After hearing the buzz about Bangalore for the past two years, St. Petersburg businessman John Long flew to India last month to see for himself. Why is this high-tech, low-wage city such a magnet for jobs once handled in the United States?
"I was amazed," says an enthusiastic Long, CEO of First Advantage Corp., a fast-growing provider of business information. In Bangalore, well-educated and motivated English-speaking workers paid $10,000 a year can afford a cook and a maid. Managers paid $35,000 can add a driver and a gardener. Long's company operates a subsidiary called Zap App with 30 employees in a state-of-the-art building in Bangalore. He plans to add 70 more jobs there this year alone.
Long has no apologies for hiring people at what are good wages in India while saving his company a bundle back home. Those savings, he argues, get plowed back into First Advantage and over time contribute to more U.S. jobs at his company.
"There's been too much fuss over the jobs going out of this country," says Long, whose company has grown from 900 to 1,500 employees in the past year. "And there has not been enough attention given to what is happening positively in the longer term back here as a result of that ability to save on certain kinds of jobs."
Still, Long is wary. In a presidential election year, the rising trend of moving jobs overseas, called offshoring, is rapidly emerging as a hot campaign issue in what so far is a "jobless" economic recovery.
"I hope things do not get too protectionist," Long says. Just to be sure, he wants to get his Bangalore hiring done before there is any government move to slow or halt the flow of jobs offshore.
The CEO has reason to be wary. A longtime proponent of the corporate benefits of offshoring, the Bush administration looks like it is in the early stages of an about-face.
Consider the political shift in just the past week:
- Last Monday, Gregory Mankiw, chairman of the Bush administration's Council of Economic Advisers, called offshoring "just a new way of doing international trade" while releasing the annual Economic Report of the President.
- On Tuesday, U.S. Treasury Secretary John Snow visited the St. Petersburg Times and, in response to a question, said offshoring is "far less, I think, the threat to the work force of America than it is often portrayed." The number of jobs heading overseas is relatively small, he said. They tend to be low-priority and lower-end tech jobs, not top high tech jobs, Snow said, and are usually held by young U.S. workers "who are more adaptive and easily transferable to other activities."
Offshoring "peripheral" jobs and getting them done at lower costs makes U.S. businesses more valuable, more competitive, wealthier and thus able to pay higher dividends and wages, the Treasury secretary said. "So there is a wealth creation process in (offshoring) that is far different from the way it is hugely portrayed as jobs just flooding out of America," he told the Times.
- Smelling political blood, Democrats and even a few Republicans on Capitol Hill jumped on Mankiw's remarks as indicative of the Bush administration's insensitivity to the country's "jobless" recovery. Democratic presidential candidate Sen. John Kerry of Massachusetts criticized the White House for the loss of 3-million U.S. jobs, saying "now they want to export more of our jobs overseas."
Last year, Kerry introduced a bill that would have required U.S. companies to have their call center representatives disclose where they were located with each call. While the bill never passed, similar measures may find a friendlier atmosphere in Congress this year.
Another Democratic candidate, Sen. John Edwards of North Carolina, has begun telling audiences on the campaign trail of the father who must tell his daughter one night that his factory job is gone and moved overseas.
- On Thursday, legislation dubbed the "Jobs for America Act" was proposed to require companies to give employees three months' notice of layoffs if they are replaced with workers outside the country. "This week, Americans learned something important," said Senate Minority Leader Tom Daschle, D-S.D. "Exporting jobs isn't an accident. It's administration policy."
In response to the rising political heat, President Bush made a point during a visit to Pennsylvania of expressing concern over the offshoring of jobs. "We need to act to make sure there are more jobs at home," he said, "and people are more likely to retain a job."
The controversy over offshoring is only part of the tale. Sending jobs overseas to lower-cost countries would be far more palatable if the United States showed some momentum toward generating better jobs at home.
But the forecast on new U.S. jobs is not heartening. Wednesday, the federal Bureau of Labor Statistics unveiled a study projecting what kinds of jobs will be created in this country between now and 2012. The bulk of new jobs, in health and information technology, will not require much education, the study said. And most jobs will pay below average.
"An associate or bachelor's degree is the most significant source of post-secondary education or training for six of the 10 fastest-growing occupations," the study concludes. The fastest-growing occupation? Medical assistants, jobs that require only "moderate on-the-job training."
Some other growing information tech jobs, including software engineers and network and data communications analysts, that require more education and pay better offer a more encouraging picture.
At St. Petersburg's First Advantage, Long says there's a big difference between offering a $10,000 job to someone in Bangalore and opening a sweatshop in some developing country just to cut costs to the bone.
His company's workers in India work in a pleasant facility. A company bus brings them to work and takes them home. They are served a lunch or dinner, depending on their shift.
"I can't do that here," says Long, who works in downtown St. Petersburg's Bank of America tower. "I could not afford it."
So far, Bangalore workers handle routine software development and back-office functions for First Advantage and its parent, First American Corp. But some key jobs will not go overseas.
"Some people are sending their customer call centers there," Long says. "We want more control over who talks directly to our customers." And higher-level and proprietary software development will continue to be handled in the United States.
While on last month's tour, Long quickly noticed that his Bangalore workers are happy, energetic and productive. So much so that the entrepreneur was struck by the difference with the uneven work ethic in this country.
"Most people work hard here, but some people have an attitude. Some people are overpaid for their efforts," he says. "And all the rules in this country make it so you get stuck with a lot of dead wood."
Add one more U.S. business executive to the Bangalore Fan Club.
