Jobs going to low cost economies

[Fergal]

A large insurance company - Hibernian - has today announced that they will reduce their Irish workforce by 580. These jobs will be relocated to the company's service centre in India. This announcement is different to other job loss announcements, in that the jobs are high quality, well paid jobs in administration and finance.

This news has sparked concerns that other finance and insurance companies who compete with Hibernian in Ireland, will now be forced to reduce their costs, in order to remain competitive and also relocate high paid jobs to low cost economies.

Has your country lost high paid jobs to low cost economies?

What can developed countries do, to maintain these jobs or otherwise protect their economies from these economic changes?

[Nazreen]

I'm not sure if anyone can do anything about this. With rising inflation, managers are forced to look for other ways to cut costs. Of course the managers won't like to reduce their salaries but they still want to achieve their projected profits so they will be looking elsewhere to cut costs. Unfortunately, that will be the cutting of manpower and outsource it to low cost economies.

This is especially true for IT jobs. With the coming of the internet, most companies are now outsourcing their IT systems to China and especially India. The rationale of these companies is that, "Why hire one IT consultant here if we can hire two or even three consultants from India or maybe Shanghai?".

In Singapore, I know that Citibank started outsourcing to Shanghai maybe 3 or 4 years back. In the last quarter of 2007, there were a lot of IT consultants in Citibank who lost their jobs probably because the work of IT staff in Shanghai were already up to standard.

[Fergal]

Globalisation was previously discussed on this forum. One of the effects of globalisation appears to be a merging of salary levels between developed and less developed countries.

Salaries in developed countries are falling as they lose high paid jobs to the less developed countries. Salaries in developing countries are increasing as they gain these jobs.

[Nazreen]

Before, people were worrying and complaining because jobs were given to immigrant workers. I've read a lot of articles written by nurses in the U.S. saying that their government shouldn't give their jobs to people from India, China or Philippines. There was also a similar complaint by computer professionals. With these complaints, the U.S. government put a quota on the number of professionals from other countries to be allowed to work there.

It's a bit ironic because now, it seems that the situation has reversed. It is now the companies going to the workers in less developed countries. I've also read a newspaper article before that many Indian IT professionals in Silicon Valley went back because wages in India became competitive and at the same time, to be near their loved ones. They also had an increase in IT job opportunities in their home country.

[DEADMAN]

Has your country lost high paid jobs to low cost economies?

It is a common fact here in Nepal.

Even high ranked job like working unders government sectors don't pay too much. Even they pay, the relatives and people of government can work in it. This is so unfair to people. In our country, the payment for the job is not so good.


What can developed countries do, to maintain these jobs or otherwise protect their economies from these economic changes?

The better way I see is to establish such kind of companies more in number which can most probably be done by Government and High-ranked Businessman.

[Fergal]

DEADMAN, has Nepal gained any jobs, from international companies setting up operations there?

[JPolito830]

This is pretty standard in the US from what I have seen.

[Nazreen]

This is pretty standard in the US from what I have seen.

I've read sometime back that there was a big issue when some U.S. companies decided to partially or completely manufacture all their products overseas. One such company is Nike. If you look at the labels at the back of Nike products, you see that most are made in China. There was a debate as to whether Americans should still continue to patronize and support their products.

[Fergal]

I wondered if there would be any kind of PR backlash against Hibernian, as a result of this announcement. To date, there doesn't appear to have been. The main focus of media reports has been on the job losses.

Insurance is seen by many people as a commodity, people price around and purchase the lowest cost offering.

[DEADMAN]

DEADMAN, has Nepal gained any jobs, from international companies setting up operations there?

Yes, Nepali have got the employment opportunities but not too much. Also, International companies are not recognised in Nepal, this means that they're less in number and are limited. So, high education is the way to achieve job from such international counties.

[Nazreen]

Yes, Nepali have got the employment opportunities but not too much. Also, International companies are not recognised in Nepal, this means that they're less in number and are limited. So, high education is the way to achieve job from such international counties.

