Ricardo's law says that wages will tend to stabilize at or about subsistence level.

In a free market, this is as it should be: it's called supply and demand. Labor is a commodity no less than are horseshoes or hand grenades.

Or buggywhips, for that matter.

The cost of a commodity -- in this case, labor -- is what the market will bear. Nothing wrong with that.

I have a had a few beers, and I may ramble, but here is my 3 cents.

He does have a point, but there is still a vast amount of growth in this nation. Look into healthcare, and healthcare related technology. Many of the "traditional" technology centers are scattering to other parts of the country because going to more obscure areas within the country will provide workers willing to work at lower wages. Think out-sourcing within our own borders.

Also a lot of this fear about out-sourcing is founded in fantasy. India is not full of anxious and experienced software programmers willing to work 24 hours a day for a nickel an hour. India is full of indians. Sending projects wo india for outsourcing is wrought with problems.The different time zones,makes it is very hard to schedule conferance calls and design meeting with programmers in India.The language barriers tend to cause some rather serious probllems, both in explaining logic, and user interface designs. I have been hearing a lot of panic about the out-sourcing boogeyman, but I don't think it is all bad.

No one is entitled to a good job. Sometimes things change and we have to work in different industries. I started in a call-center environment. I noticed the trend to outsourcing. My company had operations units in, India, Ireland, and scattered in obscure towns in middle america. I noticed the trend and got into the health-care industry. If Hillary wins the next prez election and there is a threat of socialized health care I will move to another industry. American industry will keep evolving and American workers must evolve also, or get used to living on wealthfare. It's a rough world.

Damn speedster, very well put. I should have waited for your post.

Thank you, kind sir.

;-)

I could also point out that a lot of things being out-sourced are junk, commodity types of items. Not Uber high-tech items, like this guy is suggesting. It is too hard to train foreigners to do complicated tasks. Most companies are willing to pay americans higher wages to assemble widgets if the profit margin is high enough. The result is that the things being out-sourced are hello-kitty record players and assorted other Wal-Mart junk. Plenty of cutting edge research and developement is still occuring here in the united states. And honestly look at the malls. People are still buying crap. We are buying literally tons of crap. Not essentials but CRAP. Case in point, look at the great sales numbers so far this Christmas season. Those are generally NOT needed purchases, so it can argued that a growth in holiday sales represents a growth in dispensible income. So either critical items (Food ,shelter and clothing) have gotten cheaper, or wages are increasing. I have a freind who always makes this argument, and it just pisses me off the more I think about it. She lives in New Orleans, where burger king now offers like a 5,000.00 signing bonus, plus like 12 dollars an hour. This argument seems to come from people who are unwilling or incapable of making a success of there own lives.

What I think an orthodox economist would say:

"Standard of Living" is a function not only of how much you make but also how much it costs to buy things. If you get the same number of dollars in your paycheck each month but the price of things you want to buy decreases, your standard of living rises. And if the price of things you want to buy goes up, then your standard of living falls.

All changes have negative side effects. For people who get canned and whose jobs go overseas, that's obviously bad. But it's easy -- and fallacious -- to pay attention solely to the immediate and concentrated effects without also considering the long term and diffuse effects.

Economically speaking, it is to everyone's advantage for goods to be produced where they can be manufactured cheapest. That means they can be sold for the lowest prices, which means everyone's paycheck stretches further.

Which means it is a good thing for us, in the long run, for work to be done where it's most efficient, even if that means not here in the US.

What I think as an engineer: F15C is making an unwarranted extrapolation. With companies closing in his town and fewer professional jobs available there, he's assuming that the same thing is happening everywhere in the US. That's not even remotely correct.

There's plenty of high tech being done in the US, and it's expanding, too. Nothing's come to a halt. And you can forget about India and China surpassing us in ten years. Not gonna happen.

"We're turning into a nation of burger flippers" is a very old lament. It's always been a crock, and it's never been less true than today.

Now this is the Red Queen's race, and if we get smug and sit on our laurels, we'll turn out like the Europeans have. But if we keep moving -- and we will -- then we'll do just fine.

Local pain in F15C's home town doesn't imply that the nation as a whole is going into the toilet.

There's an old devil's definition: "a recession is when someone else gets laid off. A depression is when I get laid off." I think that's F15C's impression here, and that, too, has always been wrong and continues to be wrong.

Unemployment is going down; employment is rising, gross GDP is skyrocketing, and so is productivity per worker. It just happens that this kind of thing involves occasional localized downward blips, and that just happened to him.

From a slightly different perspective- I just moved to Tennessee after most of the last 30 years in Louisiana. As you're no doubt aware, F15C (my all-time favorite aircraft, flown by my beloved 122nd TFS in Belle Chasse, LA), Nissan North America is in the process of moving its entire operation from CA to counties surrounding Nashville.

We saw a massive job loss in Louisiana with the oil bust of the early eighties... jobs migrated primarily to Texas and to Florida.

