Let’s say you’re a carrier planner or equipment vendor product architect. You work your butt off to develop a new scheme to reduce the cost of networking, to create inexpensive bandwidth for all. You get rewarded, right? Maybe not. Your invention might cost you your job, and a lot of others their jobs, too.
Everyone knows that labor costs vary considerably throughout the world. You can get people to plant crops, harvest and pack produce a lot cheaper in Chile than in Florida, for example. What has tended to level out this cost-of-labor disparity is the cost of transportation. If the Chileans can’t eat all their own fruit (or, because of low wages, can’t afford to buy it), they can ship to the U.S. only if the shipping costs don’t more than offset the lower labor cost. In short, transportation cost is a barrier to “offshoring” the fruit business.
In the current offshoring debate, we’re not talking about laborers’ jobs, but about high-tech jobs that have been rightfully viewed as the future of the U.S. economy. As in fruit “offshoring,” transportation cost – in this case, networking cost – also is a key factor in the move toward high-tech outsourcing. Ten years ago, the notion of running a telemarketing center in India would have been ridiculous. The cost of transferring a telemarketing or support call across half the world would have paid for a legion of workers in the U.S. But bring network cost down and suddenly the economics change, and that’s what has happened . . . and will continue to happen.
If network costs were zero, any job whose duties involve projecting information or selling via telephony, video or data could be executed anywhere where suitable labor exists. That means that companies with these kinds of jobs will shop them to the regions with the lowest labor costs. OK, networking isn’t free, but it’s getting less expensive on a cost-per-bit basis, and the place this hits first is voice, a low-bandwidth application. Voice-based support and sales is thus the first thing to be affected, but it won’t be the last.
Software development, hardware engineering, project management, accounting and many other jobs are just as vulnerable to cheap labor if the work offshore employees or contractors do can be coordinated inexpensively and efficiently with the on-shore company personnel and its customers. Companies might resist having software developed 8,000 miles away because they’d feel they were losing control of the process. Would they feel the same way with real-time video links to those remote resources? With instant data collaboration? All that holds back that level of techno-integration is the cost of the networking – the same cost that’s falling like a rock in today’s market. The better we make networks, the less network services cost, the lower the barriers to exporting technical jobs. Sad, but true.
We can argue that the offshoring process is self-leveling, and that’s true to a degree. Prosperity and development elsewhere will narrow the labor cost advantages and reduce the flow of jobs. We can argue that jobs will be created here by the effect, and that’s also somewhat true. The building of the infrastructure to support offshoring might well consume American products. We can argue that lower prices and higher profits will result in the U.S., and again it’s sort of true. But how much has Chilean fruit caused fruit prices to fall? Aren’t some of the low-labor-cost countries creating their own network equipment and computers? How many jobs have to be lost for this “self-leveling” thing to be unimportant? Answer: Only one – yours.
We aren’t going to put the network cost genie back in the bottle, so the only solution is productivity. High-value workers are competitive when they produce so much more (or better) goods that their premium cost of labor is justified. It seems that after the bubble, Wall Street and Main Street both distrust technology. They will have to trust it again, for our collective good.
