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The Nation's Pulse
Phoning It Out
The folly of outsourcing amid a growing trade imbalance and a worsening service economy.
I wasn’t surprised by the latest report from the Commerce Department that shows the U.S. trade deficit, the excess of imports over exports, had jumped in January to the biggest imbalance in more than three years.
My phone was ringing in the house the other day when I was out in the yard. By the time I got inside, it had stopped ringing, so I hit the *69 automatic call-back number.
A woman with a foreign accent answered and said she was calling to see when I was going to make a payment on my Macy’s bill. I asked where she was calling from. “The Philippines,” she said.
So, I buy a $95 Polo shirt from Macy’s with the little embroidered horse on the front, imported by Ralph Lauren from Sri Lanka or Vietnam, where the average hourly wage for garment workers, respectively, is 46 cents and 52 cents. Then someone phones from the Philippines, where the average starting wage in a call center is $1.32 per hour, to tell me to keep my payments current.
I thought about telling her that Americans wouldn’t have to be called as much about their bills if American call centers weren’t being exported to the Philippines, but I didn’t. She wasn’t, to use the term President George W. Bush used to describe himself, “the decider” with regard to capital mobility and the costs and benefits of globalization.
A friend of mine had a similar problem with Macy’s when he tried several times to call and make a simple change of address for billing. The operators who picked up the phone in India went from not understanding the language he was speaking to being wholly incapable of making the address change.
I had the same problem when I called 411 last week to get the phone number of a local pizza shop. “It’s the one that’s been there forever, a few blocks from Rohrich Lexus in the South Hills, right on the corner at the intersection with West Liberty Avenue,” I explained.
That used to work when the operator was in Pittsburgh. “Fiori’s Pizza,” she’d say. “Good hoagies.” Now there’s a young girl who picks up the phone in Mumbai and has no idea what I’m talking about.
The number of jobs in all this isn’t small. “The Philippines now leads India in call-center jobs, employing 350,000 compared with India’s 330,000,” reported USA Today.
Correspondingly, the amount of extra profit from outsourcing call centers isn’t small. “The positions pay the equivalent of around $4,300 U.S. per year, according to the Business Processing Association of the Philippines,” reported USA Today. “By comparison, call center jobs in the U.S. — when they can be found — may pay $16,000 to $22,000 a year.”
The difference between the $22,000 and $4,300 is $17,700 per operator a year. For the aforementioned 680,000 operator jobs in India and the Philippines, that comes to more than $12 billion in lower labor costs if jobs are outsourced from Chicago and Atlanta to Mumbai and New Delhi — $12 billion in extra profits and $12 billion in forgone wages in U.S. call centers.
And now that we’re talking about phone headaches, I don’t like it when I call Toys R Us and have to sit through a recording about their locations, store hours, website, and a spiel about the company’s “exciting employment opportunities” before I can get to the point in the call where I can hit the prescribed number and then wait some more until a “guest service associate” gets around to picking up the phone.
I didn’t need the store hours or location, or a job. I just wanted to see if they had any Saab model planes in stock. That night, there was a 60th birthday party for an ex-pilot friend of mine from Sweden who used to fly Saabs in his top gun years.
I never did find out if the store had any Saab models in stock. No “guest service associate” ever picked up the phone.
After maybe a dozen unanswered rings on that first call, I hung up and tried again, calling back and listening to the same recorded pitch about the “exciting employment opportunities” and the website and store hours and location.
About the Author
Ralph R. Reiland is the B. Kenneth Simon professor of free enterprise and an associate professor of economics at Robert Morris University in Pittsburgh.
Letter to the Editor View all comments (38) | Leave a comment
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John786| 3.20.12 @ 7:08AM
A race to the bottom.
Dave | 3.20.12 @ 12:22PM
Outsourcing reminds me of the time I was in need of some on-line tech advice having to do with my computer's anti virus program. After finally getting someone at the company's India hotline to pick up the phone, I managed to get my question out ... but ended up feeling like Bud Abbott on the receiving end of the classic "Who's On First" routine. After carefully, slooowly asking my question, there was a pause ... then (again)I asked if he had an answer. I was told - "Pleeze to hold on while I chick mi nutz.
