Econ Outlook part 2

Re: [spiers] Econ Outlook part 2


John,
A variety of thoughts on your discourse here:

I was employed in the IT industry for more than 20 years until Intel decided to
outsource their work, and my job, to India - to both
contract labor as well as employees. I trained three India contractors to do
my one job. As an aside, three years later, as I am
told by friends still at Intel, that the Intel User community is still
complaining bitterly about poor performance by the hired help
there. This, I am also aware, is not unique to my job sent overseas. The
company apparently sees this as a good investment on
their part. Replace one fairly highly compensated employee with commensurate
benefits by hiring three lower paid employees with
limited benefits. The part of the equation that is obvious to many not at the
upper management level is that they are stirring the
pot. They have universally created ill will, hired a group of under
performers, and hampered the System and the productivity within
it.

***I agree and this makes a point I often try to make: when new factories are
built overseas, they are usually built to make different things in ways the
locals can make them.

There is cheap labor in India. There are people who can do an American's job in
India. But it is extremely rare to find a cheap labor Indian who can do an
American's job in India. If you can do an American's job in India, you are well
paid, and not available to outsourcers. I'd say short Intel.***

All well and good an outsider might say, this is a good business decision on
Intel's part (I use Intel as I have the most intimate
knowledge of them and saw what happened to the individual - me, and the
supported System). Companies need to stay competitive and
go to where the competition does, in order to compete.

*** Ultimately customers will decide how Intel is doing,,, but Cypress
Semiconductor Disagrees with intel, and is doing just fine.***

However, let's examine these next points to see where this has also taken us
at a larger level.

Intel was given tax breaks by the State or county or wherever to establish a
corporate office where they would grow a pool of local
workers - mostly highly compensated. The tax break would be nicely offset by
what Intel would introduce, namely the above mentioned
jobs, housing boom, and uptick to the economy that those many new employees
would bring the State and county (Sacramento County in
this instance).

Well, outsourcing began, whether by coincidence or design, after the Internet
Bubble burst. Thousands of workers, like me, were
displaced. Intel (and H-P and NEC, etc.) stayed competitive. The county or
State in turn: lost their Income Tax base from those
displaced workers, some of whom had to sell their houses and buy down, maybe
moving elsewhere. They lost some level of tax revenue
from the companies who are no longer maintaining or growing the employee levels
as before. Employees began to draw on unemployment
benefits, creating an additional burden for the State. Also, these companies
still maintained their tax advantage granted to them
by the State in order to establish the site where it is. Those displaced
workers also had to tighten their belts. Rather than my
Father's generation not buying toaster-ovens, now we are no longer buying SUVs
(maybe a good thing) and other expensive toys - thus
affecting those industries in one way or another.

***This is exactly right... people talk of "unsustainable environmental
practices," well this is an example of "unsustainable public policy practices".
Welfare for big biz always goes bad, always, and a lot of people get hurt. On
the other hand, this is history, and before organizing one's life around a
pinnacle of malinvestment, one ought to consider what one is getting into. I
had no part of the dot.com boom beyond recognizing it was 'tradable', and got in
on a truly worthless company at 22 cents that went to $26. I got out of tech in
March of 2000, and started shorting them. (I also bought about $5000 worth of
Metricom because I used and loved their wireless internet access... lost all 5
grand so I wasn't perfect)... How did I know what was going on? i didn't...
but being in biz, at trade shows, and asking older battled hardened
self-employed here and overseas, I was able to get a better view. I am not
smart, it's just that being in biz for yourself gets you to access those who are
smart.***

The types of jobs that were sent overseas will not return. It was simpler a
generation ago to tell displaced workers to retrain and
educate themselves for the more technological world. Some were capable of it
and did so. Now we are told the same thing. However,
technical degrees earned by those now in their 40's and 50's are no longer
adequate. Where do they retrain from here? There is no
time or reasonable ability for a 40 year old Head of the Household to return to
school and become a lawyer or doctor - besides
which, the odds of them getting hired are probably limited.

***Exactly... soo..self-employment is the best bet. Kill intel!***

Many of those jobs that are being reopened in the States, are being done so at
a lower wage and/or with limited benefits. A
specific case in point - An IT friend of mine, also formerly well compensated
but unemployed more times than not these past few
years, went to discuss a position installing network software with a local
business. He was offered $8 an hour, no benefits. He
said that was absurd and that he had children to put though college. The
interviewer shrugged his shoulders and said that
eventually someone would walk through the door willing to work for that pay.

We are becoming a country of consumers and raw materials producers.

***Exactly...and exactly where Russia is today... scary, isn't it?***

I just returned from a vacation in Vietnam. Every politician taking the oath
of office for the Senate or Congress, as well as the
upper levels of Administration, should be forced to visit the War Remnants
Museum in Saigon. With some historical perspective and a
visit there, it is less likely that we would be in Iraq right now.

***Yes, except those who were there voted to invade Iraq, even those who were
POW. Sadly, our secretary of state, Colin Powell made his reputation in
Washington by keeping the My Lai massacre a secret for quite a while until one
Seymour Hirsch finally broke the story. 40 years later it still goes on: Colin
Powell lies about Iraq, Seymour Hirsch catches him at it.***

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