Sending jobs/work elsewhere to be done cheaper

nydave · Oct 21, 2003

And I hate to say it, but it all comes down to greed. Look what has happened to the clothing industry in the USA.

brock · Oct 21, 2003

The unions have made their bed and it's time for a little nap.

Nighty night

nydave · Oct 21, 2003

And we are talking about airplanes. I am pro union.

ohio · Oct 21, 2003

I am pro cheap labor... however, I also realize that it's a luxury I have for not choosing a vocational path.

I do think the unions shot themselves in the foot, but unions only form at companies where the labor needs protection. If Boeing had always dealt with its employees ethically, there never would have been a need for a union to form.

brock · Oct 21, 2003

The unions have/had their place. Every working American who has a life outside of the work place or a halfway safe work environment should thank the unions.

It is unfortunate that the unions have now become largely self-serving. Existing only to justify their existence and looking out more for "the union" than the people they are supposed to be representing.

nydave · Oct 21, 2003

I'd like to send the component manufacturing...to CA...the country...

Snacks · Oct 21, 2003

Originally posted by ohio
unions only form at companies where the labor needs protection

I disagree with this comment.....I have worked in both a union shop in the past and I have been at my current job for 7+ years, working for a private non-union company.......

I had better health insurance at my union job but I also think that it killed employee moral when your lazy co-worker talking on the phone all day and takin' 20 minute breaks every hour ends up making more than you simply because they have been with the company longer, not because of merit.......

I make more now at a non-union company than I ever would at a union job strictly due to merit raises.

Toshi · Oct 21, 2003

i say ship it out. if the chinese can build plane wings or the indians program for less money while maintaining quality, there is no reason that the jobs should stay in the us. if there isn't anything that we can do better than the other countries then we simply don't deserve our high horse and high standard of living. spread the wealth :eek:

ALEXIS_DH · Oct 21, 2003

let the best do its best.

if its more efficient do to something somewhere, well let it be.
if even being more efficient to do somethings abroad, u still do them here. then u are actually wasting money. i could be boeing´s money, but sooner or later, that´ll do a dent in the us economy.

and that argument of quality things can only be made here, or that only the US has the technology to manufacture.... well.... hahahahahahaha!!!, thats just ridiculous. just because labor is way more expensive here, it doesnt mean its better. its more expensive, because US wages are quite high compared to the rest of the world.

and manufacturing techonoloogy??, well one thing is research and development, and we´ll all agree that the US still has the edge on RD, but manufacturing???, thats way easier. u know what u need to do, and u have to meet certain standards. if u do it, no matter if u used a 100 million bucks machine to do it, or 1000 workers, if it works, it works.
if it can be done here, it can be done anywhere. manufacturing tech is easy, once you figure out how to do it (which is what RD does actually), u just tell somebody to do it.

CouchingTiger · Oct 21, 2003

The term used to describe this trend (obtaining workers from a 3rd party vendor) is called outsourcing (at least in the high-tech arena). At present, all major high-tech companies practice this and have plans in place to use more of it in the future. Many of these jobs are then filled by domestic contractors (my wife is in that position working indirectly for HP) but the growing trend is to use offshore labor.

What does this mean for US? Basically, take a whole mess of really good paying ($70k+/yr) jobs that were being filled by the folks buying the SUVs and McMansions and the Plasma TVs etc. , and now put those folks into lower paying or no jobs.

This is the same thing that happened with the textile industry and the same thing that happened with the manufacuring industry. The boom we had seen in the last 10 years was fueled by high-tech much like the previous economic booms being fueled by real estate development, manufacturing and textiles. If we take that away, we are left in a recession if not a full scale depression.

I never liked unions, even when I worked for one as a steel worker. Now however, as a software engineer faced with jobs being taken from older, more experienced (and better paid) folks and given to younger less experienced (cheaper) folks as well as outsourcing to save on benefits costs or just plain moving the jobs overseas, I am thinking more and more that the only option we have as a group is to organize and unite. We'll see though. I feel pretty safe but I know lots of older people who can't get jobs at all or others who are now and have been for long periods unemployed. Starting over in a new career at mid-life is tough but may be the only option for some.

-Couch

Silver · Oct 21, 2003

This is a tough issue.