Whaa ...?
After a few seconds of, what must have been, halarious one liners, I finally managed to figure out that the guy answering the phone at tech India was pausing to ... "check his notes."
In the end, I was relieved to translate the broken English. The way it was headed, the image of him "chicking his nutz" was beginning to weird me out.
Don't 'ya just love multiculturalism? Especially when it's on YOUR dime?
Appleby| 3.20.12 @ 7:16AM
It's a lot like the problem I have as a temp going into various offices and inevitably finding the filing system in a shambles. People have forgotten that the ultimate end of a filing system, or a telephone call to a business, is the gathering of information. And if the person on the other end of the phone cannot understand or find what you want, so s/he cannot get that information for you, what's the point?
The worst of all is the tech support outsourcing. Not only can they not understand the non-tech person on the other end of the wire, they cannot explain what's wrong and what to do about it in any language spoken by the caller. Fortunately some doubtless enraged techie has invented something that allows my friend from Illinois or from England to "remote in" and look at the problem and more times than not, fix it for me without my having to explain anything. Why can't the guy in Mumbai do that?
Big Tony| 3.20.12 @ 8:08AM
There is no excuse but the reason why the "guy" in Mumbai can't do it is a lack of technical knowledege or his company's failure to provide an internet connection.
I have to work technical issues related to call centers from time to time and it is a trouble call I dread. Far too often the "real problem" is the operator(s) making up some phoney issue and blaming the phone system so they don't have to work. Then I have the unenviable task of explaining to the call center manager that the problem is personnel related and not technical.
But the problem here is the same as over in India and the Phillippines low pay does not attach the best workers with the needed skills or work ethic.
DWH| 3.20.12 @ 8:05AM
This is what passes for education at our "elite" business & law schools. It's not building an entire business. Please don't muddy these waters by asking what's good long term as my contract focuses my entire attention to month's end, quarter's end. I reduced the cost of providing phone based customer support. I was not tasked with selling a model plane; that was the sales department.
Roy| 3.20.12 @ 5:32PM
That's the one good argument I see. And it has the characteristic of most good arguments, as in, it is not calling for government coercion.
If people are really willing to pay five times as much to speak to an American..then let's see them put their money where their mouth is!
Bob K.| 3.20.12 @ 8:08AM
I think I am starting to get phone calls like this from the Republican Senatorial Campaign Committee!
I've decided to donate directly to the candidate of my choice.
Gary B| 3.20.12 @ 8:16AM
This is what I like so much about GoDaddy. Their support staff is located in Phoenix. You get a well-spoken American every time. They provide expert help and make sure your issue is handled. As a result, their customer services is as good as it gets.
During one call, I expressed my gratitude for their made-in-America service, and the woman told me Bob Parsons, their founder, is an ex-Marine and he believes in keeping everything here. As this article says, he could be putting more money on his bottom line if he was willing to blow off his customers. In return he has my undying loyalty. God bless Bob.
Appleby| 3.20.12 @ 11:50AM
So that's why NA$CAR has them for a sponsor? And here I thought it was the nekkid girls in the commercials.
Gary B| 3.20.12 @ 1:42PM
Are you saying it's his duty to remain just barely profitable? You sound like Obama who says maybe he's made enough money. He made his money the old-fashioned way, by taking care of his customers. What a concept.
Bobloblaw| 3.20.12 @ 8:19AM
At least Philippines is 1000% better than India. I had a Philippino help me about 8 years ago format my hard drive one afternoon. He was knowledgeable, called back at the appointed time and we could both understand one another.
India is a completely different experience. You get unintelligible employees who are unable to make a decision or help you (product of India's caste system?).
Roy| 3.20.12 @ 5:29PM
There are a billion people in India, of varying degrees of competence.
Unlike us, they do not believe you need a college degree to wipe your rear end. For the most part I think this is all to the good, however some middle ground might not be a bad thing.
Bob K.| 3.20.12 @ 8:21AM
Incidentally, has anyone noticed the outsourcing of much of the work our Military used to do? Or you might describe it as privatization I guess. Flying meals over to the troops 1/2 way around the world? Wonder if we could get India or the Philippines to do that?
