OT: Hearing 'I Work Cheap' From Across the Globe (WSJ)
Jerry Leslie
"Career advice for the 21st century: Stay away from any job that
can be done online, or you'll be competing with my buddy Odyssey --
and people eager to underbid him, too. I found a good programmer
in five minutes. I'm still looking for a good carpenter."
Jerry
==============================================================================
http://online.wsj.com/article/0,,SB1023052957259844360.djm,00.html
Hearing 'I Work Cheap' From Across the Globe
By LEE GOMES
Staff Reporter of THE WALL STREET JOURNAL
"I was holding Oracle CEO Larry Ellison's American Express card in my hand,
thinking about the differences between the world's fifth-richest man and me.
I was about to discover something we had in common.
This story starts a few weeks back, when I bought a new Palm to help learn
French. One night, I was writing a Visual Basic program to drill in French
verbs, when I came across an especially tricky software problem I couldn't
solve. Several hours later, I found something online called "2 Rent A
Coder." You post a programming problem and people bid on solving it for you.
I was struck by the sums people were bidding to do jobs: $15, $25. Pocket
change, it seemed. Then I noticed where many of the people were living:
India. Eastern Europe.
I described my problem. Eventually, for $25, someone named Odyssey helped me
out.
Now that the front lines of globalization were running through my PC, I was
curious about who Odyssey was. I wrote him a note and told him what I did
for a living and asked him about himself. He wrote back. His real name is
Mani Kumar; he is 26, and lives in Bangalore, where $25 is a week's rent.
Working for Americans isn't anything new to him. He works in support for a
U.S. software company, and on American time, too, which is the middle of the
night in India. Rent A Coder, he said, is a combination of hobby and
skill-sharpening tool; he wants to eventually get a day job at his company
as a programmer.
I asked Odyssey to send a picture of himself. He did. Globalization includes
Gap's casual uniforms of the world's computer programmers.
Thanks to the Internet, there was suddenly a link between two previously
separate worlds, mine and Odyssey's.
Is that, though, a good thing?
My home in San Francisco is near a street of pick-up laborers -- usually
Mexican immigrants who stand on the sidewalk and wait for contractors to
pull up in their trucks. When one does, the workers gather around, pushing
each other out of the way, frantically trying to get hired. "Hey Mister, I
work hard." "Hey mister, I work cheap." It's close to what economists call a
"perfect market."
Most cities have such a place. The one near my house happens to be on Cesar
Chavez Street, named in honor of the farm workers' labor leader. For the
pick-up laborers, though, the name is a cruel joke.
Labor unions are all about the idea that workers don't stand a chance if
they are battling other workers. Walking down Cesar Chavez Street, you need
a heart of stone not to be pained by the site of a young father trying to
put food on his table by promising to do a day of back-breaking work for
even less money than the young father right next to him.
I can't, though, discern much difference between Cesar Chavez Street and the
evolving Internet. With my programming problem, I had just, in effect,
pulled up in a pick-up truck. People whose economic circumstances are vastly
different from mine then jostled for my attention.
True, the Internet isn't yet as perfect a market as Cesar Chavez Street.
Just give it time. Very large invisible hands are at work. One day, everyone
in the "digital economy" may find themselves on a Cesar Chavez Street that
spans the globe.
Career advice for the 21st century: Stay away from any job that can be done
online, or you'll be competing with my buddy Odyssey -- and people eager to
underbid him, too. I found a good programmer in five minutes. I'm still
looking for a good carpenter.
The same day that I got my picture from Odyssey, Larry Ellison visited the
Journal bureau. He was talking about how security is better for credit cards
than pilot's licenses, hence the passing around of his American Express.
But then he started talking about how Oracle uses a lot of programmers in
Bangalore. Maybe I had a guilty conscience, but I seized on the point.
Doesn't Oracle feel a responsibility to hire Americans? Well, said Mr.
Ellison, we are a global company; plus, we hire lots of Americans, too. And,
he added, don't people have a moral responsibility not just to their
country, but to the whole world?
A perfectly good answer, though I couldn't help thinking about the Flint,
Mich., of "Roger and Me," where GM executives had said similar things before
shutting down all those car plants.