Sorry DEADMAN but I guess the reason why big International Companies are not setting up shop in Nepal is because of the high level of corruption in your country. Most companies will not invest and stay away from countries where the politicians and government officials are very corrupt. Even though the initial costs are low, the company will probably pay even more because they might be forced to pay bribes.

[Fergal]

You are right DEADMAN education is extremely important in attracting foreign inward investment. Even when Ireland was quite poor and the Government had little money to invest they invested in a strong and modern education system. The Catholic Church also played a major part in providing a world class education system in Ireland.

Another important factor was that we had a top of the range telecoms infrastructure. This was before the arrival of the Internet when telephone lines were run on copper. Unfortunately we haven't been the most progressive in the Internet age and our broadband reach is quite low.

Nazreen on what basis do you say Nepal has problems with corruption, I'm not suggesting that you're wrong, I'd just be interested in your source?

[Nazreen]

...Nazreen on what basis do you say Nepal has problems with corruption, I'm not suggesting that you're wrong, I'd just be interested in your source?

No worries there. I got it from Transparency International's Survey (http://www.transparency.org/policy_research/surveys_indices/cpi/2007). According to that survey, CPI score for Nepal is 2.5 which is at a tie with Philippines. I know that the Philippines is also corrupt because my husband is a Filipino and he even told me a story of a blind person who was able to get a driver's license there because he's got money to pay for bribes. :)

In that survey, we can see that the least corrupt countries are Denmark, Finland and New Zealand with Singapore occupying the top 4 spot. Ireland is coming in at 17th place. At the other end of the survey, the most corrupt countries are Myanmar and Somalia.


* CPI Score relates to perceptions of the degree of corruption as seen by business people and country analysts, and ranges between 10 (highly clean) and 0 (highly corrupt).

[Fergal]

Thanks for the reference Nazreen. Nice to see that Ireland has ranked quite high.

[akhanna01]

as the input costs for the companies rising , they are searching for new places where they can get tax rebates and investor friendly conditions . they are shifting their operations through outsourcing.

[Nazreen]

In the latest news, some big conglomerates like Ikea are now moving production closer to the consumers due to rising fuel costs. With rising oil and transportation costs, it may no longer be viable or practicable for businesses like automobile makers to make engine parts in low-cost economies, like Thailand or the Philippines, ship them to Britain to install them, and sell the finished car in the US.

[Fergal]

Very interesting Nazreen. Most of us don't like high fuel prices, but I suppose every cloud has a silver lining.

This will probably not impact on other businesses or parts of a business moving to low cost economies, such as call centres and software production. These products or services obviously would not have high transport costs.

[deepak_sharma]

ya its very true that jobs are going to low economies countries. Like in India their ar enumber of call centres which are doing the jobs of different foreign companies. Now they are paying 10k rupees and getting a work of 25k from every person.Then why these companies would not outsource.

[Fergal]

Call centre outsourcing has increased dramatically in the last 20yrs or so. More and more of this business is going to countries like India and The Philippines. This gives local people the opportunity to gain employment in customer care.

Having previously worked in call centres, I was very impressed by the promotional opportunities that they provided to their employees. The customer care, communication and business experience gained in a call centre can also prove very valuable to your future career prospects and development.

On the other hand customers can sometimes find it frustrating when they call a customer service line to find that their call is being answered on the far side of the world. This can pose some customer dissatisfaction if the call centre agent doesn't have an excellent knowledge and command of the caller's native language.

[scifi]

In my opinion company's don't take such measures unless until a condition of die out reaches where you have no other option left to sustain yourself in the business.
Well transfer of jobs to low cost economy such as India as mentioned also has the quality of work they needed.
If they get something worth 2bucks with same quality why would anyone would pay more bucks for similar thing....

[Fergal]

...If they get something worth 2bucks with same quality why would anyone would pay more bucks for similar thing....

That very point worries me. It is good for developing countries but it will cause problems for countries like Ireland. Ireland has benefited greatly in recent years, from foreign owned companies setting up operations here. As developing countries with their lower cost base, develop their infrastructure and economies, they will attract these operations.

Countries like Ireland will lose existing jobs and the ability to attract new jobs.