How about running military hospitals like the now defunct Walter Reed Army Medical Center. Didn't Senator Feinstein's husband make big bucks from running it (into the ground)?
I think we outsourced the Panama Canal too? How much money did that save us?
Damn! With a little bit of imagination we could outsource our need for troops in Korea!
We've outsourced our steel industry to China. Makes building aircraft carriers and submarines cheaper I'll bet!
The possibilities are endless!
Bob K.| 3.20.12 @ 8:23AM
We were even going to outsource the Keystone Pipeline to Canada until Obama stopped it!
TrueBlue | 3.20.12 @ 11:54AM
Except it wasn't going to be outsourced, the Canadians were going to outsource it to US. It was going to be built and maintained by American workers, paid for by Canadian companies.
Bob K.| 3.20.12 @ 5:18PM
Why would Canada outsource a US pipeline in the United States? They would have to own it and have purchased all of the rights of way needed to construct it first. I don't believe any of this has taken place.
Pecos Pete| 3.20.12 @ 9:05AM
We could outsource all of the federal government and save a LOT of money.
Old Soldier| 3.20.12 @ 8:48AM
Does this article have a point? What business manager can ignore getting a cut of the above mentioned $12 Billion in cost savings?
I've seen successful and failed outsourcing efforts. American workers are simply the best, but they are expensive particularly after taxes and benefits cost another 30% over their salaries.
Dmac | 3.20.12 @ 9:02AM
Old Soldier,
I'm sorry but I have to dis-agree with you that American workers are expensive. Wages have been held flat in this country for years and everyone knows it. CEO's , corporate officers and such, why yes, their wages have gone way up, and mostly at a cost to American consumers and American workers.
Whats more expensive, paying an American a decent wage to have a job, where his/her income is spread through our economy, or to pay the un-employment check, welfare check, medi-caid check and such month after month?
All of this outsourcing, every damn bit of it is doen to enrich not so much the stockholder, but the officers of the comapny, and the rest of us pay for it. We pay for it with higher taxes, lower quality goods and services. We pay for it by losing our homes when our job is outsourced. We pay for it when we can't do for our children the way our parents did for us.
The more I type and think about the issue, the more upset I become about your comment of American workers being too expensive.
Evertytime the economy takes a dive most American companies have lay-offs. What happens, they dump the work of the laid-off employee in th elap of the employees that remain. Does the remaining employee get a raise? Hell no, but he/she does get to do twice the work for the same pay. But the CEO got his big bonus for downsizing the comapny, go figure?
It's not that American workers are too expensive, its that American corporate officers are both too greedy and too expensive.
PCC| 3.21.12 @ 9:39AM
Sorry, Dmac, but the real business cost issues in the U.S. are taxes and regulation, not labor. Lower taxes and regulation will engender a tidal wave of domestic and foreign investment simply because, as a general proposition, it makes sense to locate your service and manufacturing facilities closer to your customer base.
Make it difficult and expensive to do so, then companies will naturally put their service and manufacturing centers in cheap countries and will live with imperfect customer satisfaction and trade higher tax and regulatory costs for trans-ocean shipping.
The big problem is that Americans don't understand that it is a COMPETITIVE world, and, in particular, the U.S. government is oblivious to the need to compete against more favorable tax and regulatory regimes.
Betina| 3.20.12 @ 9:00AM
You know what I love? The foreigner on the other end of the phone you have to speak with when you have a technical problem with your cell phone or your computer. So you have a problem which clearly frustrates you and then you are forced to listen to someone whose words are indecipherable and the lack of understanding increases the frustration level in all directions. You are correct when you say that the person with the lack of English proficiency on the other end of the phone is not the CAUSE of all of this, but guess what. I let it fly anyway because it GETS AROUND. If enough Americans tell them I can't understand you, can you get someone whom I can speak with comfortably, there can be a change. But too many of us have absorbed the indoctrination that we are not supposed to express our disgust with all this. That is RACISM or some other politically correct bull shit. Years ago that was going around too. If an American objected to being put through a verbal/aural meat grinder because some foreigner had a language issue, then the one who was supposed to shut up and take it was the English speaking American. If you didn't like it, well..that's because you are a racist. And guess what? People, for the most part, shut up and took it. And it's not just at call centers. Try ordering fast food and speaking to someone whose verbal skills can't make it at the driveup. Because it's not just overseas but here as well. Nowadays I don't give a rat's ass. I tell them straight to their faces either I can understand you or get me someone else. Learn the language.
