Rarely will you see a front page story as thin as this one, and if you do it will probably also be in the Financial Times.
It goes above the fold on page one today with a story clumsily headlined “US proves call centre match for India over hire costs.”
Call centre workers are becoming as cheap to hire in the US as they are in India, according to the head of the country’s largest business process outsourcing company.
The FT says massive unemployment in the U.S. has driven down call-center wages here while Indian ones are up 10 percent in the last year.
I’m having a hard time believing this one—especially since it’s sourced to one guy: The CEO of an Indian outsourcing company. There are no data here; no other sources backing up this assertion. Why is this in the paper at all, much less on the front page of a sophisticated financial publication?
I made the case in The Wall Street Journal several years back that companies were rethinking going overseas since the costs of small-town operations could be competitive—all things considered, like real estate and telecom and reputational costs. But the FT isn’t talking about any of that. It’s saying, or implying strongly, that wages are similar.
And that’s just hard to figure. If you take free-trade fundamentalism to its logical conclusion, U.S. wage stagnation won’t stop until pay in poorer countries find an equilibrium.
Despite the disaster for the American worker over the last three decades, I don’t think we’re there yet.
I think that's unfair to the FT which generally has very high standards and many people I know on Wall Street prefer to the WSJ because of its better take on the global economy (disclosure I have written for the FT). I agree that it is dubious that Indian wages even for highly educated classes are now at the same level as in the US. If that were the case, India's economy would have an uphill struggle against its Asian neighbors. But the phenomenon described is generally true: Sheridan Prasso brilliantly told a similar story in Fortune in May about Chinese companies piling into the US - not for the low wages, but abundant cheap land (have you seen land prices in Guangzhou?) and utilities like electricity. Sorry Andy Grove, assembling electronics in the US is never going to be competitive with Asia. Tacking on a huge tariff is just going to penalize people who shop in Walmart and Target, where's the justice in that? Of course Mr. Grove won't mind that a computer costs your college-bound daughter $2500 instead of $450 .
#1 Posted by Charles Wallace, CJR on Thu 19 Aug 2010 at 06:00 PM
I think that's unfair to the FT which generally has very high standards and many people I know on Wall Street prefer to the WSJ because of its better take on the global economy (disclosure I have written for the FT). I agree that it is dubious that Indian wages even for highly educated classes are now at the same level as in the US. If that were the case, India's economy would have an uphill struggle against its Asian neighbors. But the phenomenon described is generally true: Sheridan Prasso brilliantly told a similar story in Fortune in May about Chinese companies piling into the US - not for the low wages, but abundant cheap land (have you seen land prices in Guangzhou?) and utilities like electricity. Sorry Andy Grove, assembling electronics in the US is never going to be competitive with Asia. Tacking on a huge tariff is just going to penalize people who shop in Walmart and Target, where's the justice in that? Of course Mr. Grove won't mind that a computer costs your college-bound daughter $2500 instead of $450 .
#2 Posted by Charles Wallace, CJR on Thu 19 Aug 2010 at 06:02 PM
Beyond the fact that the FT should have looked deeper into the cost comparisons, it also would seem obligated to address how these cost comparisons are affected by the just-passed border security bill that pays for its $600 million in measures in large part by raising by $2,000 each the cost of an H1-B or L-1 visa ... visas used in large volume by Indian outsourcers.
#3 Posted by Adam Bruns, CJR on Fri 20 Aug 2010 at 08:25 AM