On the one hand, you've got unions that are self serving and greedy.

On the other hand, you've got companies that are self serving and greedy, but have better PR.

Who do you cheer for?

LordOpie · Oct 21, 2003

Originally posted by Silver
This is a tough issue.

On the one hand, you've got unions that are self serving and greedy.

On the other hand, you've got companies that are self serving and greedy, but have better PR.

Who do you cheer for?

The FLORIDA MARLINS!

fluff · Oct 21, 2003

Originally posted by Silver
This is a tough issue.

On the one hand, you've got unions that are self serving and greedy.

On the other hand, you've got companies that are self serving and greedy, but have better PR.

Who do you cheer for?

Well, clearly it depends on whether you are an employee or a shareholder...

Of course, if I had a lot (and I mean a lot) of shares in a company of which I was an employee, I'd shaft myself for the profit.

biggins · Oct 21, 2003

i have to agree with brock on this one. unions cause job loss in america because they demand so much. why do you think everything in new york is so much more expensive than it is here in north carolina. just using that contrast as an example.

fluff · Oct 21, 2003

Originally posted by biggins
i have to agree with brock on this one. unions cause job loss in america because they demand so much. why do you think everything in new york is so much more expensive than it is here in north carolina. just using that contrast as an example.

You lost me there. What's the connection?

Silver · Oct 21, 2003

Originally posted by biggins
i have to agree with brock on this one. unions cause job loss in america because they demand so much. why do you think everything in new york is so much more expensive than it is here in north carolina. just using that contrast as an example.

Cost of living. The same reason things are more expensive in California than they are in Nevada.

Jr_Bullit · Oct 21, 2003

Sorry biggins, I agree with Silver that the reasons for the differences in housing and such boils down simply to cost of living...that has little to nothing to do with Unions but simply how much money is in the general area. I know that a lot of what sparked or generated the population growth in certain areas can be attributed to Unions...but in CA where silicon valley once was ...that wasn't simply unions...it was pure capitalism that grew that economy to the horrendous beast that it is today.

As for shipping jobs out or keeping them home...well I guess it depends on your focus...

The kids in my development class would both support and be totally against it for reasons totally against my own personal thinking.

It's a tough issue...and idealism aside...corporations will do what is natural...compete to make the most. In this day and age, that means shipping labor outside the nations borders because it's cheaper. Eventually, and most likely, labor costs will have to even out - or we can hope anyways. If the other nations of the world succeed in catching up and the US continues iwith t's plummeting economy (spelling?) and levels of debt...in the end we'll all end up the same...but probably not in our lifetimes..or not in the recent future.

btw - I've had too much to drink, so I apologize now if anything above is not a coherent statement

ALEXIS_DH · Oct 22, 2003

Originally posted by MMike
Kinda-sorta relevant....more on the Boeing/7E7 saga

http://seattletimes.nwsource.com/html/businesstechnology/2001771010_7e7incentives21.html

Bascially Boeing is shopping for a state to assemble these planes. Conventional logic would imply that Boeing would build them here, but right now Boeing is asking various gov'ts "What are you gonna do for me to build 'em in your state?"

c´mon ALABAMA!!!! ALABAMA!!! ROLLLLLLLL TIDEEEEEE!!!!!!!

its the closest to the 3rd world they´ll find in the US, (MS is just way too much).

i need some cool sounding brand like boeing here, before i finish a PhD.

Jr_Bullit · Oct 22, 2003

An article I received today. Can't link to it - sorry - it's a subscription based goodie.

If you want all the graphs and stuff PM me and I can send you a .PDF of the article.

It's very well done, by McKinsey Quarterly.

By moving service industry work to countries with lower labor costs, US companies can focus on creating higher-value jobs.

Vivek Agrawal and Diana Farrell
The McKinsey Quarterly, 2003 Number 4 Global directions

Widely cited figures predict that by 2015, roughly 3.3 million US business-processing jobs will have moved abroad.1 As of July 2003, around 400,000 jobs already had. Other research suggests that the number of US service jobs lost to offshoring will accelerate at a rate of 30 to 40 percent annually during the next five years.2 Vast wage differentials are prompting companies to move their labor-intensive service jobs to countries with low labor costs: for instance, software developers, who cost $60 an hour in the United States, the worlds biggest offshorer, cost only $6 an hour in India, the biggest market for offshored services (see "Offshoring and beyond," to be published on mckinseyquarterly.com in late October 2003).