But at least Mr. Ellison is practiced in dealing with questions about
profiting from the Darwinian labor economics of the Internet. Now that I'm
doing the same thing, I could use some pointers on how I should handle the
issue myself."
Jerry Leslie
: The most salient point of this WSJ article:
:
: "Career advice for the 21st century: Stay away from any job that
: can be done online, or you'll be competing with my buddy Odyssey --
: and people eager to underbid him, too. I found a good programmer
: in five minutes. I'm still looking for a good carpenter."
:
: Jerry
The WSJ ran a followup article today that include some of the letters
Lee Gome received that document the "huge world of pain"...
Readers Ponder the Economics
Of Global Programmer Market
"Lee Gomes's Boom Town column appears in the print and online Wall
Street Journal every Monday. Readers' letters appear here Fridays.
Lee writes: To say the latest column touched a nerve would be an
understatement; in fact, it seems to have exposed a huge world of
pain.
The piece was something of a meditation on my hiring a programmer in
India over the Internet to do a little project for me, and what that
portended for future labor markets -- especially for workers in
various computer-related fields, the same ones who had rushed to
embrace the Internet and who had previously seen it as something of a
friend. I wondered whether what happened to many manufacturing workers
during the 1980s would soon start happening to computer programmers,
people presumed to have the sorts of "future-proof" jobs everyone had
been told to get during the last 10 or so years.
In fact, this employment exodus seems to be already happening, and in
spades, as several of the following letters make clear.
At the same time, many readers took the column to be a critique of
"free trade" and the like. Most of these readers suggested that the
phenomena I was seeing and describing was a solution and not a problem
-- as well as something that in the end was ultimately in everyone's
best interests. Several of their letters are below, as well.
I'll have a few concluding thoughts after all the letters. The last
word, though, will go to my friend Mani, who helped start it all.
* * *
It's ironic that your article about cheap labor appears on the same
day I was relieved from my duties, where this type of hiring practice
has taken a stronghold. A job done well is no longer the criteria for
staying employed; rather, the cost to the company decides whether you
stay or go. And, yes, a company based in India will be performing this
work remotely for a price less than what the local mailroom worker
charges. Of course, you cannot fault a company for reducing its costs.
What does this mean for the American worker? In my opinion, Americans
will not be able to compete against a country where a week's apartment
rent is $25 (and for all we know, this might be the rent for a luxury
apartment). One observation from my travels around this country is the
explosion of Indian nationals working in the IT world on H1B-visas.
American companies, like Oracle, argue they cannot find qualified
Americans with the same skills. In actuality, the argument is only
partially stated, as these companies forget to add "for a cheap cost."
I envision myself standing someday on a virtual street corner with a
sign saying, "Will program/consult for food." Or better yet, moving to
India and competing against the locals. By the way, did Mr. Kumar pay
tax to the U.S. on his $25?
Brian Wallace
* * *
Mani Kumar negotiated a fair price based on his economic model, while
you no doubt received a bargain. No one is harmed in this transaction
and ultimately the wage scale for Mani or more likely his successors
will improve. The bigger sin would be not to let Mani compete for the
job. Ignoring lower wages, commodity prices and competition for too
long inevitably leads to the sad story of "Roger & Me" mentioned in
your article. Those companies employing the Mani Kumars of the world
in all probability would be the best organization for an American to
work at long term.
Dan MacDonald
* * *
As someone who strongly supports globalization as the path to better
lives for people in developing nations, I must express my disagreement
with your extremely narrow view. A few things to consider. The
programmer in India is earning a week's rent by providing a service to
you that is facilitated by the global economy. He is happy to do so. I
expect he is better off than his father and has a chance to give his
children a better future than he has. This is great news, although, as
with many stories that result in opportunities for individuals, it has
hard work and sacrifice at its core. As the demand for his services
grow with an expanding world economy, he can raise his prices and work
less or continue to work the same amount and make more money. His only
foe is those in our midst who would deny him this opportunity in the
name of some type of misguided paternalism or guilt.
Your example of the Mexican workers in San Francisco is also worth
thinking through as opposed to your understandable emotional reaction.
