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How can American IT Professionals Compete with asian workers?

By kveratis ·
With all of the outsourcing that is going on in the IT industry, especially in software development how can American IT professionals effectivly compete with IT people from India and China. It is not possible to live in America making the slave wages these people work for, so we can't compete on price. I read a very good report on "Fair Globalization" www.ilo.org/public/english/wcsdg/docs/report.pdf which outlines a lot of the problems that this issue is causing, but I'm not sure if the solution is feasible. The only thing I have been able to come up with is finding jobs in small businesses where it is impractical to outsource at this point, but how long will that last?

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One point

by onbliss In reply to How can American IT Profe ...

When you say "slave wages", I would like to draw attention that the wages needed to be looked relative to the countries. So a $30,000 would be something like Rs. 12,90,000 (that is almost 13 lakhs), in India. Even after taxes, that is a ridiculously rich amount for an Indian, living in India, when compared to a Indian working in a non-IT area. It increases his/her purchasing power enormously.

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onbliss: Question for you

by TechExec2 In reply to One point

You're a good person to ask this.

I understand that software engineers in India make about 20% of what those in America do. And, the reason for this is because of the currency exchange rate, cost of living, and current market differences (i.e. supply vs. demand). I understand it's changing (wages rising due to changing market) and some work is moving from India to China. How correct is this right now?

How does the cost of living compare between America and India?

Food? Gas? Clothing? Computers? Housing?

Thanks for your insight!

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Just a thought.

by TonytheTiger In reply to onbliss: Question for you

The cost of living varies greatly even within the U.S., and many people use that to their advantage.

What, if any, influence should the cost of living have on wages?

Actually, there's probably an argument in there against setting a fixed-dollar amount minimum wage.... Do you set it so city folk can barely survive, or do you set it so that country folk live like kings (relatively speaking)? Shouldn't we apply the measurements involved to the variance within our own country before we start applying it to other countries?

Not complaining, just wondering others' thoughts.

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Good Point

by kveratis In reply to Just a thought.

I think that minimum wage should be determined by getting an accurate estimate of cost of living in the area the person lives and factoring in the ability to save a little so that they can get ahead in life. This would also increase a persons disposable income which helps fuel economic growth. Ulimately our economy is dependent on cash flow. The taxes that are necessary for government to fund itself are collected from scenarios where cash is flowing through the economy (Sales Taxes, Income Taxes, Capital Gains, etc). Hence, the more people you have with disposable income the better off your economy is, and the better able your government is to fund itself and not require deficit spending.

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Accurate estimate

by TonytheTiger In reply to Good Point

for what? A single person - single job?, married couple - no children - two jobs?, Maried couple, 4 children - single job?, single mother - one child - single job?

So what are we going to measure? Are we to require employers to pay based on family situation/other income?

Sounds scary to me.

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Exactly

by kveratis In reply to Accurate estimate

That is the exact problem that I have not been able to figure out either. Getting a fair estimate without creating a nightmare for the businesses. Most of the real growth in our economy is fueled by small businesses, and you don't want to create a situation that makes it almost impossible for them to operate in a profitable manner which would prevent them from growing. At the same time businesses must realize that their customers and their employees are coming from the same population, by paying their employees as little as possible they are also limiting how much they can sell to their customers. This was what Henry Ford figured out a long time ago, when he dramatically increased the pay of his employees so that they could afford to purchase the cars they were building. Everyone thought he was crazy, until it worked. It's a very difficult balancing act. I learned in macroeconomics that raising the minimum wage really doesn't help since it doesn't create true economic growth, but it does cause inflation which erodes everyone else's purchasing power. The idea I mentioned in my previous post was just that, an idea. Maybe it wasn't even a good one, but it was worth a look.

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Part of the problem that's part of the problem.

by TonytheTiger In reply to Exactly

Big government proponents absolutely despise small businesses, because they are the absolute proof that big government is not needed. By raising the minimum wage, they are, in effect, attempting to kill off their competition!

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My thoughts

by onbliss In reply to onbliss: Question for you

I am not sure how to compare the cost of living between the two countries. The culture and lifestyle being different, it is little difficult to glean much from a straight comparison.

The people working in IT are a special breed onto themselves. Their purchasing power is different from others. So food, gas, clothing etc are still inexpensive for them.

But for the poor and others, those items are expensive. It is universal, if you have money you could buy anything.

Let me know if you need me to elaborate.

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Cost of Living - Thailand

by Wayne M. In reply to onbliss: Question for you

I can't speak about India, but I am familiar with the cost of living in Thailand. The exchange rate when I visited last summer was 42 - 43 Baht to the US Dollar; currently it is trading at 37+ Baht to the dollar.

One needs to distinguish the costs of local items, i.e., food and housing, from imported or globally traded items such as cars and gasoline.

For lunch, we could typically have a sit down meal of some kind of noodles for about 20 Baht with the range from 10 - 30 Baht. Pizza Hut or Dunkin Donuts were quite a bit more; Pizza Hut was considered a fancy restaurant. Upscale housing, consisting of a detatched house larger than a typical US townhouse and on about 1/8 acre in a gated community ran about 1,500,000 - 2,000,000 Baht (about $50,000). Nice, shore side hotels with swimming pool and breakfast would run 80 Baht per night (not Phucket!), while we stayed in some of the nicest hotels in the north for 150 Baht per night.

I paid less attention to car prices, but I seem to recall that a Honda City (1.5 liter engine, smaller than a Civic) cost over 500,000 Baht (over $12,500). Last summer, I calculated the price of gas at about $2.25 per gallon; slightly higher than the price in the US at the time.

I hope this illustrates how the price of local goods is not necessarily indicated by exchange rates. This can drastically skew labor costs to the outside world.

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Great for India, not good for America.

by kveratis In reply to One point

Those wages might be good for a person in india, but not in the U.S. Here in America, that same amount of money is infeasible to live off of. Consequently, while the person in India is living the high life on those wages the person in America can't put food on the table. When I say "slave wages" I am referring to the fact that it is impractical for an American to live off of the same amount that a person in India can live off of for the same type of work. If the sole basis for India and China's competitive advantage is their lower cost of living, it doesn't help the industry or world economy in the long run. When Japan was kicking Detroit's butt in building cars, it was because they were producing a higher quality product in a more efficient manner. That method of competing is perfectly acceptable because nothing stops the automakers in Detroit from adopting the same methods or even developing better ones. Either way it moves the industry forward.

Another reason why this kind of economic situation is not good for America is that by driving down the wages of educated American workers, the government will not be able to collect as much in taxes from them. This obviously causes a problem when you have a massive debt (8 trillion at last count I saw) and are fighting a war at the same time. Furthermore, histroy has shown that when people can't find work they start getting desperate things get rather dangerous.

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