On this topic, purely from my vantage point, the mass exodus of jobs that seems to be taking place in California also seems to be taking place with less fanfare from the Great Lakes area, particularly in the northeast. My gig is in TV news, and what a lot of us have seen is more of a migration of workers... many computer jobs seem to be popping up around the I-25 corridor between Denver and Cheyenne (HP being one of the prime movers)... automotive jobs are popping up along the I-65 corridor from Tuscaloosa, AL (Mercedes-Benz) through Nashville (Nissan) and into Kentucky (Hyundai). Heck, on the West Coast, there's a significant IT expansion, as well as a medical technology expansion, going on in Klamath Falls, OR.

I need to do some research before saying this with any certainty, but things don't appear well with the northeastern steel business, particularly as opposed to the steel industry in Birmingham, AL. With that in mind, look at what's been happening in Buffalo, NY... people are leaving quickly enough that there aren't enough taxes coming into Erie County, necessitating a 2500-worker layoff of county employees this past January.

Come to think of it- if you look at what's been happening with the AFL-CIO, and particularly with Detroit-area auto manufacturing and also the airlines, one could make the argument that you're seeing a restructuring of companies purely based on competitive wages. I don't for a moment pretend to be qualified to tell you what's going on with these guys, but it has not escaped attention that many of the job growth areas (particularly automotive) are happening without unions leveraging things.

I would imagine, F15C, that it will take a while to get good statistics on what jobs have been created, but a big story that is not running, and a good story it is, is the population (and job) migration from particularly the Great Lakes into the mid-south. I couldn't begin to analyze it for you (my master's is in opera performance), but I tend to wonder if we, the media, are panicking over a perceived loss of jobs in the three major media centers in this country- NY, Los Angeles, and Chicago...

I hope any of that made sense... it's kind of train-of-thought, but my point is that there are some unusual areas really starting to flourish, and it seems to me that states that don't necessarily align themselves with growth (CA, NY, LA) are beginning to reap what they sowed.

In re-reading, that also is not necessarily intended as a slap against unions (my personal feelings notwithstanding)... just more observations of a perceived pattern.

tmi3rd

By the way, "less than zero high tech business expansions"?

Intel just announced it was going to build a 45 nanometer fab in Israel. After that they're going to build one here in the US, probably in Arizona.

Does that count as "expansion"? I think so.

One of the problems here is that big closings make headlines, but most of the expansion is happening incrementally and quietly. It's not that there is none, but that it doesn't make the headlines.

Oh, and there's also the problem that too many in the MSM actively hope for disaster -- in war, or economically, or damned well in any other way which might hurt the Republicans. Don't believe everything you read.

Jobs may be outsourced, but we still kick ass in R&D.

That's what's important, right?

Previously, "high tech" jobs were all about who's making IC chips. Right now, "high tech" is all about programming. There's still some advancement left in hardware, but the real progress to be made is in software. Look at the basic machine you get from Dell for $399--it's got enough MIPS to put a man on the Moon 4000x over. The limiting factor is not hardware. It's not 1986 anymore.

HP, and IBM, did great work in the '80s and '90s, but their star has faded. I'm not as familiar with HP, but IBM is all about services. Both HP/UX and AIX are dead-end products. They redirected that business expense towards open source products like the Linux kernel because it was a good idea and a sound business decision. It also ties into their business of providing services to business.

Software is fundamentally different than hardware in that a single person can make huge leaps, largely due to the interoperability of software. While one language may be a lot different, the fundamentals--algorithms--are practically universally applicable. Add to that the incremental nature of software--building on libraries and APIs, making new libraries and APIs--and you've got an environment where some guy literally in his basement is changing the way we look at technology.

Even hardware has benefited from this. Designing new chips today is a matter of using the fast processors of the past to emulate the new designs before you fab chip one. Productivity increases are huge. Cost of development is way down.

All this is a matter of productivity. We're hugely productive. That's not a conducive environment for Large Corporations. Hell, I used to work for WorldCom. The corporate office had three buildings. Now compare with Vonage. The whole company is housed in an old U-Stor-It 8x9, along with somebody's grandmother's pie safe.

(Which brings up the Internet--recognized and open protocols means Bob's Fiber can be a Tier 1 provider for western Utah.)

The future of American business is not more HP and IBM. They're important, and have a role, but it's all about small, fast and flexible. This is also why unions are doomed, and why catering to a reality of 80 years ago is for chumps. The American worker of the future had better be buying his own insurance, planning for his own retirement, and keeping up with his own job training, or he'll be out-competed by somebody who is.

If one looks at these job dislocations over time, it is easier to see the answer.

TV sets were once made near Chicago. We could have passed a law or two, or a tariff or two, to keep the production at home. If made today, those sets would cost over $ 2,000.00 for a 19" standard, not HD, set.

All over the US we would all pay lots more for a TV in order to "save" those jobs. It is Robin Hood in reverse - rob from the many to pay for the few.

100 years ago, the Swiss could have protected their clock workers mandating that all clocks be made the old way, hand made gears, etc. Today, in that country, all clocks would cost what Rolex watches cost.

That is just clocks and TV's. If we do the protection thing with enough stuff, the many will lose out and not have the dough to spend on cell phones, computers and Ipods. It is a formula for negative growth, but that's not the worst of it.