First and foremost, Mexicans move to the U.S. in great numbers,
legally and illegally because their government engaged in decades of
protectionism designed to milk the wealth of the nation for the
benefit of a privileged few. The way it worked in Mexico was the
favored families in industry and politics got business franchises --
in most cases protected from outside competition and were able to have
high prices that in effect transferred the wealth of working-class
Mexicans to this royal class. That is all changing now because of --
you guessed it -- globalization supported by a democratized political
system. I spent almost four years in Monterrey setting up a General
Electric business that has flourished. For the last five years wage
inflation has greatly outstripped currency devaluation so the Mexican
workers standard of living has improved by double digits for each of
those years. Tangible evidence of this is we have recently had to
greatly expand parking lots for the great expansion of cars owned by
our workers there. People who were forced to take awful public
transportation a few years ago are now able to buy cars and improve
their quality of life.
I am forever disappointed in people who take a short snapshot of the
effects of globalization, apply sensibilities that are developed from
experience living in the richest nation on earth without any
countervailing real experience living in a developing nation, and
decide if this modern phenomena is good or bad for people in places
like Mexico, or Brazil, or India. Opportunity and the chance to
compete for an ever-increasing economic pie is what people in the
Third World want and deserve to have. Globalization and free economic
systems supported by democratic governments deliver that opportunity.
Ask your friend from India.
Stephen L. Smith
* * *
As a photographer who also does digital work (motion graphics /Web
sites/ animation/ etc.) I've been creamed by the Internet.
I moved to New York over 20 years ago, and for about 10 years after
that, photographers could still make a good living. But the rise of
"stock photography" and the Internet have reduced the profits.
I've moved into things like motion graphics and animation. But there
are no barriers of entry into those fields. It was expensive to get
into photography; a Hasselblad lens can cost $4,000. But getting into
digital work is easy and cheap, and anyone with an iMac and a pirated
copy of Flash can work on Web sites. Now my clients are hiring
animators in Russia and New Zealand. I regularly get spam from people
who are selling web site creation for $299 by designers in Eastern
Europe. Maybe next year, Web sites will be designed by 12-year-old
Chinese girls for $10 a month.
Nothing can be done, and I don't think it's "unfair." But I'm
obviously not happy with it.
David Vesey
* * *
I live in South Texas; my parents immigrated from the north of Mexico.
The questions and issues your article raises hit us all in the heart
and in the bank account. I think many people in the U.S. struggle over
which of those is more painful. I don't know how a person can't feel
compassion forthe men, women and children who sit on the side of Cesar
Chavez Boulevard (the same street name in Austin has a similar group
of workers-for-hire) or the side of the information superhighway
saying, "I work cheap." I also know that the last thing many of those
people want from others is pity. They believe strongly that they are
working to improve themselves by learning skills or working harder
than the next guy with the skills they've got. Most aren't looking for
anyone's compassion, they are looking for an opportunity to work and
earn a living with as much dignity as they can muster.
I think that the laws of economics work well in most cases. Whether
it's Mani Kumar in Bangalore or a worker-for-hire on Cesar Chavez
Boulevard, the best thing you can do is, if you have work that needs
doing and they are offering a quality service for the money, hire them
and give them a chance to either work or learn that they need to do
something else.
Gerardo Lopez
* * *
I am an unemployed techie. Now I am starting a humble business that
does not have anything to do with computers. To augment my small
income I will join my neighbor's tiny business. She cleans offices and
offered to take me in. Do not laugh: she charges anywhere $40-$75/hour
and has flexible hours. She has turned down some clients due to
overbooking. There is another benefit to joining her: plenty of
physical exercise on the job (IT offers none) and no pointy-haired
bosses (IT has an excess of those).
Elmira Cancelada
* * *
You were clearly taught -- long ago and very carefully -- that the
prosperity and security of your life in a civil society should make
you feel guilty. This is the same corruption that has eaten the brain
cells of those on the custard-head Left, who claim that increased
global trade causes poverty. I remind you:
Those who claim that free markets in labor represent a "race to the
bottom" have it exactly backwards. The alternative to the street
corner for the laborer (usually an illegal immigrant) you mention is
subsistence farming where he came from. That's an 80-hour work week
and death of old age at 40. That, and not the street corner here, is
the "bottom" of the global economy. The opportunity to bid for casual
work here, lousy as conditions are, is a possible, very small, step
off the bottom. What we should offer such workers is legal recognition
-- a work visa that gives them access to our courts and removes the
threat of deportation.
