that Telstra is importing IT contractors
from India to work in Australia has ignited
an industrial dispute over job losses
from global outsourcing. Australian unions
claim that Telstra is paying the Indian
contractors one fifth of the pay of an
Australian IT worker. But as India strives
to make outsourcing more attractive, the
issue is far from resolved.
India's global competitiveness is founded
on its infamously low wages. A manufacturing
worker's wage for example, is little more
than Aus$1 an hour. Global companies are
now beside themselves trying to get into
India and hire skilled (yet cheap) workers.
Over the past few years, Indian IT workers
have shown that using new technologies,
they can now work as efficiently as their
counterparts anywhere else in the world
- and do it cheaper. Some estimates say
between 50 and 70 per cent cheaper.
It's no surprise that these low costs
now appear to have lured Telstra. The
& Public Sector Union (CPSU) says
IT contractors from India are being paid
$12,000 Australian dollars to work in
Australia. Both Telstra and the Indian
IT contractor have denied the claims.
But what's at stake here is not just
an ordinary pay dispute, but the willingness
of corporations to cut jobs in rich countries
and send them to cheaper places like India.
A salary of $12,000 appears cut-price
for Australians, but it is around six
times more than the salary of an office
worker in New Delhi (exchange rate effects
Of course, if Telstra is breaching Australian
industrial laws by paying these wages
in Australia, they should be prosecuted.
Nonetheless, my guess is that the Indian
IT contractors will send much of that
money back to India and help ease some
financial hardship for their families.
The fact is that there are thousands
more highly skilled Indian IT workers
looking for work. India's government and
Indian IT corporations see outsourcing
as a key to India's development and global
status. Corporate cost-cutting in rich
countries is indeed driving India's outsourcing
industry. Some Indian IT outsourcing companies
claim they have never stopped hiring.
Many corporations hype (and many unions
worry) that outsourcing of services represents
the new era of globalisation. It is not.
Outsourcing is part of the same urge to
locate production in the lowest-cost location.
It's the evil genius of capitalism.
Outsourcing is creating new wealth in
India. It's offering thousands, young
people especially, new job prospects.
Some perspective: thousands of new jobs
from outsourcing is creating islands of
affluence amid grinding poverty. India
needs at least 450 million new jobs to
help (mostly unskilled) poor people earn
more than a dollar a day.
It is, however, immoral and plain unfair
for Australian workers to compete with
Indian wages in order to keep their jobs.
Australian workers are entitled to feel
insecure and angry as global outsourcing
But if an Australian IT worker loses
her job, or can't get a new job because
it is outsourced to an Indian IT worker,
there is still arguably a net rise in
global equality. The comparatively poorer
Indian worker and his family gains an
opportunity he would not otherwise have
had. Admittedly that's not a soothing
thought for Australian workers and their
So what can be done? The Australian government
could mandate that no Australian jobs
can be outsourced (echoing similar legislative
attempts in America) but this solution
sadly tends to appeal to base prejudice
and easily leads to the charge of "foreigners
taking Aussie jobs".
Government-owned companies can decide
against outsourcing, as the CPSU has demanded.
But under competitive pressures, even
state enterprises may not be able to afford
such a policy. It's better to employ people
by staying solvent than to risk jobs by
going under. Other market interventions
may help; where private investment fails,
the government can be a "buffer"
employer, for example.
But in developed economies like Australia,
the only immediate help for workers that
comes to mind is to rely on a very deep
safety net. If political (and trade union)
pressure makes job cuts so odious and
unpopular as they ought to be, then there
is no reason why governments shouldn't
be able make unemployment payments, and
retraining and job placement schemes,
very very generous.
On an international front, it's in the
interests of Australian unions to support
rising wages in poor countries. Apart
from the obvious effect of helping such
workers buy more of the things they produce,
it also helps restrain capitalism's restless
urge to shift production to low-cost regions.
For unions, simply opposing more trade
that actually creates jobs in poor countries
will not help workers in developing countries
earn more money. Supporting ways for low-paid
workers in poor countries to unionise