Technology TransactionsAs Jobs Flow Overseas, What Happens To U.S. Homes?
The past year has seen technology stocks take a beating on Wall Street, and now the question arises as to whether a small-but-fundamental change in the world economic order is taking place -- one which would make the U.S. just another high-tech center rather than a world leader.
Amazingly enough, this disquieting matter is ultimately a real estate issue. To understand why, consider the term "maquiladora."
"Maquiladora" are U.S.-owned factories just across the Texas border in Mexico. If you"re a manufacturer, you can build a Mexican factory at a fraction of the cost a new facility would require in the U.S. and then staff it with workers who are paid little and receive few benefits when compared to workers in Ohio, Pennsylvania, Oregon, or Massachusetts.
As a country we have fairly well cleaned-out major portions of our manufacturing sector by sending work to just about anywhere else where wages are low and hours are long. The result is that we have lots of imports coming in, huge amounts of cash going out, fewer job opportunities at home, and stores filled with goods made elsewhere.
International trade, say economists and politicians, is a necessary evil. You must have trading partners, and for years Japan was an excellent example of this theory -- it exported much and used arcane and complex rules to assure that it imported little. The result was strong economic growth and a terrific balance-of-payments account.
But to maintain the easy exports/few imports policy, Japanese consumers pay high prices for basic goods, accept competitive bans that would be intolerable in the U.S., work long hours, and live in homes that are remarkably small by U.S. standards. And, of course, Japan has seen little growth in a decade, evidence that it"s economic policies simply don"t work in the long-run.
Still, "we" accept the belief that international trade is good and brush aside the inconvenience of a "few" jobs here and there slipping away. Of course, the people doing the accepting are business leaders concerned with shareholder values and quarterly earnings reports rather than people who actually know how to make things. And politicians -- who need business dollars to fund re-elections campaigns -- merrily go along.
In this matter there is a great deal of snobbery. After all, to this point the jobs we"re talking about are occupations which generally did not require college degrees, have much social standing, or generate big paychecks when compared with "learned" professions or new-economy open-collar workers.
But this is about to change.
Not only can we send jobs for machinists, assembly-line workers, and loom operators overseas, we can also do the same with programmers, middle managers, call center operators, and data processors. Instead of NAFTA and big fights with organized labor, all you need is a telephone line and skilled people in other countries who want work.
It turns out there are a very large number of people worldwide who program, speak English, and are just as productive as anyone else. And they cost a whole bunch less to hire and retain than their U.S. counterparts.
*AOL expects to spend $100 million in India during the next five years, and will hire 100 software engineers this year.
*First Union, American Express, and Citibank all spend money for Indian programming services.
*Ford is investing $30 million to create a call center in India and to do programming.
*GE processes insurance claims and loan applications in India.
*You used to be able to hire a full-time Russian programmer for as little as $700 a month, reports The Russian Journal. Now, for reasons Marx could never understand (supply and demand), Russian computer specialists can get $1,000 to $1,200 a month.
It all seems so logical. Governments overseas are not somehow "unfair" because they allow skilled workers to sell services at a fraction of their U.S. cost. It"s not unreasonable for companies to reduce expenses where possible. There are huge benefits associated with international trade, so there"s no call being made to close our borders -- it"s too late for that, anyway.
Instead, there is merely the thought that real estate demand is closely related jobs: employed people with cash and credit can buy houses. When lots of people compete for houses prices tend to rise above the rate of inflation, thus creating real wealth for homeowners.
Alternatively, if the job base erodes, there is less demand for homes. Less demand equals fewer sales and maybe even price declines.
Self-interest is a powerful force and companies will send jobs overseas with electronic rapidity as long it pays. It"s hard to argue that such thinking is somehow "wrong," unless Buy American campaigns suddenly become both fashionable and effective. Such programs didn"t do much for textile workers, steel mills, shoe manufacturers, or auto workers, so there"s little reason to believe that software engineers or call center operators will do any better.
You could, however, argue that sending jobs overseas is remarkably short-sighted. It would be impressive to find a business leader who stands up and says, "you know, we could ship 1,200 jobs out of the country by Tuesday, increase company profits, and raise shareholder values. But if we do that, who will buy our products? Not people who are unemployed. It"s in everyone"s best interest to realize that employees are also consumers, and to recognize that if we shaft one group we also shaft the other -- and ourselves."
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