,370,400; wage: $38,260
Installation, Maintenance, and Repair:
emp: 5,305,260; wage: $38,050
Production:
emp: 10,249,220; wage: $29,890
Transportation and Material Moving:
emp: 9,594,920; wage: $28,820
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» emp- Employment
» wage- Mean
Let's whip out our trusty calculators and add up how many jobs could end up being done over a wire...
We can take them in order and adjust the gross numbers accordingly. This is guesswork but it will likely be pretty close to the mark.
Management has 5,960,560 workers and also enjoys the highest pay scale of all US professionals. The question is how many of these `managers' are hands on and how many are strategists or go betweens?
A CEO would seem pretty safe but what about number crunching CFO's and COO's? Then there are CIO's and other internal IT professionals...of four positions only one appears to be safe. Could we lose ¾ of the management pool?
Not that companies necessarily would but we'd have to conclude that 75% of management jobs are `vulnerable' or 4,470,420...jobs with a mean wage of $88k.
Next are our Business and Financial Professionals weighing in at 5,410,410 workers with wages in the $57,930 range.
Assuming only registered, licensed and bonded brokers and traders would be at least relatively safe how many researchers are in this number?
The brokers themselves pull down big cake so there must be a lot of grunts working in this industry to pull the `mean' down to just $58k.
I'd opine that 90% of workers in this industry are vulnerable or another 4,869,369 workers whose jobs could be lost to a much lower wage area.
That makes 9.3 million vulnerable jobs in just two classifications. Two classifications and we're only 3.7 million jobs shy of 10% of the workforce.
Next we have Computer & Mathematical weighing in at 2,952,740 workers who average $67,100 annually. Um, how can I say this? In light of recent moves by every major computer manufacturer I'd opine that we can kiss every one of these jobs goodbye.
This is not an estimation of what corporations will or won't do, it's merely an exercise in determining vulnerability.
This makes three fields with damn good wages and our vulnerability index stands at 88%!
Next we have Architecture and Engineering weighing in at 2,382,480 worker with wages averaging $63,910...
This one's a tough call because we have two specialties and the engineering side dwarfs the architectural. Then there's the grunts and the wunderkind to sort out.
On the engineering side we can safely bet that everyone under the status of `project manager' on this side of the wire is toast and the same goes for architectural.
The tough call here would be does this constitute 90 or 95 percent of these workers?
Even if we ere to caution and go with ninety we're still talking 2,144,232 workers.
Job category four and we've broken the 10% of the workforce barrier while our vulnerability index stands at 88.75%
Next we have Life, physical and social sciences weighing in at 1,185,730 workers with an average wage of $58,030.
Here we encounter the same difficulty we encountered with management where only the hands on people and their `big boss's' enjoy a margin of safety...but only in the social sciences. Life and physical sciences more closely resemble engineering where no one under the project manager level has a prayer.
For the sake of argument I'd peg vulnerability here at 75% or 889,298 workers for a running total of 15,326,059.
Next we have Community and social services, not to be confused with sciences, weighing in at 1,692,950 with wages averaging $37,530.
Most of these jobs are taxpayer funded and severely understaffed. Compared to other professionals, workers in this field are not highly compensated and off-shoring the grunt work might actually prove beneficial...although we know this isn't going to happen unless some crony wins a no-bid contract that charges the municipality ten times what these workers make...
Well, what are the chances of that happening?
Okay, we set vulnerability at 50% because this overworked crowd will likely lose precious boots on the ground in order to pay for the lucrative, no-bid contract...so we go down another 846,475.
Next on the list is Legal weighing in at 986,740 workers earning an average wage of $81,070.
Law is one of those funny industries where obtaining a degree and passing the bar carries no guarantee of employment. There are lawyers and there are partners.
Partners are safe; lawyers are expendable. I drive lawyers from the big Boston firms and these folks work like dogs, often putting sixteen plus hour days for maybe a little higher than the average listed here since it's Boston.
These guys are scared. The partners are in fact off-shoring everything that isn't nailed to the floor.
What do these folks do for a living? The handle the `details' of work brought in by the partners. Depending on the nature of the work much of what they do could indeed be done over a wire, much of what they do today already is...today these local lawyers have work but there's no guarantee it will be there tomorrow.
Keep in mind not all things will move at once. That said, it's not hard to envision an eventual 80% reduction in the use of high priced domestic talent over the next twenty years.
This places another 789,392 jobs on the line.
Next we have Education, Training and Library weighing in at a whopping 8,078,500 workers with an average wage of $43,450.
Once again this is a publicly funded sector. Will guest worker programs be instituted in the not too distant future to take the `pressure' off of spiraling wages and benefits in this sector...it's hard to say.