Such projections have caused alarm in the United States. In February 2003, the cover of Business Week asked, "Is your job next?" In June, the US House of Representatives Committee on Small Business held a hearing on "The globalization of white-collar jobs: Can America lose these jobs and still prosper?" Several US states are considering legislation to prohibit or severely restrict their state governments from contracting with companies that move jobs to low-wage developing countries,3 and labor unions, notably the Communications Workers of America, are lobbying Congress to prevent offshoring.

Yet pandering to protectionism would be wrong. Many people believe that money spent to buy services abroad is lost to the US economy, but such views are easily disproved. Companies move their business services offshore because they can make more moneywhich means that wealth is created for the United States as well as for the country receiving the jobs. A McKinsey Global Institute (MGI) study reveals the extent of the mutual benefits.4

As the study shows, for every dollar that was previously spent on business processes in the United States and now goes to India, India earns a net benefit of at least 33 cents, in the form of government taxes,5 wages paid by US companies, and revenues earned by Indian vendors of business-process services and their suppliers (Exhibit 1). What of the impact on the US economy? First, it is important to put the figures in context, since fear of job losses makes many people overstate the effects of offshoring. Some 70 percent of jobs in the United States are in service industries such as retailing, catering, and personal care. This work, by its very nature, cannot be moved abroad.

In addition, any job losses must be seen as part of an ongoing process of economic restructuring, with which the US economy is well acquainted. Technological change, economic recessions, shifts in consumer demand, business restructuring, and public policy (including trade liberalization and environmental regulation) can and frequently do result in job losses. Even when the economy is growing, mass layoffsusually from restructuringare much higher than the job losses predicted from offshoring.6 In 1999, for instance, 1.15 million workers lost jobs through mass layoffs, out of a total of 2.5 million lost. Liberalized, competitive economies with flexible labor markets can usually cope with such restructuring; the US economy, the worlds most dynamic, certainly should be able to do so. Indeed, history suggests that, over the medium to long term, a flexible job market and the mobility of US workers will make it possible for the United States to create new jobs faster than offshoring eliminates them.

The United States today has more than 130 million employed workers. According to the Organisation for Economic Co-operation and Development, it has the highest rate of reemployment of any OECD country by a factor of almost two. Over the past ten years, 3.5 million private-sector jobs a year have been created, on average, for a total of 35 million new jobs, so most workers who lose their positions find another within six months. Jobs lost to low-cost foreign competitors are not so easy to replace. Nonetheless, from 1979 to 1999, 69 percent of the people who lost jobs as a result of cheap imports in sectors other than manufacturing were reemployed.7 The mean wage of those reemployed was 96.2 percent of their previous wage.

Finally, remember that the population of the United States is aging. At current productivity levels, the country will need 5 percent, or 15.6 million, more workers by 2015 to maintain both its current ratio of workers to the total population and its living standards. By 2015, despite current fears about job losses as a result of offshoring, the US economy will need more, not fewer, workers. Offshoring is one way to meet that need.

But focusing the offshoring debate on job losses misses the most important point: offshoring creates value for the US economy by creating value for US companies and freeing US resources for activities with more value added. It creates value in four ways:

Jr_Bullit · Oct 22, 2003

Cost savings. For every dollar of spending on business services that moves offshore, US companies save 58 cents, mainly in wages. Offshore services are identical to those they replaceand at times better, since offshore workers, enjoying higher-than-usual wages, tend to be motivated. Reduced costs are by far the greatest source of value creation for the US economy.

New revenues. Indian companies that provide offshore services need goods and services themselves, ranging from computers and telecommunications equipment to legal, financial, and marketing expertise. Often, they buy these from US companies. We estimate that for every dollar of corporate spending that moves offshore, suppliers of offshore services buy an additional five cents worth of goods and services in the United States. Exports from the United States to India stood at $4.1 billion in 2002, compared with less than $2.5 billion in 1990.

Repatriated earnings. Many Indian offshore service providers are in fact US companies that repatriate earnings. Such companies generate 30 percent of the revenues of the Indian offshore industry. Thus an additional four cents of every dollar spent on offshoring creates value for the United States.