Petronius| 3.20.12 @ 11:09AM
We are in this mess because our labor market is totally distorted due to over taxation and government imposts such as environmentalism, social engineering, and product liability costs. We have reached the point where American business at too many levels is saturated with the Occupier mentality stemming from attitudes about "fairness" and lack of any concepts of value among working people in lower echelons. Too many believe that the salaries they take home should afford them the life style they desire when they cash their first pay check. Ask the AFL CIO rep who says, "it's not what government takes out of that check. It's what employers do not put in," (that creates poverty). That attitude has made many construction and craft unions all but defunct. Now that so much work Americans once did has been exported and those complaining cannot find jobs with inflated salaries for the minimal pursuits of mindless occupations which existed before the rest of the world developed an industrial base, it's corporate America's fault. Bravo Sierra. This country will never again have a healthy economy until people face reality and learn how markets function. Their sand box is a zero sum dead end just like their fantasies of painless living without the necessity to compete. They care even less that the American consumer cannot afford that after taxes. Americans who are successful and prosperous in the private sector are those who are willing to acculturate to its requirements. Bitching at Wall St. won't ever change that.
Dmac | 3.20.12 @ 2:07PM
Petronius,
Unions make up a small portion of the American work force. As someone has stated below, American labor cost will never be able to compete against cheap asian or central American labor costs.
The people depend on the government, mainly the President, the State Department and the Senate to make sure that trade deals with foreign countries do not hurt or decimate American jobs. For the last 30 years the exact opposite has happened.
Nixon sent George Bush to China to open up its markets so they would buy U.S. Goods. Bush screwed us all and help set China up to make goods to be sold in American for American corporations.
Our economy has been a tiger chasing its tail for 30 years and the tiger has finally caught its tail.
What do you expect the 80% of our population that does not have a college degree to do? They need jobs they can do with their hands.
No businessman has done iton his own in this country. Someone died and spilled blood to give each of us the opportunity to succeed in this country.
The problem is too many major stock holders don't give a damn about their fellow American.
Why is that in the 50's and 60's if a company laid off workers their stock dropped? It was because American companies only laid off when there were problems at the company. Why is it ever since the 80's when a company has a lay-off their stock value goes up? Because it usually means that the company is ditching its American workforce for cheaper labor.
Problem is, it's not cheaper. If you add up the additioanl taxes we pay as a country to pay for the food stamps, welfare, medical cost, subsidized utility bills and housing the country, and individual states have to give to those who lose their jobs it gets damn exepenisve real fast.
I'm a capitalist, I believe competition works. However I also belive that too much greed will ruin it for all of us.
How many more wars will Americans send their kids to fight in for "National Interest" when th eemployees of the "National Interest" being affected are from a foreign country?
This country should develope with the WTO a fair way to tax the the labor cost difference for products so the playing ground is level for American workers. If we don't we will continue to see more and more American son welfare and more and more of the available cash in this country in the hands of the already well off. Many of whom got that way by stabbing their fellow American in the back for profit, rather than working with the government for fair trade policies, not free trade policies.
Petronius| 3.21.12 @ 12:26AM
There is no such thing as "my job", "your job", or "American jobs". And "fair trade" is a misnomer. The nature of business is simple. The only components which carry Value are innovation and marketing. Everything else is COST. Add to it the fact that monetary values world wide are disparate and the obstacles American companies must face that are not a factor in the far east or South America and we lose that business. If people want jobs to return that we once did, this country had better grow up. That means not suing every company that makes hammers if you miss the nail and smack your thumb. It means not suing the company if you don't get hired or promoted because Work is a Duty and Employment a Privilege. It means Those political parasites called Environmentalists cannot sue every business dealing in natural resources which drives up the cost of living for everybody on earth out of sheer spite and hatred of what they do. And above all every line employee whether public or private must take responsibility and keep a realistic attitude about the viability of their companies instead of treating them as support groups and thinking only in terms of what they "get". But it's going to cost. The price to every "American worker" will be discarding the old sand box mentality and embracing willingness to compete regardless of circumstances or conditions.