This particular sector is under siege by spiraling costs and reduced budgets. If our public school systems collapse it doesn't really matter if these workers are off-shored or not. So long as our legislators lack the will to increase taxes so we can fully fund our schools this sector will continue to bleed jobs.
Assuming a small number of free market morons vote locally to approve replacing their public school teachers with guest workers, I estimate the vulnerability index here as ten percent from guest workers and twenty percent from economic attrition.
Beyond the twenty-percent level the public school system will no longer be able to function. This adds another 2,423,550 vulnerable jobs and raises our running total to 18,539,001 workers.
If the public education system collapses this number could reach as high as 80% but let's not go there just yet.
This crisis in the making is receiving little far too little attention!
Next we have Arts, Design, Entertainment, Sports & Media weighing in at a slight 1,683,310 workers earning a `mean' wage of just $44,310...?
Most of these people must make spit if we consider the headline making salaries commanded by sports and entertainment superstars...you're either a `star' or you're not! Stars, short-lived as they are, will be reasonably safe...everyone else is vulnerable. Are there really a 168,000 stars? No. But like management, the hands on people will also enjoy a margin of safety...someone has to run the camera/cue the commercials.
I estimate vulnerability in this industry upwards of 90%, which puts the heads of an additional 1,514,979 workers on the virtual chopping block.
Next we have Healthcare practitioners and Technical...weighing in at 6,547,350 workers earning an average wage of $59,170. Managers and hands on people will once again enjoy a margin of safety, it's the periphery such as diagnostic services that are vulnerable.
Already in a separate category are Healthcare workers so we should assume our 6.5 million practitioners are all degreed or licensed professionals.
What percentages of this profession do what can be determined by studying the industry breakdowns but this diary is getting over long. We're hip-shooting here and I think that the guest worker piece of the puzzle is the wildcard.
I'd say vulnerability here is low. Maybe ten percent from guest workers and ten more for off-shore diagnostic services.
The puts the jobs of another 1,309,470 workers at risk.
By design or not the next category is Healthcare `support' weighing in at 3,363,800 workers with an average wage of $23,850. Most of these jobs are hands on so the only vulnerability comes from guest workers...how aggressively the healthcare industry pursues this course of action would determine vulnerability.
If the will to do so exists all of these jobs will disappear. However, let this be our first `push' or `zero' vulnerability. There is enough US citizens willing to work for these low wages and perhaps even lower if things get much worse than they already are.
Next we have Protective Services weighing in at 3,056,660 workers earning an average wage of $35,750.
We'll call this one our second push or (near in this case) `zero' vulnerability as the only aspect of security work that might get off-shored is alarm monitoring. There is the traffic cop in a box phenomenon that is making it's way across the nation's busy intersections that are owned by off-shore concerns but I think this is neither fish nor fowl.
Next we have food preparation and serving weighing in at the highest number yet with 10,797,700 workers earning the lowest average wage so far of just $17,840.
I've worked in this industry, if you're looking for undocumented workers the back of the house is where you'll find them!
While this industry is not susceptible to off-shoring or guest workers it is (very) vulnerable to the drying up of disposable income. You don't go out to eat if you can't afford it.
Restaurants have a built in stop loss system called the OTLE, where they throw workers out the door if it's not busy. Restaurants never have layoffs--you either get fired or you quit.
Vulnerability at the moment is high as disposable income is drying up rapidly. Dining out is a luxury and one of the first things to get cut when people are forced to tighten their belts.
I predict a 50% (+) reduction of employment in this sector in the next twelve months.
This adds 5,398,850 to our vulnerable jobs and raises the running total to 26,762,300 or twenty percent of the total workforce.
Next, I think there are 20 categories, we have Building and grounds cleaning and maintenance weighing in at 4,342,550 workers earning an average wage of $21,930.
Like our restaurant help these jobs constitute the bottom of the food chain. A good facilities person makes a decent paycheck but the crews they employ make crap due to the menial nature of the work.
Here the vulnerability lies in the softening economy. Like dining out, cleaning services are the next item on the cut list when money gets tight. If the dollar continues it's slide I predict that 50% of these jobs or 2,171,275 workers will `hit the streets' .
We're getting close to the end, hang in there! Next on the list we have Personal care and service weighing in at 3,188,850 workers `enjoying' an average wage of $22,180.
Another `luxury' sector I'm afraid and I will apply the same principle here as I did to restaurants and cleaning crews, a fifty percent drop in employment within the next twelve months due to the softening economy.
Thus adding an additional 1,594,425 workers to the unemployment line.
