Wednesday, September 01, 2010

Low Wage Jobs Are Coming Home


For years, Americans have had their phone calls about credit card bills and broken cell phones handled by people in the Philippines or India. But American firms are starting to bring call centers back to the U.S. — and this time around, they are hiring more people to work in their own homes.

Ten years ago, it made a lot of sense to outsource these jobs overseas. But that's changing. Increasingly, companies that want to outsource their customer service jobs are happy with these domestic arrangements.

High inflation and double-digit annual raises in some sectors are pushing up the cost of labor in India. At the same time wages in the U.S. are falling and companies are rethinking the trade-offs associated with outsourcing.


Experts say outsourcing is still accelerating for jobs in IT services and manufacturing. Phil Fersht, an outsourcing analyst, says even before the recession started, companies were starting to realize that offshoring wasn't the best option for other services.

In other words, the wage scale in the US has fallen so far that it's cheaper to hire folks at home to do the lowest paying jobs. The better paying jobs, like IT and manufacturing, are still going overseas.

In fact, US labor is so cheap now, that outsourcing companies in India are outsourcing jobs to the US. From

Pramod Bhasin, the chief executive of Genpact, said his company expected to treble its workforce in the US over the next two years, from about 1,500 employees now.

“We need to be very aware [of what’s available] as people [in the US] are open to working at home and working at lower salaries than they were used to,” said Mr Bhasin. “We can hire some seasoned executives with experience in the US for less money.”

I trust I don't have to underscore the irony inherent in that last story.

Finally, if unemployed folks find jobs, those jobs are likely to be lower paying. From the New York Times:

For years, long before the recession began, job growth had become increasingly polarized in this country. High-paid occupations that require significant amounts of education and training grew rapidly alongside low-wage, service-type jobs that do not, according to David Autor, a labor economist at the Massachusetts Institute of Technology.

The growth of these low-wage jobs began in the 1980s, accelerated in the 1990s and began to really take off in the 2000s. Losing out in the shuffle, Dr. Autor said, were jobs that he described as “middle-skill, middle-wage” — entry-level white-collar positions, like office and administrative support work, and certain blue-collar jobs, like assembly line workers and machine operators


A new analysis by the National Employment Law Project, a liberal advocacy group, takes a different approach, identifying industries that have experienced job growth in 2010 and examining their median wages. It is a blunter measurement because it focuses on whole industries, within which there is often great diversity in income. Economists also cautioned that it was still too early to know exactly which sectors would eventually lead the way in a sustained recovery.

Nevertheless, the law project analysis offers a snapshot of where the employment growth has been so far. It found that job expansion to this point had been skewed toward industries with median wages that are low to middling, with a disproportionate share of job growth happening in industries whose median wages fell below $15 an hour.

Given that our entire economy revolves around consumer spending, it's difficult to imagine how an abundance of low paying jobs will provide "recovery." If this is the wave of the future, more foreclosures and bankruptcies await.

Cross-posted at MainSt/

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