Redeployed labor. Beyond the direct benefits to the United States in the form of savings, new exports, and repatriated profits, offshoring can indirectly benefit the economy: capital savings can be invested to create new jobs, for which labor will be available. Indeed, this is exactly what has happened over the past two decades as manufacturing jobs moved offshore. The Bureau of Labor Statistics reports that overall manufacturing employment shrank by two million jobs in the past 20 years. But workers have found it easy to locate jobs in other areas, such as educational and health services. These service jobs, on average, pay more than the manufacturing ones they replaced, helping to increase the populations standard of living.

The same thing could well happen again. As jobs in call centers, back-office operations, and repetitive IT functions go offshore, opportunities to train labor and invest capital to generate opportunities in higher-value-added occupations such as research and design will appear. The Bureau of Labor Statistics estimates that from 2000 to 2010, there will be a net creation of about 22 million new jobs in the economy, mostly in business services, health care, social services, transportation, and communications.
How much value will be created in this way depends on the countrys future economic performance. Historical trends can serve as a guide. If we use the statistics on reemployment and wage levels already noted69 percent of nonmanufacturing workers are reemployed at 96.2 percent of their previous wagesand bear in mind that 72 cents of every dollar offshored had previously been spent on US wages,8 the indirect benefit to the US economy would come to an additional 45 to 47 cents for every dollar spent on offshoring. That is a conservative estimate, since workers in IT and business services tend to find jobs more quickly than do workers in the service sector as a whole, and the demographic shift will increase the demand for workers.

In this way, offshoring, far from being bad for the United States, creates net value for the economy. It directly recaptures 67 cents of every dollar of spending that goes abroad and indirectly might capture an additional 45 to 47 centsproducing a net gain of 12 to 14 cents for every dollar of costs moved offshore (Exhibit 2).

The total possible wealth creation does not, of course, ease the plight of people who lose their jobs or find lower-wage ones. The statistics showing that 69 percent of those who lost jobs in the nonmanufacturing sector were reemployed also show that 31 percent were not fully reemployed. And while, on average, those who found new jobs secured similar wages (96.2 percent of their previous wage), 55 percent took lower-paid jobs. As many as 25 percent took pay cuts of 30 percent or more.

These issues must be addressed. Training programs and generous severance packages, perhaps accompanied by innovative insurance programs (see sidebar, "Easing the pain for workers"), are among the measures that could mitigate the effects of the transition without great cost to the economy. And while many people will undoubtedly suffer short-term disruption, it should be set against the consequences of resisting change: if US companies cant move work abroad they will become less competitiveweakening the economy and endangering more jobsand miss the chance to raise their productivity by focusing on the creation of jobs with higher value added.

The openness of the US economy and its inherent flexibilityparticularly that of its labor marketare two of its great recognized strengths. The current danger is that public policy will make its economy less flexible. To do so would endanger the economic well-being of the United States.

Easing the pain for workers

As part of severance packages, and for a small percentage of the savings from offshoring, companies could purchase insurance covering the wage losses of displaced workers. Building upon an insurance proposal that Lori Kletzer (of the University of California, Santa Cruz) and Robert Litan (of the Brookings Institution) developed for workers displaced by trade in manufacturing,1 the McKinsey Global Institute estimates that for as little as 4 to 5 percent of the savings companies realized from offshoring, they could insure all full-time workers who lost jobs as a result. The program would compensate those workers for 70 percent of the wages they missed from the time they were laid off to the time they were reemployed, as well as offer health care subsidies for up to two years.

llkoolkeg · Oct 22, 2003

When unions first came into being, they were sorely needed to combat brutal working conditions, unpaid overtime, child labor, blacklisting and a host of other industrial evils. Now the pendulum has swung too far in the other direction with unions pressuring people to join, establishing featherbed positions, becoming linked with organized crime, demanding COLAs in no way based in reality and engendering a highly uncompetitive work environment. Recently here in MD, the head of one of the biggest teachers unions(and a few of her top cronies) has been under investigation for stealing millions of dollars from the fund established for its members- teachers, as in "underpaid" and "underappreciated" teachers. When I see a snaggletoothed illiterate wearing a "Local 666" T-shirt and getting into a brand new $40,000 dually with a "Union Yes" bumper sticker on the back, I see prima facia justification for sending more jobs overseas. It chaps my cheeks raw to know that I had to bust my ass in college and work two jobs in order to make less money than some slackjawed unionized yokel who can barely print his name with a fat marker on the back of his grossly inflated paycheck. Unions have held American companies hostage long enough. They are smart(and corrupt) enough to forestall their demise, however, for longer than reasonable by bankrolling one of our two major political parties...I won't say which(not that the other is any less corrupt). :mad:

brock · Oct 22, 2003

Originally posted by llkoolkeg
When unions first came into being, they were sorely needed to combat brutal working conditions, unpaid overtime, child labor, blacklisting and a host of other industrial evils. Now the pendulum has swung too far in the other direction with unions pressuring people to join, establishing featherbed positions, becoming linked with organized crime, demanding COLAs in no way based in reality and engendering a highly uncompetitive work environment. Recently here in MD, the head of one of the biggest teachers unions(and a few of her top cronies) has been under investigation for stealing millions of dollars from the fund established for its members- teachers, as in "underpaid" and "underappreciated" teachers. When I see a snaggletoothed illiterate wearing a "Local 666" T-shirt and getting into a brand new $40,000 dually with a "Union Yes" bumper sticker on the back, I see prima facia justification for sending more jobs overseas. It chaps my cheeks raw to know that I had to bust my ass in college and work two jobs in order to make less money than some slackjawed unionized yokel who can barely print his name with a fat marker on the back of his grossly inflated paycheck. Unions have held American companies hostage long enough. They are smart(and corrupt) enough to forestall their demise, however, for longer than reasonable by bankrolling one of our two major political parties...I won't say which(not that the other is any less corrupt).

Here Here!!!! :thumb:

It's not just the companies who are being taken for a ride by the unions. It is also the taxpayer. By negotiating project labor agreements that exclude non union companines from bidding on public works projects they are driving up the costs and wasting tax money.

Damn True · Oct 22, 2003

Originally posted by MMike
Yep...(I always use Boeing as my example just because it's such an extreme case. It's theonly place I know of where the engineers are unionized.....and they struck in 2000 for about 40 days).

But the union mentality is amazing to me. Yes they had their place during the industrial revolution, but there are laws now to prevent that. Boeing was bleeding money and the unions were still demanding double digit pay raises among other things. And funnily enough, raises have nothing to do with preformance.

AND speaking of performance, Boeing essentially can't fire
people. it can lay them off in hard times, BUT they have to bring them back in the reverse order that they were let go. So basically, you are there for life.....assuming they ever ramp up again.

This is a big reason for Boeing wanting to get out of this region. The unions are a monkey on the back of the company.

I have more....but it's too much to type...

I agree with MMike.

Hell hath surely frozen over.

Sorry for calling you Shirley.

Damn True · Oct 22, 2003

Originally posted by llkoolkeg
When unions first came into being, they were sorely needed to combat brutal working conditions, unpaid overtime, child labor, blacklisting and a host of other industrial evils. Now the pendulum has swung too far in the other direction with unions pressuring people to join, establishing featherbed positions, becoming linked with organized crime, demanding COLAs in no way based in reality and engendering a highly uncompetitive work environment. Recently here in MD, the head of one of the biggest teachers unions(and a few of her top cronies) has been under investigation for stealing millions of dollars from the fund established for its members- teachers, as in "underpaid" and "underappreciated" teachers. When I see a snaggletoothed illiterate wearing a "Local 666" T-shirt and getting into a brand new $40,000 dually with a "Union Yes" bumper sticker on the back, I see prima facia justification for sending more jobs overseas. It chaps my cheeks raw to know that I had to bust my ass in college and work two jobs in order to make less money than some slackjawed unionized yokel who can barely print his name with a fat marker on the back of his grossly inflated paycheck. Unions have held American companies hostage long enough. They are smart(and corrupt) enough to forestall their demise, however, for longer than reasonable by bankrolling one of our two major political parties...I won't say which(not that the other is any less corrupt).