Dmac | 3.21.12 @ 9:19AM
Really what I hear you sayinghere is what most Americans believe, that we have way too many lawyers who are looking for a quick buck.
loulou| 3.20.12 @ 11:25AM
The Vietnamese are undercutting the Chicoms! Who'da thunk it?
Karl Jay| 3.20.12 @ 12:12PM
It is a settled fact that American Labor will always be more expensive than 3rd World Slave Labor, however this fact would probably be contested by the OWS movement.
Petronius| 3.20.12 @ 12:16PM
OWS does not consider or car about Cost to business concerning employment. They only declare what American Business "owes"them.
Dmac | 3.20.12 @ 2:37PM
All Americans, including American corporations owe America, and I'm not talking about taxes.
The OWS group, while the majority of them are just lazy and think they are owed something are wrong, there are a few in the group who understand that the future holds very little promise for the average middle class worker.
You have to admit Petroniuos, it's pretty fricken sorry of American corporations to import engineers from India to work in the United States simply because they don't want to pay engineers born, raised and educated in the United States a good wage. And its going on in other professions as well.
Ron| 3.20.12 @ 12:24PM
Ralph,
May I call you Ralph? it is not simply outsourcing to other countries, but even internal outsourcing that leads to poor customer service...For example, when my second child was due, I worked two jobs. One of those was in Phoenix, Arizona for a company called EXCELL...it provided directory assistance to various cities....In fact, i would get an inordinate number of callers from New York who were looking for the same information you were...I would do a name search in the area code, and they would start telling me where the store or business was...That did not help in the pre-WWW days when there was no Google maps, etc. to find it for them...So, really it is not limited to non-English speakers, though it is sad that outsourcing of potential operator jobs in, say New York, end up going to Phoenix.
Ed| 3.20.12 @ 12:48PM
Mr. Reiland, if you want a model of a Saab fighter jet (such as a Draken or Gripen) check out an internet vendor like megahobby.com or a local hobby shop. I avoid call centers like the plague, the internet is far more efficient. In my experience, Toys R Us would not have an unusual plastic model like a Saab fighter.
THKrupp| 3.20.12 @ 12:59PM
In this day and age I dont understand why we even need call centers anymore. Pretty much everything and anything can be done over the internet. I expect that in a very few years outsourcing call centers will go the way of the woolly mamoth. Not that there will be an increase of jobs in the USA just that we dont really need them anymore for the most part.
Slacker| 3.20.12 @ 1:18PM
The sad part is many people in Mumbai exercise better English grammar than one is likely to hear spoken in Atlanta or Detroit.
Betina| 3.20.12 @ 2:08PM
How can you tell? Since you can't UNDERSTAND what is being spoken. Rather listen to an AMERICAN mangling the grammar than a foreigner mangling everything. At least I know the American is working and being paid. That's the effin' point, isn't it?
Roy| 3.20.12 @ 5:21PM
Well, no. The point is to get my question answered.
Slacker| 3.20.12 @ 6:17PM
The point is, sadly, some Americans are unable to structure a sentence, have insufficient vocabularies, and are verbally outclassed by somebody who speaks English as a second language. Pathetic.
Joe D.| 3.20.12 @ 2:15PM
You are correct. And companies have lost my business before since we get tired of waiting.
Mark in LA| 3.20.12 @ 8:36PM
Dang, you mean that a pay differential of 80% between the American and the Phillipinos is what is causing the outsourcing? Here, I thought it was like the Republicans said that if we just lowered GE's taxes from 2.3% of income to 2.0% and eliminated all regulations on food and the environment, all the jobs would come flooding back home. Silly, me.