The programmer you mention has already taken several steps off the
economic bottom. If he could sell his skills in his local market for
more than you are willing to pay, clearly he would. The communication
afforded by the Internet is an enormous benefit to him because it
gives him a far wider market in which to find customers. What is your
problem? If it makes you feel better, hire him for what he asks and
then pay him more than that when he does your job well.
Our prosperity derives, more than anything else, from the accumulated
intellectual and physical capital of 150 years of learning to produce
food cheaply. When fewer people produce more food, more human time is
freed to do programming and write newspaper articles. The progression
is not always direct, not everyone gets a piece of the goodies in
every generation, and the changes in individual lives as technology
and labor markets evolve are often wrenching; that is about the best
you get in a human universe.
Steve Daniels
* * *
As a retired software engineer with about 40 years of experience, I
taught, in 1997-98, programming (C and C++ languages) to a class of
12-13 students for a period of three months. These courses were part
of a nine-month sequence of courses designed to prepare students who
had earned high-school diplomas but had not gone to college for
entry-level positions programming computer software. This full-time
program cost the students over $15,000; they usually took out loans to
finance it. Even though it was a full-time program, most of the
students worked in addition at part-time jobs to support themselves.
I was impressed with the outstanding ability of many of the students
who had no college to grasp programming concepts and to write
meaningful, valuable computer programs, given the proper instruction.
So it was with no small amazement that I found that even the very best
ones (with only one exception) were unable to obtain a single job
offer after they had completed their nine months of study. I can
certify on the basis of a successful software career myself that many
of them were without peer among qualified entry-level professionals.
One of the very best of my students kept looking for a job for a full
year before she finally found one.
You article indicates, quite correctly, that Mr. Ellison (and most
likely, Mr. Gates and a great many other very rich men who head
American software providers) have "grown" their companies by hiring
people under such conditions as you were able to hire Mr. Kumar, as a
conscious strategy. It seems to me we may confidently assume that Mr.
Ellison and others of his ilk have significantly lowered the average
salary of programmers in their companies relative to professionals
doing similar work who cannot be replaced by foreigners; and with
equal confidence we may also assume that Mr. Ellison's own salary is
in no way lower than those of other executives in American companies.
This kind of strategy was a significant factor in preventing the
outstanding software professionals in my class from obtaining jobs for
which they were outstandingly qualified.
You mention "the sight of a young father trying to put food on his
table by promising to do a day of back-breaking work for even less
money than the young father right next to him"; I think I have a
similarly disheartening thing to think about: The situation of a young
father (or mother) who will be working as a salesperson in McDonald's
or a shoe store for 5-10 years to pay off a $15,000 loan which went to
waste (not to mention the nine months of a young life which also went
to waste) because the U.S. is no longer a land of opportunity.
John D. Robinson
* * *
Most of the world's population does indeed suffer under circumstances
less desirable than those enjoyed by most Americans. The opportunity
for Third-World persons to offer goods and services to Americans,
however, is not the cause of this discrepancy, it is what will
eliminate it.
With regard to pointers on how to handle the "Darwinian" labor
economics of the Internet, this is what you should do. Seek out
opportunities to do as much business as possible over the Internet,
and aggressively seek out the lowest price. That will most often
result in your taking your businessto the individuals in the least
well off condition. You will not only be permanently raising the
standard of living of the world's poorer people, you will be raising
the standard of living in your own nation as well.
In your column you have reinforced a common myth of trade -- that
trading with less-well-off persons harms them and us. This myth deters
people from embracing international trade, and perpetuates the
horrific conditions under which millions of people live world-wide. No
one need feel guilty about getting a good deal by trading with persons
less well off. Remember, for you it is merely a matter of saving a few
dollars. For persons in truly desperate conditions, the opportunity to
trade with you can be a matter of life and death. No one need feel
ashamed of eliminating world poverty and increasing the well-being of
Americans, even if you save a few dollars in the process. And if you
do still feel guilty, there is nothing wrong with giving the low
bidder a tip when you buy from them.
