Corvallis Gazette-Times :: August 3, 2003

White-collar jobs may be departing U.S. forever

Experts say tech, globalization trends make permanent shifts

By Angela Shah
The Dallas Morning News

Globalization and the high-tech revolution drove the U.S. economy to new heights in the 1990s and many white-collar workers particularly enjoyed the ride.

But those very same forces are now serving to prolong workers' misery. More college-educated executives and managers have been cut from payrolls this last recession compared with previous ones. And it's taking them longer to find new work.

More worrisome to them, however, is that the jobs may never come back.

The economic churn — so familiar to displaced blue-collar workers in decades past — has shaken up the managerial ranks. Improvements in technology mean that software code or tax forms can be written or processed in India or elsewhere — at a substantial savings.

The trend is particularly biting for many of North Texas' unemployed, still hobbled by the collapse in tech and telecom.

"The substitution of Third World labor is causing a lot of pain in this area," said Gene Nelson, an unemployed telecom engineer, who lost his job at Geunity Inc. three years ago.

Economists add that even news that suggests an economic rebound is imminent — for example, Thursday's surprising second-quarter GDP report showing a rise of 2.4 percent — won't reverse the exodus.

"This is just the leading edge right now, but a trend that will grow," said Jeffrey Wenger, an assistant professor of public policy at the University of Georgia. "It's good for American consumers and bad for American workers. Unfortunately, they tend to be the same people."

Despite an economic recovery that officially began in November 2001, the U.S. labor market remains weak. Businesses have cut 236,000 jobs this year alone, bringing the total slashed from payrolls to more than two million since the tech bust three years ago.

But the unexpected good economic news out earlier last week had raised hopes that the jobs picture would also become brighter. On Friday, the Labor Department reported the July unemployment rate dipped to 6.2 percent, but only because more workers became discouraged and quite seeking jobs. The economy lost 44,000 jobs in July. In June, the jobless rate had risen to 6.4 percent while companies cut 30,000 positions.

"The bulk of their costs is people," said Donald Hicks, a professor of political economy at the University of Texas at Dallas. "Anything that reduces people-related costs is a boon to the bottom line."

So, using the capabilities of the Internet, operations like financial processing or IT consulting can easily be moved overseas.

Labor is "a mouse click away, more skilled and at one-fifth of the cost," said Rudy Puryear, a partner with Bain & Co. in Chicago, who advises clients on such off-shoring issues. "There's been an acceleration of that over the last three or four years."

Over the next 15 years, Forrester Research estimates that 3.3 million U.S. services industry jobs and $136 billion in wages will move to countries like India, Russia, China and the Philippines. "IT," the firm noted, "will lead the initial overseas exodus."

The recent economic downturn — and the subsequent moves by companies to weather the storm — has taken its toll on the white-collar ranks.

"White-collar workers have lower levels of unemployment but once they become unemployed, they stay unemployed for a long time," Wenger said. "It's very unlikely you'll be struck by lightning. But once you do, the consequences are pretty dire."

White-collar long-term unemployment more than tripled during this last recession, supporting a perception that the current downturn is a more "high-end" recession than those in recent memory, according to a report by the Economic Policy Institute in Washington.

And better-educated workers have been over-represented among the long-term unemployed as compared to the total unemployed population, the report said.

Much of North Texas' long-term unemployment is in the technology sector.

Right now, only a fraction of those workers cite off-shoring as a cause of job loss, said Meghna Virick, a visiting assistant professor of management at the University of Texas at Arlington, who recently completed a survey of people looking for work in this area.

"Some of the people whose jobs moved overseas acknowledged that they were highly paid compared to people where the jobs are being moved to," she added. "But in their comments, they expressed dissatisfaction with decisions being made out of the country."

Nelson understands the frustration, saying he has not been able to find permanent employment since he was laid off. He disputes the benefits companies cite when moving jobs to other countries.

"If you have a core business process, you can't offshore it until you move the entire business offshore," he said. "These jobs require coordination of the entire team. They need to be in the same room. There has to be high level of quality communication."

Nelson said he was to help lead a protest of Perot Systems Corp. on Saturday. The company has been increasing its presence in India, while it has also cut jobs in the United States and Europe.

Last month, the group protested outside Microsoft Inc.'s local operations and it plans further demonstrations.

"This has been going on the whole decade but it's been compensated for by the jobs being created here," said Hicks. "But now, in a jobless recovery, it's a much more high-profile set of announcements when companies shift tasks abroad."

Puryear of Bain & Co. said this "tends to come up to the forefront in any economic downturn." But what's different in this business cycle is that not only is it cheaper to hire workers in other countries, but their quality rivals those of their American counterparts.

"Economies like India have MBAs from great universities," he added. "They are English-speaking and fully loaded cost $8,000 to $12,000 a year."

Off-shoring has become popular in a variety of fields, including financial services, insurance and others.

"Even the medical sector is being affected because a lot of radiology is being read overseas," said Irwin Kellner, a professor of economics at Hofstra University in New York. "They're transmitted back and forth on the Internet."

Experts say they understand the misery felt by those looking for work when they see companies transfer operations out of the country.

"We try to ask them to develop some options rather than looking at what's leaving our shores," said Christine Glasco, vice president and executive advisor at the Center For Executive Options in Dallas.

"It is a global market," Virick said. "No company is truly a domestic company. Practically every company does have some kind of international part, people or services."

In the long run, more efficient companies mean more prosperity for Americans, economists say.

First, U.S. economic activity needs to pick up substantially, said Kellner.

Economic data released by the government Thursday suggest that the sluggish recovery's days may be numbered. In addition to the surprisingly rosy report on economic output, the Labor Department said the weekly number of Americans filing new claims for jobless benefits fell to 388,000 last week. Economists consider 400,000 a benchmark that differentiates a weak labor market from a growing one.

"We will manage not only to muddle through but to create jobs to add to our overall well-being," said Kellner. "I have faith in the system. Somehow or another, we'll create jobs that can't be exported overseas."