If we don't allow our great tech companies to reduce support costs when they can, they will fail to compete over time. SAP, Siemens and the Japs will do it anyway.

So we lose out in world market share, and that folks, really sucks.

Successfully outsourcing software development is great for the US economy. Look, virtually every business uses software and IT. Walmart's, Domino's Pizza, Kragen Auto Parts, your hospital, you name it, computer infrastructure is part of their cost of doing business. Driving this cost down increases wealth across the entire economy.

If American computer programmers get put out of work, well, at least there's a booming economy on hand to provide them with opportunities for a new line of work. And since when were we all that concerned about the welfare of engineers? They get paid wonderfully and are well educated; they should be fine. Seriously, save the pity for people who actually need it.

As for actual innovation, almost all of the world's technical innovation continues to come from America (and Japan), and I see no signs of that letting up. Driving down our operating costs will only contribute to that end.

Outsourcing is not necessarily a problem. I lefta corporate position voluntarily to become an outsource provider. I know several other people who made the same move. With high tech tools and with the internet as a work environment, there is no longer a need to be housed under a common roof in order to fill a variety of technical roles for business. It's just as easy for me to log onto an engineering database from my home office as it was from my company office. I can work my own hours without being distracted by meetings, training, or the thousand things that reduced my productivity before. I provide my own benefits, so even though I make more now than I did as a company man, I cost the client less money.

I'm happy, they're happy. No problem. I just want to spread the word that outsourcing is good. So is quality, and that is where I continue to kick offshore vendors asses. There will always be companies that opt for the lowball price, but more are concerned with quality at a decent price.

An extremely under-reported trend of the past several years has been the rise in self-employed workers and entrepreneurs. They do not show up on the employment reports, but do show up on the household report. From the beginning of this recovery, those people have been significantly contributing to economic improvement, but

Sorry, my last post got kicked out before I was finished. Fat fingers at work!

The point that I interrupted was that decentalization and "cottage" businesses are a growing segment of our economy. I produce technical manuals. I do it better and cheaper as an independent, networked to a group of other independents. I know engineers who work the same way, as well as software developers. And, of course, I want my piece of it to keep on rolling.

Don't confuse this with a contract labor house, where layers of management and non-productive shareholders add 35-40% on top of the "consultants" wages, some of which are pretty pricey in their own right. They are one of the reasons why businesses look offshore for outsourcing solutions. I want to see more outsourcing come home to this country.

"Standard of Living" is a function not only of how much you make but also how much it costs to buy things. If you get the same number of dollars in your paycheck each month but the price of things you want to buy decreases, your standard of living rises. And if the price of things you want to buy goes up, then your standard of living falls.

That's true, and in some cases people don't realize they're net-ahead. If health care costs rise, but most of your other costs fall, you may be spending more on healthcare, but you have the same mix of goods you used to have; you're just spending a higher proportion of your actual dollars on health care, while retaining your same level of spending power.

But... I do wonder if this actually all does even out. Some jobs are protected from global competition due to their nature; you can't outsource a doctor, for example. (Although we seem to in-source a lot of doctors from the poorer countries of the world.)

Those on the lower rungs get paid less due to competition for manufacturing, and they also get cheaper manufactured goods (due to cheap foreign labor), but they continue to have to pay full American rates for services whose labor components can't be reduced by outsourcing.

Someone with a manufacturing job, then, might be experiencing the full impact of global competition on labor rates, but only be receiving a fraction of the benefit of global competition as regards total purchasing power.

Hey, I've just skimmed over the comments, although I read F15c's comments very closely. Here's my thoughts about this issue.

I am deeply involved in the software/tech industry, and have a degree of access to decision makers and decisions made. I'll say a few things:

+ The migration of jobs has really been more of a migration of tasks and services. Certain tasks in development which are semi-automatable are what are being outsourced. Certain services which sound familiar to the immigration debate: No American wants to do the helpdesk stuff, for example. And the debate is similar - Americans demand more money for helpdesk-level skills. In aggregate, there is a market for cheap labor in certain areas.
+ A lot of the tech migration has been in direct response to the tech bubble bursting in 2000-2001. CTOs and COOs have had to deliver similar levels of service with far less credibility and dollars to provide those services. Outsourcing is a natural fit.
+ The tech industry is in a consolidation phase of sorts, driven by several factors - maturation of parts of the industry (think web services, stable linux, RosettaNet, UML 2.0), a laissez faire approach by government (little government litigation (a la Microsoft and the Clinton Justice dept)), lower taxes, government taking a mentoring position in certain standards (look up Dr. Brailer and the National Health Information Network), and most importantly, a hyper-experienced American work force. This experience came from a whole host of managers, programmers, architects, designers, and engineers who crunched 10-12 years of experience into 3-4 years of the dot com bubble. Driven by the profit motive, a whole industry went into hyper drive and matured. Products and processes matured with them.
+ Along with this latter point, as the workforce matured, they were more and more unwilling to do menial / repetitive tasks. And probably rightly so.