Alan Lockard
* * *
Your "Darwinian" metaphor is inappropriate, which is part of your
conceptual problem. A market economy is not about the "survival of the
fittest"; it's simply an expression of freedom -- the freedom to buy
and sell on the basis of perceived mutual gain. Freedom, property
rights, and the rule of law will lead to societal wealth creation. A
rising tide lifts all boats, and everyone survives, as in the U.S.
There is no Darwinian aspect to this process, though some people
succeed more than others.
You seem bothered by the willingness of some individuals to work for
what you perceive to be unreasonably low wages. If the result of such
low-wage employment (primarily in developing countries) is that some
American jobs are lost, then that's simply a market signal that the
Americans who can no longer compete for those jobs should move their
efforts into something more highly valued by the economy at large.
Admittedly, if you happen to be one of those people, that's not very
good news, but in the broader scheme of things, that's how wealth is
constantly created -- by moving resources from lower-valued activities
to higher-valued activities. Without this market discipline,
innovation would be stifled, as people threatened by technology or
lower-wage workers would insist that consumers squander resources on
activities that have dropped in value.
By the way, your comment that "labor unions are all about the idea
that workers don't stand a chance if they are battling other workers"
misses the true purpose of a union: to create a cartel of labor for
the purpose of forcing above-market compensation for the relatively
few members of that union. It's a good deal for members of the cartel,
but bad for everyone else. There's nothing progressive about the
concept.
John Charles
* * *
Here's the other shoe dropping. Used to be that when we set up
manufacturing "off-shore" we didn't move cutting-edge process and
technology or R&D.
But now companies in many of our high-tech industries (telcom for
example) are shutting down state-of-the-art process centers in the
U.S. and moving them to China. We are also doing cutting-edge R&D
globally. These are management decisions made for a variety of
reasons, not just the "race to the bottom" revolving around cheap
labor.
This current process is more than just job creation, and taking the
lowest bid. This process is really industry building in a form it
hasn't been done before, at least in the high-tech world.
The result? Among others, some of the newest startups with "spin-off"
technology show up in these regions as the engineers and managers take
what they know and begin to build new ventures. Now "we" no longer
control the decision-making processes for that next generation of
investment.
So the question for Mr. Ellison (and the rest of us) is, "What are the
drivers for you, when you invest big capital bucks and move
cutting-edge technology to other regions of the world? And do you
think (or even care) about the consequences five years down the road?"
The underlying assumption in Mr. Ellison's current position is that he
is in control of the process, and thus can afford to be a good global
citizen. The fact is that the process itself will change the locus of
control and his successors may very well find themselves on the other
end of the decision process.
And now for extra credit my real question, "What will the U.S. economy
look like in 10 years, given the way things are going?" I've tried to
research this, but can't find anyone working on the issue, so ...
please stand up and identify yourselves.
Robert Gelber
* * *
You've certainly identified the focus of extreme anxiety on the part
of every U.S. IT worker. It's no coincidence that hundreds of
thousands of IT workers have lost their jobs over the past few years,
far beyond any contraction due to Y2K build-down (the reductions due
to the dismantling of extensive Y2K efforts) or the implosion of the
dot-com bubble.
I can assure you that American businesses are dumping their domestic
workers as fast as possible (but not so fast as to seem greedy -- it
looks like about 10%-20% year after year) in their rush to lower
expenses. Of course there is no similar rush to trade our high-priced
domestic top management for a lower-priced foreign brand.
A similar thing occurred a few decades back, when America's
blue-collar workers found their jobs moving south of the border in
droves. One difference between then and now is that many (but not all)
of the blue- collar workers had unions to prevent entire industries
from moving outside the U.S. . No such similarity exists in the case
of IT workers. About the only guarantee that any IT jobs will exist in
this country will be the positions that require U.S. citizenship (the
FBI is not likely to recruit foreign nationals to rebuild its IT
infrastructure), and they represent only a tiny fraction of all the IT
work performed for U.S. entities.
