We're the home of the Information Economy ...
But more and more - the information providers are not
here at home. An opening offshore drain.

01/26/03 - It may not be long before your banker is in Mumbai, your tax accountant is in Singapore and your broker is calling you from Russia. That's because the forward edge of IT (Information Technology) is now sending loads of work outside our borders, leaving our own workers holding pink slips. Not long ago, there was the big outcry about immigrant technical workers flowing into our country. Well, that's no longer the problem. The immigrant workers can now stay at their home, and we're sending the work to them!

For companies looking to cut IT costs, the increasing trend is to ship high-tech work overseas, to India, Singapore, the Philippines, Russia, and China. Forrester Group says that more than 3 million related IT jobs will go overseas in the next 15 years, which translates to $136 billion in U.S. wages lost to foreign workers. Gartner expects the IT outsourcing market in North America to grow from $101 billion in 2000 to $160 billion in 2005.

Think this isn't a reality? Try calling for Microsoft Technical Support mid-evening. For your $35 fee, you're likely to get a well-spoken, courteous and highly-professional voice at the other end of the line - with a bit of an accent you don't recognize. That's because the "other end of the line" is in India - where the wages are one-fifth what they are here at home. But those folks don't see it that way, because their wages are well above the norm there. They work hard, and they are good at their work!

The Thompson Group views this as the latest and fastest opening drain, flushing our U.S. economy. Sure, we winced when all the TV's were built elsewhere, when our tennis shoes left town - but now we are talking about services - the largest remaining part of our job base. We think The Forrester Group is way low on its estimates that 3 million jobs will head overseas in the next 15 years. Also, their reporter neglected to point out that the $136 billion in U.S. wages lost to foreign workers is the amount lost per year! 

Our view sees 9 million jobs going in half that time, adding to $405 billion per year in lost wages here by 2010. And it will hit at both ends of the skills spectrum. Call centers - with far less technical tasks than Microsoft's - are already playing the game. Your next call to a merchant like Nordstrom might be answered by a worker in Bombay!

As technology ramps up, and competition turns far more fierce than even today, we'll see things we haven't dreamed in our worst nightmares. For most, finding new ways to make money here in the good old USA will become an absolute necessity for the working majority lacking big assets providing investment returns.

Right now, our nation is an island of buyers. Our balance of trade shows we spend more than we earn, and we're increasing that trend every year. OK - we recently had one or two months where the trade deficit dropped - when all our west-coast dock workers walked out. We simply couldn't "buy" for a brief moment. The fact remains, when you buy more than you sell, you eventually run out of money!

$405 billion in lost wages annually - if the 10% flat tax rate ever came to pass - would just about build us a new aircraft carrier ($4.3 billion for our latest CVN 76). As the tax structure stands now, we could build two! Now think what else we could build, and who we could help.

So the jobs sucked through wires to workers elsewhere are presenting a looming
impact - and, like an asteroid, it's heading straight for us in our homeland. Short of government intervention, which we see as impossibly unlikely, nothing will stop the impact.

So get down, and get ready! While you're in your foxhole, think of some ways to make money. Perhaps making tennis shoes for the offshore tech-workers is a job in your future - with a move to Thailand in the bargain.

Other than that - take a new look ahead!

William H. Thompson
Principal

PS - Visit the Thompson Group web site. Click here!

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