The truth of the matter is this: the jobs that are going overseas are jobs that I don't want. But I fully realize two things for the short term: that for every job and task that goes overseas, an American manager is going to have to interface with that resource (this can be extremely difficult), and secondly that the pendulum will swing the other way as the young talent pool will dry up. I am trying to hang on to the young talent that I'm around because I know that they will be in demand.

The last point to make is this: the tech industry in America is becoming increasingly entrepreneur / consultant / independent contractor friendly. It always has been to a degree, but there is a whole host of empowering tools springing up as the internet matures into a business enabler rather than just a network for email. Have you seen Groove? Or Sharepoint? These are incredibly powerful interfaces between individuals and organizations.

Ultimately, F15c is wrong, at least in part. R&D / Design / Architecture is firmly ensconced in America and the West (especially Great Britain). There are simply few competitors on a national scale that can realize the economies of scale that come from outsourcing while absorbing the pain that goes with that decision (try working with a non-native-English speaker to debug an interface from different time zones - the short answer is patience and clarity in communication).

I'm not saying that there's no cause for concern, but his points are lifted from the anti-Nafta spin that was prevalent in the early 1990's. The problems are better and worse than that. For example: It is troubling that unless the American economy continues to grow at a tremendous rate, there will simply come a point where the young talent pool will dry up because there won't be an appropriate proving ground. Another: Computer Science education in America is mired in the '80s and '90s. This will be disastrous unless there is a move to the leading edge of the curve. Those are not really addressed by the industrialist-leader-America talking points memo.

On a side note, these are the "rubber meets the road" issues that are being addressed politically better on one side of the aisle than the other. Here's a hint: I don't think that Harry Reid can really spell IBM.

DDG

SDB has hit on the heart of the matter (no surprise, that), in separating the short-term effects of such dislocations from the long-term. Ignoring the fact that there are two pieces to the puzzle, time-wise, is the flaw in most well-intentioned anti-globalization arguments. Ignoring the decreasing cost of living brought on by such economic diversification is a flaw in the least well-intentioned of such arguments.

Among the long-term effects that's commonly not considered is that while Indians are presently willing and able to work at certain tasks for less than their US counterparts, they're not as inexpensive as they used to be and were never "24-7 nickel an hour" resources anyway, as Marty pointed out.

Ricardo's law posits that, in an economic system that's not increasing overall output, subsistence wages are approached, and many folks incorrectly presume that subsistence is always approached downward from above.

Not true, and some of what we're seeing is an approach to subsistence from below. If allowed to run its course over the economic and development cycle, we'll find that India, ten years hence, will be complaining about the same thing some Americans complain about now - being undercut in certain industries by others trying to grow to their level of wealth.

I find such aspirations to be a damned hard thing to argue against, and I fully expect that we, and the Indians after us (and the Vietnamese, perhaps, after them) will find better and more useful things to spend our efforts on, to the benefit of us all. More valuable avenues for our efforts counters the other half of the Ricardo equation, by ensuring that the economy, overall, is growing, so I remain comfortable that we're not, in fact, heading to economic Hell.

Ace,

You know, one of the great things about technology and productivity gains is that you can actually talk about outsourcing things like, say, doctors. I'm not talking primary care in most cases, but think about efficient, high bandwidth systems that can shove around radiological images. Why have a radiologist expense in rural areas, or in combat zones, for example, when you can think about doing the consult from a distance.

I'm just sayin'. This is an incredibly huge deal right now. And it really hasn't been realistic until, say, the last 1-2 years.

J

Another conceptual trap to avoid is the assumption of a zero-sum game.

For instance, the assumption that if there's a rise in software jobs in India then there must be a drop in such jobs here. (Or more generally a displacement of engineering and other white collar jobs.) It's not that simple.

For one thing, if there is a significant increase in middle class workers in India, then there will be a rise in demand there for products beyond the basics. India may well be creating a lot of engineering jobs (and they are) but in doing so they also are creating a lot of new demand for engineering products, many of which will come from us, designed by engineers here.

Rho, you have too narrow a view of what "high tech" means. There's a lot more to it than desktop computers. There is plenty of room left for hardware innovation; the well hasn't come close to running dry, because as high tech becomes cheaper and more powerful it gets used in more and more things.

How many processors do you think there are in your computer? A lot more than you think. Your mouse has one, and so does your keyboard. There's a dedicated one on your sound board (or built into your mobo chip set to produce sound). There's one doing your display. Every hard disk has its own, and so does your CD/DVD drive. There's at least one in your monitor.

Meanwhile, your microwave oven's got one, and there are probably three in your cell phone. There are several in your car. Every vending machine you deal with has a couple inside. Your television has at least one, and might have more than that. Every remote control you own has a computer inside. Virtually every stereo component's got one. Your VCR probably has a couple; and so does your DVD player.

Who's designing all those things? That's just a drop in the bucket when it comes to embedded stuff; you should see all the places where microprocessors and ASICs (Application Specific Integrated Circuits) are used in industrial and engineering equipment.

Nor is it the case that hardware design in desktop computers has slowed. Not even remotely, believe me.