Our next category is Sales & Related weighing in at 13,930,320 workers earning an average wage of $32,800. This, our largest group yet, is the number two sector employment-wise in the economy. That said, I find it a bit disturbing that we have more people selling shit than making it...
Once again the softening economy will result in large reductions in the size of this workforce. The drying up of disposable income due to the shrinking value of the dollar will send the commission sales people scrambling for safer ground while retail chains (continue) to shutter stores at a brisk clip.
Here our 50% vulnerability rate adds 6,965,160 workers to our vulnerable list and raises our running total to 37,493,160.
Next we have our largest single employment classification, those who feed the merciless paper machine that keeps the whole ball of wax humming along currently known as Office and Administrative support, weighing in at a muscular 22,784,330 workers earning an average wage of $29,710.
This is the only sector of the economy that overshadows the nation's single largest employer, the US government.
This is also a realm that is highly susceptible to jobs being lost over a wire. Call centers and word processing departments are being off-shored wholesale.
As the economy weakens the tempo of off-shoring in this sector is bound to overrun capacity...a very small saving grace. The trough the economy is dropping into is both very deep and very wide so the fall is likely to last for decades (if people don't come to their senses.)
The biggest sector is likely to take a big hit. I predict a minimum of 80% of jobs in this classification are vulnerable and that the attack on this sector has only just begun.
This adds another 18,227,464 workers to the street and brings our running total to 55,720,624 or approximately 40% of the total labor force!
Thankfully there are only four more categories. Our next one is Farming, Fishing and Forestry weighing in at an anemic 443,070 workers that earn an average wage of just $21,010.
What does it say when we have half as many agricultural workers as we do lawyers? There are few things more important to life than food yet the work is considered menial and thus the lousy pay...
I call this category another push, not at all vulnerable to off-shoring and the failing economy might actually do them some economic good...if the owners share their huge gains that is...
Next we have Construction and Extraction...(who makes up these groups?) These sectors weigh in at 6,370,400 workers who enjoy an average wage of $38,260.
Here we have a two-edge situation where construction is dropping like a rock but high commodity prices are driving mining jobs.
I'm afraid both sectors are going to be hurting thanks to the coming huge drop in demand.
Look for an eighty percent drop in this category in the next twelve months. The average person can no longer afford a new house and the average homeowner is far more likely to perform their own repairs or home improvement projects for the foreseeable future.
This will add another 5,096,320 to our rapidly approaching fifty percent of the workforce unemployment rate.
The next category is Installation, Maintenance and Repair weighing in at 5,305,260 workers who earn an average wage of $38,050.
A softening economy will reduce the demand for new capital equipment but the old units will still need to be maintained or repaired.
Save an invasion of guest workers in this sector these people should weather the coming storm fairly well...that said, there will be some pain which I calculate to be a thirty percent reduction over the next twelve months.
This will add another 1,591,578 to the vulnerable jobs category and raise the running total to 62,408,522 or very near the 50% mark of 65 million.
But wait, there's more!
Our next to the last category is my own former profession of Production, weighing in at a healthy 10,249,220 workers earning an average wage of $29,890.
What can I say, historically production is the first sector to take the hit and the last one to recover.
That said this isn't going to be pretty. Not only will thousand of shops go belly up. I predict a fifty-percent reduction in this sector over the next twelve months.
We are already far below the numbers necessary to provide for our own nation's consumption and the sinking economy will only make this situation worse. Demand will be there in spades but there's no capacity. Combine this with no liquidity and you have a disaster on your hands.
Ironically, it will be this disaster that feeds all others. Shortages of everything (except the ever-abundant BS) will abound.
I'll wrap this up by adding an additional 5,124,610 to our exploding unemployment figures.
Last but not least we come to my current occupation, transportation, weighing in at 9,594,920 workers earning an average wage of $28,820.
I wish.
Is anyone else disturbed by the fact we have nearly as many people carting stuff around as we do making it?
Here we have an interesting mix that is not going to fair well in the softening economy. As the dollar slides our suppliers are going to put us on a shorter leash, which will mean there will be less stuff to move. Rising energy prices will squeeze profits and result in layoffs, that will in turn cause delays in the JIT delivery system...which will spur more layoffs.
Rising commodity prices will slacken demand causing even more layoffs...still, people and things have to get where they're needed somehow and price to get it there will rise accordingly.
The transportation system is about as efficient as its going to get so most job losses will be the result of reduced demand. Cabs and limo's will suffer more than freight but employment in ground transportation is at an all time high.
I predict a forty percent drop in this figure over the next twelve months adding an additional 3,837,968 workers to the vulnerable list and raising our grand total to 71,371,170.
Some will take these number to be extremely pessimistic given the media's cheerleading on the economy but it's important to understand that Wall Street has nothing in common with Main Street.