I agree with much of what you say. How sad is it though that even with one of the most powerful Unions in the country, public school teachers are STILL so grossly underpaid. A classic example of a Union existing to foster it's own existance.

brock · Oct 22, 2003

Originally posted by Damn True
I agree with much of what you say. How sad is it though that even with one of the most powerful Unions in the country, public school teachers are STILL so grossly underpaid. A classic example of a Union existing to foster it's own existance.

Holy $hit!!!

It is getting damn cold down here!

ummbikes · Oct 22, 2003

I understand the arguments against the BIG UGLY UNIONS and for the most part agree with them.

Unions could be doing more for the poorest of workers. It's easy to pick out the glaring faults of the Society of Professional Engineering Employees in Aerospace who have negotiated great contracts for their memebers. It's the lack of solidarity for all workers that is the most appalling.

The farm worker or tree planter provides a needed service and most times gets poverty wages.

The labor laws of this nation still are negatively biased towards farm workers.

So no I don't feel real bad for the Boeing designer who wants 70K a year instead of 60K but I do understand why the apple picker wants $10 an hour instead of less than minimum wage.

brock · Oct 22, 2003

Originally posted by MMike
And then you have a Boeing mechanic that squeezes rivets for a living that make $30/hr....

And heaven forbid he squeeze too many in that hour. Some of "the boys" might have a have a talk with him.

Andyman_1970 · Oct 22, 2003

Originally posted by MMike
And then you have a Boeing mechanic that squeezes rivets for a living that make $30/hr....

It cracks me up when I go down to the shop to work and issue on the airplane. The mechanics give me a hard time saying "you make the big bucks, you tell us how to fix it". In a good year those guys can make 110-130k a year. Needless to say once I straightened them out, they had at least some compassion for me.

As an engineer (we dont get paid over time) I'll never make that kind of $. I guess I should have got my A&P instead of my degree.

brock · Oct 22, 2003

Originally posted by MMike

And I'd wave at the picket line in and out each day....

Crossing picket lines is fun. I've crossed a few hostile ones in the construction industry. I'd stop my truck once. Tell them the next time I'd be crossing at 9 or 90. they could pick. I've got ZERO tolerance for hostile/aggresive picketers.

It really pisses me off when people try to stop others from being able to make a living, provide for their families, etc just to push their agenda.

Andyman_1970 · Oct 22, 2003

Originally posted by MMike
Damn dude! Be like me! Be a shopper! I'm a degreed engineer. I get time and a half O/T. No paid vacation, but the extra money you make with the higher contract wage more than makes up for it. AND you have way more freedom. You can take time off whenever you want.

It's the way of the future!

That has crossed my mind a time or two. I'm not down with the whole gypsy life style (from the shoppers I have seen). The engineering department at my company has gotten real bad about the OT. You are expected to put in extra time every week, unpaid. And if you don't "this will reflect poorly on your next performance evaluation". They say they can do that because we are salaried, however, if i were to take a few hours off one day, I would not get paid my full 8. That does not sound like salaried to me.

I am not a fan of unions, but with the way we (engineers) are being treated, more than one of us have considered organizing. With the aircraft industry as "soft" as it is, I guess they feel like they have us over a barrell.

And one more thing. When we had shoppers here (pre 9/11), some of them would complain that they got paid less than us if you figure benifits. Come to find out, the company the shoppers worked for, paid their vacation time, and provided benifits almost as good as ours. That hacked us directs off, getting paid straight time, and about $10 less an hour to hear the shoppers complain.

Ok, I'm done ranting......................

fluff · Oct 23, 2003

Now I'm not really qualified to comment on the US labor market (US spelling, see. I can do it!)

What I would like to say is that the posts here are coming across as 'Unions suck, they protect workers and shaft companies'.

That doesn't sound all bad to me. In the last 30 years the UK has seen a big shift in employment. Basically job security is non-existent, a company will use you for as long as you are required, paying you the minimum to keep you from leaving and then drop you like a brick if the share-price drops.

That may sound OK from a company/capitalist point of view but from an employee point of view it's crap.

We have ended up with areas where industries have sacked thousands to up their profit and there is no alternative employment (and I know this has happened in the US, where's that place Michael Moore comes from?).

I guess I'm a socialist and a minority (and I'm a 'shopper' or contractor in UK-speak, and unemployed at present!)

Sending jobs/work elsewhere to be done cheaper

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