For one thing, if there is a significant increase in middle class workers in India, then there will be a rise in demand there for products beyond the basics.

My understanding is that India has invested very heavily nationally in creating a technologically-educated strata of cs engineers, etc. Part of the outsourcing phenomenon has been a national marketing campaign to put this workforce on the map. It is probably not an error to think that there will be some regression to the mean, as it were. So the supply has met the need for an abundant, educated tech-savvy workforce.

It seems that most analysis is really premature, since there will almost certainly be some intermediate effects from this. You mention Vietnam. That's probably not too far off. South Korea is another possibility, as well as the Phillipines and Australia. Who knows?

This doesn't address all of the points raised, but I would like to call your attention to this article fromT&D World. It points out that there will soon be a shortage of engineers and craft workers in the electric utility industry. These jobs pay well, and have good benefits.

I don't think I said that hardware was dead. If I implied that, it's not what I intended. I'm also aware that ASICs are found everywhere, but are you aware that they are commodity items? Like flanges or bushings or whatever. There's precious little innovation in ASIC design, since by definition, the ASIC needs an application. Turning software logic into hardware is not "innovative".

As for computer processors, the move in that field is towards multiple-cores and do-all chips. You're not seeing diversification on the desktop computer platform, you're seeing integration. Where it can be, it's being offloaded to the general-purpose CPU. Where it can't, it's all going to the integrated southbridge chip that does video, networking, dish-washing, and pr0n auto-search. You can get a functioning computer that runs on 30w and fits in a gin bottle, with room for enough gin to make a Big Gulp martini.

While there are people designing hardware, only the highest end of it is what could be considered "innovative". Most of the rest you can nearly learn in a community college course. The major paradigm-shifting innovations have already come. Now we've got to make the software catch up to the hardware.

And to prove it, all you have to do is watch what happening in the market. Google is not a hardware company. eBay is not a hardware company. Hardware is critical, in that it allows for hardened, or environmentally protected, or small, or quiet components that don't require a general purpose CPU. But hardware is much less an art form and much more of a trade skill. Software, still, is very much an art form, where innovation is still taking place. Or, put another way, we now have "hardware engineers", because hardware has a series of set and proven practices. We have people who we call "software engineers", but they're not. They're like little iconoclastic wizards.

Wow, Ace. All I can say is any post whose comment thread gets pinged TWICE by SDB is high praise indeed. I'm just sayin'...

LauraW, I apologize- I credited Ace with this post instead of you. Should've known better.

I'll just reinforce the comments, the valid points have already been made.

I work in IT for a transportation/logistics company. We've outsourced to India for years. However our IT payroll and number of employees is rising, and has for 14 consecutive years, because our business is growing.

We outsource low-level programming tasks, and report-writing crap that you would give to a junior associate with ink still drying on his diploma. $20 an hour is all that's worth.

Our developers work on more complex programs, high visibility projects, and they write specifications for the other stuff. They are more business analysts than coders, and we like it that way. They have developed a more valuable set of skills than they would have doing simple programming. They understand how our business works, and that's worth something.

Read at a fast skim -no mention here of H1-B's. I worked for a company that was very big in importing them. I got laid off 6 months ago and haven't been able to find a job since. Posted my resume on the usual sites and have been haunting them since. I have always tested in the top percentile on tests, have a steady work history, and am flexible in work hours; you would have thought I'd get at least a nibble - no dice. India is trying to do to the IT world what Japan did to the automotive world. They have a large enough population base that they don't NEED a high percentage of skilled IT types to make life interesting. Perhaps I should re-train as a heavy equipment operator.

I'll repeat my advice that I've saved up in case someone asks me about the wisdom of an IT career:

There's still room, but watch your cornhole.

You're going to have to watch the market, anticipate changes, and keep your skills up to date. Be prepared to swap career types. If you start working for a big company, don't get complacent. They're probably planning to throw you to the wolves in fifteen years or less. Keep your eyes open.

If you want job stability, go into the skilled trades. It pays just as well, the work seems more stable, and it's easy to start your own business after a few years.

You guys are awesome.

Thanks so much, I have learned a lot today.

Frank, I think the word of the day, and everyday for the rest of our lives, is: Adapt.

...or become a lawyer, there are always criminals, divorcing couples, and plenty of people to sue. :)

(mind you, if you don't find a niche you like, burnout is a likely outcome.)

And I worked with some H1B visa holders in my last job. Great guys, all. I remember that they were all in it for one thing - US permanent residency and/or citizenship. That was the holy grail, and they were willing to put up with a crummy job for it.

The company paid them as much as everyone else, but the place was lousy to work at and turnover was through the roof. I could quit, they would have had trouble. Plus the way the INS dicked them around made my blood boil.

I don't think that the "tech worker shortage" that got the H1B passed actually existed, but I don't know if they've had the effect on IT hiring a lot of my colleagues think they have.

Oh, and if you're reading this by some chance, Sek: I hope you got your green card and that they gave you the huge-ass raise you deserved for putting up with all the BS on that program.

I'm also aware that ASICs are found everywhere, but are you aware that they are commodity items?