The economy is producing tons of money but very little (real) wealth. Look at the figures above, only thirteen-percent of our workforce (Add construction, production & agriculture) actually produces wealth (produces raw materials or converts raw materials into useful products.)
If this number seems small that's because it is. This is the danger our economy faces. We don't have the capacity to produce what we need to keep ourselves going and our creditor/suppliers know it.
Hence the growing trade deficit, hence the sinking dollar (largely thanks to our government borrowing in order to maintain our irrational consumption.)
A nation that can't produce enough to meet the needs of its people places them at the mercy of those who can...and we all know how `merciful' bankers are.
Those who control commerce have deliberately put us in this position...so they could wax wealthier at our expense.
In a global economy, where technology has swallowed distance, corporations have to get disaggregated to get more efficient. What's expensive to do in Chicago is almost certainly a lot cheaper to do through Genpact operations in India, China, Romania, Mexico or Hungary.
Ambitious graduates there (Genpact has process engineers speaking 19 languages) will work long hours for relatively low salaries. "We can drive critical information to corporations faster and cheaper," Bhasin says.
But, of course, the impact of companies like Genpact is broader than on the bottom line. They drive global shifts - of jobs and talent - that impact societies in often disconcerting ways. They also illustrate how globalization provides opportunity to graduates from Beijing to Bucharest, but leaves the less educated behind.
Globalization - the almost instantaneous movement across borders of ideas, technologies, capital and goods - is a tremendous creator of wealth. But more than a decade after new technologies and the Cold War's end started driving modern global economic integration, it's not clear the process is also a good distributor of wealth.
Indeed, there's plenty of evidence that the growing wealth disparities in countries from Latin America to Asia are attributable in part to the divide between those with the capacity to board the globalization train and those left stranded by it.
A case can be made that if slavery was the overriding moral issue of the 19th century, and totalitarianism of the 20th, inequality and poverty will be those of the 21st. Communism is passe; the issues that gave rise to it are not.
But the world has shifted. No longer can inequality be confronted within particular societies, because the state as a unit of organization is becoming progressively weaker. The core issue is poverty on a global scale - and what corporations that are the central actors of the non-state networks now running things can do about it.
Which brings us back to Genpact. Bhasin, a genial man who divides his time between New Delhi and New York, thinks a lot about these issues. As he points out, there are "lots of pushes and pulls" in the globalization process.
Jobs migrate from developed economies, where they are expensive and accompanied by health care, to less developed ones, where they are cheaper and health care is a dream. That drives political anger in regions and whole economies losing jobs.
But as Genpact grows, it buys Cisco routers and bandwidth from ATT. That's revenue for U.S. corporations. Moreover, if tens of millions of Indians are joining the middle class, it's thanks to companies like Genpact. Those Indians consume, travel and seek top educations for their children - all of which equals jobs in the developed world.
Still, are the corporations benefiting from globalization doing enough - in the fields of health care, education and community projects - to offset the growing social divides that liberalization and technology foster? It seems not.
Inequality is growing exponentially in Asia, in places including China and Malaysia. Less than half a percent of Chinese households now hold over 60 percent of the nation's personal wealth, according to Boston Consulting Group.
"We've abandoned the notion of growth with equity," said Tommy Koh, Singapore's ambassador-at-large. He was deeply troubled recently when a Singapore company on whose board he serves outsourced call centers to Malaysia and India. "We broke the rice bowls of hundreds of local women to save a few million dollars."
So it goes. Broken rice bowls. Jobless communities. Desperate shanties. In Latin America, two decades of liberalization have generated enormous wealth, but done little to unravel the hold on it of the few.
"The marked degree of income concentration is one of the hallmarks of Latin America's panorama," the Economic Commission for Latin America said in a 2004 report, calling the region "the most inequitable on the planet."
There's no need to look any further to explain the rise of Hugo Chávez, the Venezuelan strongman, or the popularity of the recent decision by Evo Morales, Bolivia's leftist president, to nationalize the country's gas industry.
The growing influence of the troika Chavez has laughably called "the axis of good" - himself, Morales and Fidel Castro - is evidence that a leftist backlash against globalization is possible. Money makes the world go round; alas it does not necessarily make the world go flat.
Bhasin worries about this. "We want to make sure decisions are not taken in a thoughtless way," he says. "But companies will become better by importing more and more services over a period of time. Wal-Mart got big by importing 70 percent of its products. Services will not be very different from manufactured goods."
I suspect he's right. But I'm also sure global corporations are going to have to think more about social equity if that sort of process is to go smoothly.
I apologize for the tedious length.
I'll sum up with one word: Grim.
Thanks for letting me inside your head,
Gegner