Is this a good thing for U.S. businesses? In the absence of regulatory
strictures (ugly as they are), yes. The competitive advantages cannot
be denied, and the financial incentives are enormous. I question how
strong a domestic IT capability we will have in a very few years, in
exchange for a significantly higher level of corporate profitability
and commensurate loss of control.
A similar threat is ongoing in the hardware end of things -- EE and
computer engineering is moving quite rapidly to the Far East, with
domestic computer manufacturers merely bolting together components
designed and built offshore.
There are certainly extenuating factors beyond the discrepancy in wage
rates, such as the failing American educational system. Nonetheless,
the major driving force in this is profit, and not superior
capabilities elsewhere.
With all of these displaced workers -- blue collar, IT, engineering
talent -- they eventually find replacement jobs, but always at
significantly lower pay levels. Since we rely on our work force to
provide the funding for our many social programs, it becomes
increasingly difficult to see how we will be able to prevent the
collapse of Social Security (if anyone really believes that they will
get anything out of that particular pipeline), or even sustain our
economy. If that part of the American workforce responsible for
producing products moves outside the U.S., can we survive as a nation
of people in customer support?
David Lentz
* * *
When I started Rent A Coder (only nine months ago), I had no idea that
it would become a global marketplace. I had envisioned it as a way for
programmers like myself to be able to pick up jobs and get rid of
their day jobs. However, within a week of turning the site 'on', I
quickly saw that I simply couldn't compete economically with the
Indian and Romanian coders.
What to do? There was quite a backlash at the time as well. I received
lots of angry e-mails from U.S. coders sold on the same idea I
originally had ... that they could get rid of their day jobs. People
told me I should ban non-U.S. coders, put surcharges on coders from
certain countries, etc. This would result in higher profits for Rent A
Coder, they argued, because bid prices would rise 10-12 times, to U.S.
rates.
It took another week for me to decide not to go the "protectionist"
route and go with the flow of the "invisible hand" you mentioned ...
which drew a lot of criticism. So it was, in a way, gratifying to read
your article and think that I had been able to correctly tap into a
global trend (even if that trend has both negative and positive
aspects as you pointed out) .
Ian Ippolito
Creator of RentACoder.com
* * *
Lee writes: After the column ran, I was chatting (using IM, over the
Internet, naturally) with Mani. I told him, somewhat apologetically,
that the piece had very definitely been written from an American point
of view. I was, after all, worried about what effect the Internet,
globalization and the like would have on the standard of living of me
and my friends. From our point of view, it all seems like a threat.
From Mani's, though, it sure looks like an opportunity.
At least for the time being, that is. Banagalore, where Mani lives, is
one of the most prosperous cities in India. I can't help but wonder
how long it will take for programmers in other parts of India, or in
China, to begin underbidding Mani and his friends, all of whom are
already somewhat yuppified.
Great for them, of course. In fact, a number of readers thought I
somehow had something against Mani doing what he was doing. Hardly;
who can oppose a rising global standard of living?
I think the issue, though, is the extent to which there is Full
Disclosure about who is winning and who is losing from all this. This
doesn't involve Mani; it involves American companies. It is very clear
from the letters that many Americans don't think the burdens of this
new round of globalization are being shared equally. Manufacturing
workers from the 1980s were often heard to say that when plants were
closed, the bosses always made out OK while working people always paid
the price. Now, it's the turn of white-collar workers to make the same
observation. One wonders what the social and political fallout of all
this might be; one of the nice things about free capitalist economies
is that people can band together to work on behalf of their best
interests.
One other point, about the workers on Cesar Chavez Street. I don't
doubt that they are probably better off here than they were in Mexico,
something many readers pointed out. That doesn't mean, though, that
one can't also wish for an even better situation for them, one that
treated them with more dignity and allowed them a fair, livable wage
for all their hard work.
Finally, I wanted to give Mani the last word in all this. I told him
to think about anything he'd like to say to Journal readers, and to
send it to me in an e-mail. This is what he sent:
Hi,
I spent some time thinking what to say ... I do not know what to say
... What I understood from my interactions with people from the U.S.
is:
Respect for others
Expect perfectness and promptness
Never hesitate to appreciate good work
What I learned in my life: Patience and perseverance are the path to
success."
Jerry