I spent much of my career working on/with ASICs and I can tell you that they are about as far from being commodities as it's possible for them to be. And if you think they're easy to design, my only answer is that it depends on the application that they're specific to.

I know that the ASICs I worked with at Qualcomm were not even remotely easy to design. They were very large and extremely sophisticated chips which incorporated three licensed cores and included very large amounts of original circuitry -- things like rake receivers for CDMA. This stuff isn't simple.

I emigrated from the UK in 1999. I'm a finacial software developer in Costa Rica. My income is a lot less than I would be making in the UK; my quality of life is far, far higher. I outsourced myself, if you like. Now I can watch with appalled fascination as Tony Blair and Gordon Brown steer the strongest economy in Europe onto the rocks.

And SDB's right—how the hell can an ASIC be a commodity? The acronym stands for APPLICATION SPECIFIC integrated circuit. As in, SPECIFIC to the individual APPLICATION. As in, custom freakin' designed. Anyone who thinks ASICs are easy to design has never designed one, or even seen one being designed.

To some extent, I'm categorizing ASICs broadly, perhaps overly broadly. The chip that runs the microwave in your earlier example? That's a commodity ASIC. The one in your $39.95 MP3 player? That's a commodity ASIC.

The one that runs a fabricating CNC? Not so much a commodity, but also relatively rare. Cell phone ASICs are less commodity, but due more to the chaotic nature of the wireless industry and its divergent standards: and even there, the growth industry in cell phones is not in hardware, but in smaller, faster, more general-purpose chips, and doing all the innovative stuff in software (read: Java). As cell phones get smaller and are asked to do more, the trend is to concentrate the hardware into a general-purpose CPU and do the interesting bits in software. This is not neccessarily because software is better--having a hardware phone that "just works" is often much better--but because "better" is the enemy of "good". When your well-designed, thoroughly tested ASIC-based cell phone finally comes out of development and fabrication, it's now 6-12 months behind on features compared to the phones that don't depend on it, and you can't update the phone with bug-fixes because all the bugs are in hardware.

So where ASICs come into play in this environment is where you turn a high-cost software loop into a bit of hardware to save time, processor cycles, battery life, etc. That's not innovation, that's transcription.

Also, I didn't say it was simple (though it it much easier now that general-purpose processors have the oomph to emulate many enviroments before you lay even the first trace), I said it's not as innovative. I'm pretty familiar with what's going on in CS research, and it's very light on hardware-as-innovation. Not because we're "falling behind" the rest of the world in technology, but precisely because we're not.

Career - HA!

Unless by career you mean "job".

For anyone looking to get into IT, it is about (as lauraw said) adapting. Being a tech lead is one meeting away from being a project manager. And if you are in an explosive growth situation, then your job can literally change a few times in a few weeks.

heard a "futurist" at a conference earlier this year - used to work for the Dept. of Labor and the IRS. Two things he mentioned got my attention.

One-half of all new entrants to the US work-force are "new" Americans.

And the biggest potential area of growth for the next 7 years will be healthcare.

laura - adapt. You mean doing things like downloading the beta 2 version of VB.Net 2005 and going through the online tutorials on it. Yep, been doing it. Started my work career in a warehouse, moved to truck driver, then to corrections, then to computer programming. Don't think I can be accused of getting stale. As for H1B co-workers, yes the goal was citizenship and most of them were excellent workers. But if a large percent of new employees - Dave said 50% in his post - are also new citizens then the possibilites for natives gets very slim. May be time for another career change.

I just ambled by here on my usual morning read to see if lauraw responded to my last comment - and I find this... whoa.

To say the least, I am impressed by the quality of thought expressed here and highly appreciative. It is clear the subject is one that many good people are interested in, and based on the responses most seem optimistic about the eventual postitives of outsourcing technology core competencies. That is good.

One thing I want to make very clear though - I did not and am not asking for protection of jobs or anything of the sort. I'm trying to describe what is happening in my world and asking some questions related to my experience.

I'm not complaining because I was laid off either. I have never been laid off and I'm fortunate enough to currently be the founder and CEO of a very early stage (pre-funding so I'm living off my savings right now...) technology startup that has attracted the attention of the former president of Netgear, former engineering VP of Cisco and others like them. I have a former Intel VP on my board. I also have as CTO a former master level networking systems designer (one of the best in the industry) from a Fortune 10 company. I consider myself among the fortunate - even if my venture does not succeed.

I'm writing all this out of concern for the future of our nation. I see America essentially giving away its expertise in some economically advantageous core competency areas without having a replacement. Technology R&D in both basic research and in product development is moving out of the US (and Europe for that matter) to mainly India and China. I see those R&D compentencies as key to economic growth in the future and their loss as meaningful.

Someone wrote that R&D is not being outsourced - I beg to differ. India and China are becoming more competent every day with technology R&D. Microsoft, Intel, HP, and others are investing heavilly in R&D facilities and people in those countries. Between American, European, and domestic capital, the foundational competencies for very strong R&D capabilities are rapidly developing in those countries. The Chinese and Indian leaders know that technology R&D is the core competency of economic growth in the future and have every intention of being the leaders.

