JerseyGuy’s update on the declining U.S. computer software industry
In September, 2010 JerseyGuy wrote:
I have seen this transition with my father’s computer systems programming and software development company here in Northern NJ. The company consists of around 100 employees located in Northern NJ and Southeastern Pennsylvania. I’m only 26 years old but I remember as recently as 1998 that the company was virtually 100% native born American. However, in the early to mid 2000s, this has completely changed. Now my dad says that at least 60% of the company is foreign born, mostly Indian, as well as a few East Asians and Eastern Europeans. He did confirm to me that the wages for the programmers and systems analysts have pretty much stagnated for the last decade, even as the company has grown. In addition, the American workforce has stagnated as programmers are being used from India, China and Eastern Europe. These people all work remotely from their home countries. The quality of the foreign born workforce? He says that they are pretty much average. Certainly smart. Certainly competent. But by no means MIT or Carnegie Mellon level computer scientists. They are pretty much the quality that you would get from an above average U.S. state school.
Again, my father has worked at this company for about 30 years. The first 20 had virtually a 100% American workforce. Now in the last 10, it has gone to 60% foreign born. My dad isn’t concerned about his job but he is concerned about the next generation of American programmers. If all of the labor force can be imported at lower wages, or done by a foreign work force working remotely in other countries, where does this all end?
We were told that we could offshore our manufacturing and still rely on “higher valued added” services.
Now what do we do?
Today he writes:
So I can’t believe that this is from over five years ago but wanted to give you an update on what is happening in the computer programming industry according to my 64 year old father and what is happening in the public accounting field according to my first-hand experience.
First, my father. He’s still with the same company in Northern NJ. Still about 100 employees and the Company is doing well. However, about 60% of the Company is now in Chennai, India. Yes, the higher level work is still done in the United States. But, according to him, more and more of the work has been shifted to India. We spoke about this in reference to the latest rain storm to hit Chennai that virtually shut down the city for a few weeks. He was saying that the employees in India were doing basic programming and that it would be difficult to quickly shift the work to the United States. I asked him about much they pay in the US for this type of work. He said about $30 – $40 / hour, which isn’t too bad at all. Then, I asked him much they pay those employees in India. $8 – $10 / hour!!! About one quarter of our wages!
Ok, so now onto my profession of public accounting. They recently published the billing rates for our India office, in which we are now being advised to use as much as possible. Essentially, their billing rates are 25% of our billing rates in the US. 25%! It’s so outrageous. To put this into perspective, the billing rates for Senior Managers in India (which make on average approximately $140K in the US) are actually 20% less than the billing rates for our administrators and typists in the US! That means that Senior Managers in India are paid about 20% less than employees who have either a high school diploma or at most, an associates degree.
I could go on with another story about a 60 year old programmer I know who was just laid off from Verizon Wireless in NJ. He actually said he was planning to retire this year and had accumulated enough wealth to do so. He didn’t take is too harshly but he did mention that other programmers in their early 50s were also laid off. He indicated that they are transferring a third of the workforce to India and are building a facility in Irving, Texas in which H1B workers are being brought in to replace American jobs.
Essentially, the moral of the story is that these were supposed to be the jobs of the future. It was ok that manufacturing was being shipped overseas as long as we kept our “value-added” jobs in programmer and public accounting. Now, these jobs are being shipped overseas at a quarter of the labor cost!
No matter how many regulations that we cut or stream-line, there is simply no way that Americans or others in the West can compete with 3rd world labor on a large scale. To finish, a lot of people on the Right are wondering when people are going to “wake up”. I don’t think it will be crime or public looting in some post-industrial town. I think it will occur when outsourcing (and H1B importation) reaches criticality and enough middle and upper middle class jobs are lost.
My observation is that computer programming and accounting (to a slightly lesser degree) are jobs that don’t require good command of the English language or understanding of American culture, which makes them easy to outsource to India, or insource to Indian immigrants.