Here is a very good article about India and China and their futures with some very pragmatic detail - note as well the parts about life science capabilities in the two countries vs. the US:

http://www.businessweek.com/magazine/content/05_34/b3948401.htm

To me it simplistically boils down to this: If high technology is waning as a major driver of 'good' jobs in America, what is the next big thing that will fill the void as tech did for manufacturing? Healthcare is often mentioned as the 'next big thing' in terms of economic growth engines, but what about sustainability? The healthcare industry is heavily regulated (look at the nursing situation here in California, the need for nurses is just went insanely high due to government mandated nurse/patient ratios - it is an unsustainable environment) and is not as subject to market forces as it should be to be a sustainable growth engine.
Moreover the healthcare industry relies on salary/benefit budgets in other employers and government spending for its revenue - its customers are not you and I, but our employers and government. Healthcare as an industry will not help the trade deficit as it is not a good or service that is amenable to export.

Thanks all for your responses. As always, I've learned some things and gained new perspectives.

Again, great responses by great responders. But, I want to ask if you folks can be more specific about America's core economic competency area in the future. Touting free market principles in glossy and somewhat lofty terms is nice, but says nothing specific and pragmatic about our future. The responses - even after a second read - still seem a bit high on the ladder of abstraction.

There is no question that America has provided the bulk of the education, capital (for infrastructure), and opportunity that has incubated and enabled India's and China's unprecedented growth in tech.

I do believe in the American economy but I believe that R&D in technology and life sciences is absolutely critical to our economy and from my perspective we are ceding our leadership to China and India with no viable replacement.

So to be specific, India and China are poised for 8% GDP growth or better over the next ten to fifty years due something very specific that they (and I) can point to: technology (and potentially life sciences) R&D leadership.

So fill in the blanks below and explain your rationale with examples of how we are building the foundations for such growth including capital investment, education, and infrastructure:

America is poised to have __% GDP growth or better over the next couple of decades due primarily to American leadership in _________.

F15C,

You're touting the Indian and Chinese economies because their anticipated growth is based upon an extremely focused area of expertise or two, which allows their governments to "contribute" to those focused areas.

Fist of all, both nations will compete with each other. Companies in each country will compete against each other. Who wins? The companies doing the R&D: American companies.

Secondly, there's no saying that the Philipines, Thailand, Bhutan, Montserrat or whomever can't follow the Indian model and become a competitor and outsourcing partner, driving costs even further down.

On the flip side, the US economy is diversified. All of our eggs are not in one basket. As long as American companies can leverage these less-expensive outsourcing options, we can do much more with less.

In the 70s and 80s, free marketeers in the US were demonized while the Japanese government was lauded for "supporting" certain industries. Who won out? Clearly, the US government's laissez faire attitude, and the adaptability of American industry, got us through, while the Japanese economy still languishes (same per capita GDP as France).

Is one industry going to be the "saving grace" of the US? No. And if we do become dependent upon one industry for our economic growth, THAT is when you need to start worrying.

I want to ask if you folks can be more specific about America's core economic competency area in the future.

Predicting the future is very very hard.

But one of many areas in which America will probably do well is biotech (medical science and agriculture).

I caution against using the growth rates of the Indian and Chinese enconomies. They have the advantage of practically starting at the Stone Age, and acquiring computers somewhere around the Bronze Age. They'll have massive growth that will flatten out fairly quickly, IMO.

There's not much we can do with a globally competitive India and China. We can't prevent their expansion--the best we can do is, perhaps, limit their influence on our economy, and that's a dubious proposition at best.

My personal take is, "so what?" By and large, an economically rich India and China is approximately 2 billion people who are too rich to launch missles at us.

So, if we want to be competitive with India and China, the answer is not more goverment, it's less. When a 2-page form can launch a corporation, and tax compliance for that corporation is less than 2 pages... that's what will make the U.S. more competitive.

If your desire is to protect the U.S. worker, then we'd better stop chasing socialistic utopianism and start teaching our kids that competition, hard work, education and financial independance are positive things AND their own responsibility.

Again, I'm not about protectionism. But I challenge the assumption that everything will be just be ok because of the ostensible open global market. I think it will only be ok because we make it that way through investment, planning, and policy.

Maybe I'm misinterpreting the responsese here, but it seems that there is a huge amount of faith placed in the global market even though there is no guarantee or strong indications shown that the US will flourish in that market in the future. I'm not looking for guarantees. What I'm looking for is thinking about the American economy and its future in specific terms.

Health care (aka life sciences) was brought up as a candidate to lead our economy. This from the article I linked in an earlier reply:

"One implication is that the balance of power in many technologies will likely move from West to East. An obvious reason is that China and India graduate a combined half a million engineers and scientists a year, vs. 60,000 in the U.S. In life sciences, projects the McKinsey Global Institute, the total number of young researchers in both nations will rise by 35%, to 1.6 million by 2008. The U.S. supply will drop by 11%, to 760,000. As most Western scientists will tell you, China and India already are making important contributions in medicine and materials that will help everyone. Because these nations can throw more brains at technical problems at a fraction of the cost, their contributions to innovation will grow."

Those metrics at least don't bode well for US leadership in life sciences or hight technology from my perspective. If I were a big dollar investor I'd be betting on the areas best poised for growth.

I'm also not advocating one sector to be the be-all, end-all of our economy. But we do need a significant growth sector that provides incentives for high risk capital investment because that is what keeps the economy fresh and vital. I can't see it being high-tech or life sciences - at least for more than a few more years. So what will it be?

F15C: One of the requirements, I think, for holding the view that I do (namely that, over time, market forces can be counted on to allow the cream to rise to the top) is the recognition that if the US ceases to be the best at (fill in the blank here), it's ass will be pureed and fed to it by some country or countries better suited to that task.

Which is just as it should be, and I'm against anything that messes with market forces to avoid such outcomes. Agricultural tariffs and price supports, steel tariffs, and punitive textile trade barriers are just three recent manifestations of this idiocy standing in for reality recognition.

So, to answer your question "What will be that significant growth sector" (a question I can't actually answer), I'd simply suggest you look for defensible advantages that the US has over all competitors and seems likely to retain over a long period of time.

In IT, there wasn't one, and all the education in the world wasn't going to keep IT from approaching commodity status. Too easy for others to acquire the same skills. Our research infrastructure remains unparallelled, in life sciences and many other places, however, and while I don't think that there will be one area of growth that dwarfs the others, I do think that a cluster of specialties will be a basis for future growth, and that this cluster will come from the activities on which most R&D is presently centered.

Nanotech, biotech, and healthcare have a lot to commend them in that regard.

Patton -- Excellent answer, thanks. I completely agree with the premise you layed out in your first paragraph. I am a believer in planning and setting a course. It seems that is lacking in our economy today. In the mid and late nineties we were planning on becoming the leader in the coming information society with high tech as the driving force of our economy. Tax incentives, retraining programs, etc. Key there is we were having a national discourse on it. Not everyone was happy about it, but at least the discussions were happening.

Today it seems we talk a lot about the 'global market', but little if any specifics as to what our place is going to be in that market and how we intend to get ourselves there. I think that America can continue to be the leading economic power in the world and I think it would be a good thing if that were the case. I believe in this country and that is really to say that I believe in the people of this country.

I am probably missing something because many (not all) of my fellow conservative/libertarian types seem ok with the economy and where its going. I appreciate your thoughtful replies.

I love it when the engineers and software types get worried about outsourcing.

Did they think about that when they went and bought that Porsche with their crazy internet money instead of a Corvette?

Do they wonder how many cashiers, typists, and bookkeepers they put out of business with their work?

Of course, the ironic part is that the internet is making it easy to oursource their jobs now...

Also, there is any easy way to retain industry in the USA. Eliminate the minimum wage and import cheap labor.

last two comments are a little strange - I buy used Fords, Chevys and Buicks. Nothing like jumping to conclusions as a form of exercise. As for importing cheap labor - I thought that was what all the workers migrating north out of Mexico are letting businesses do, or am I missing a nuance there?

"You know, one of the great things about technology and productivity gains is that you can actually talk about outsourcing things like, say, doctors. I'm not talking primary care in most cases, but think about efficient, high bandwidth systems that can shove around radiological images. Why have a radiologist expense in rural areas, or in combat zones, for example, when you can think about doing the consult from a distance. "

You can actually outsource any doctor that doesn't have to actually put his hands on you... call him up on a videoconference, tell him your symptoms, and he tells you what medicine to take. The sticking point is that current law doesn't let you then go and pick that medicine up off the shelf and buy it... the doctor has to be licensed in the US and hand you a permission slip. But, again, this is an instance where ordinary people would be better off with less law rather than more.

Of course if bandwidth and robotic arms get cheap enough, you'll be able to outsource just about anything, including the so-called "skilled trades" - your plumber could be halfway around the world controlling a robot that fixes your toilet.

(Although I don't know how well people would trust a commercial airline pilot or truck driver who wasn't putting his own neck on the line along with theirs...)

So don't look for "safe havens"... there aren't any.

What's going to keep us employed is being ready to adapt and change. And looking for new opportunities in decreasing costs of products produced by our former industries... for instance, how'd you like to go to the store, load your basket, and walk right out the door with no waiting in a "checkout" line... just have sensors at the door reading RF tags in the groceries and charging your credit card as you leave? Cheaper hardware and software make that cost-effective.

So what will we work on in the future? Who knows.... we were supposed to have spaceships and flying cars by now, and instead we've got computers and cell phones. So you just never know. (Of course those flying cars were scotched mainly by the FAA, while no one could get their panties in a twist about people hurting themselves with computers until they were pretty well established...)

In the meantime, cracking down on crime and dismantling regulations on housing, health care, and education will lower our overall cost of living and increase our total wealth and our competitiveness. If you don't have to live in a "nice" neighborhood just to keep from getting shot, and you don't have to pay through the nose for medical resources kept deliberately scarce by our fearless leaders, you'll be able to weather the ups and downs of the economy a lot better.