“We believe this is a wise move financially. The cost savings should be significant, stated Congressman Thomas Reynolds (R-Wash). Reynolds, with the aid of the GAO (the General Accounting Office), has studied outsourcing of American jobs extensively. We cannot expect to remain competitive on the world stage with the current level of cash outlay, Reynolds noted.

Its not clear to me that a successful real-estate agent is particularly more skilled than a specialist call-centre technician.

I think the real estate industry is ripe for a computer-oriented takeover. For what it’s worth (not much to me) here’s my ideas:

On the sales side, the main issue is that assessment of house value is a time consuming process and of course the buyer cannot trust the seller. The agent helps by bringing more buyers and sellers together faster and culling out the matchups that will obviously never work. A computer could do it better and faster. There are a number of internet websites covering property and most of them show agency property only (no sneaking round the gatekeeper). This barrier can’t last, and I predict that direct buyer/seller transactions will become more common.

On the rental side, it is a whole different ballgame. Long term profitable rental management is a skilled task, well beyond most owners, and also beyond many agents. Most real estate agencies are small, and do a bit of rental on the side but see the big money in sales. Rental is an annoying, low margin, thing that requires effort. I can see an opening for a network based rental management system that runs to a nice formula, makes low margins but also runs on low overheads. With proper computer assistance and a good formula, one person can manage many dozens of properties. I’m happy to collaborate on this one if someone wants to give it a whack (I have plenty of computer skills but real estate law is too arcane for me).

Well, I wouldn’t be so sure. And I would leave out the word “personal”.

My only concern is we strive to mitigate the worst effects of inevitable off-shoring and technological-replacement of industries. In some cases that may well involve small amounts of gradually-phased-out subsidisies to allow businesses to fold via natural attrition, in others it may involve direct support to help businesses retrain staff/upgrade equipment etc. As a last resort it may involve minimal doses of old-fashioned protectionism. Yes, there are risks in any of those strategies, and there’s a potential cost in getting them wrong – but there’s a definitive cost in simply pretending that there are no issues, and part of the job of government is to ensure that such costs are kept to a minimum. Given that there will always be huge political pressure on governments to protect workers, there’s little point pushing a line of “we refuse to help anyone” anyway, so I’d much rather that governments concentrate instead on which methods are least like to throw up nasty unintended consequences.

I’m not intending to hand wave about trade restrictions. I only mean those that are intended to protect industry. The Kiwis are complaining about our restrictions on their apples, claimed to be necessary to stop the import of fireblight. If the science is right then keep the apples out, if the science is wrong then lets not lie to our neighbours to advantage our farmers at the cost of consumers.

I only raise the point about economic nationalism because we have been discussing the justice of protection. No question that it is a political reality, my point is that it is not necessarily something to be proud of if we put local workers ahead of poor foreigners. the poor old africans want to sell europe food and all they get are hand outs and the occasion big rock concert.

As far “economic nationalism” – unfortunately democracy practically dictates that. No-one else other than the government of Australia has any mandate or political responsibility to the Australian people, so realistically, yes it has to put the interest of Australians ahead of non-citizens. Obviously there are often very good economic arguments that demonstrate that certain forms of restrictions that may be intended to protect the interest of citizens fail to do that (high tariffs, quotas etc.), but I don’t accept that governments should simply sit back and claim that any attempt to look after the interest of Australians is guaranteed to backfire.

The “if you lose your job you can get another one” argument is fine as far as it goes, but when someone has spent the better part of their life building up their skills in a particular industry, dedicating their professional life to it, and supporting a family and a mortgage on that skill-base, then it suddenly turns out that those skills are no longer needed because they can be found cheaper elsewhere, I don’t see how you can argue there is NO cost. Personally, if something forced me to change careers, our family would have no choice but to sell our house, most of our assets, and resort to a much lower standard of living, while I retrained myself in a field where Australia could be competitive. Worse, it’s not even something I can insure myself against – ideally I would be happy to voluntarily pay for insurance that enables me to support our family’s current standard of living while I retrain myself in such a situation, but no company I know of even offers such a type of insurance. Given no private insurer sees fit to do so, why can’t the government?

I’m not sure any costs have been identified from off-shoring. If you lose your IT job to an indian then you can get another job. Also, what are the moral relevance of national boundaries to the distribution of economic goods? Is economic nationalism defensible? I have a hard time thinking how it could be.

I’m not so optimistic about your “not too distant future”. India has a big enough population that it could probably provide the entire world’s off-shorable IT expertise, and at current rates of economic growth, India still has a good century to go before it reaches the wealth of most developed nations.

“Either you are in favour of free trade…or you are not”

Define “free trade”! Trade with no with restrictions at all? Trade with no taxes on imports? The former I certainly can’t imagine myself supporting. The latter, sure, provided you can demonstrate that there are better ways of dealing with any costs that arise from off-shoring.

I think the good news about India is that those IT employees will probably cost the same as local ones in the not too distant future. I wonder how much of the cost differential actually reflects the different size of government per capita?

I suppose there is no answer to your question about IT or call centre workers. Either you are in favour of free trade, for the over all gains and despite sectional dislocations, or you are not. If against (and I’m not suggesting you are), I think you have justify why IT customers should pay higher costs. I expect you would need wage subsidies to protect IT workers because it would be enormously damaging to impose IT tariffs.

No disagreement there, except I’m not particularly talking about unskilled workers. It’s not clear why technology substitution would be an issue with the sort of call-centre work my wife was doing, or indeed any number of IT type jobs (including programming, my own field) that many companies are finding it more profitable to ship off to India in particular. The fact is that India *does* have lots of skilled IT workers that are not really any more productive than local workers, but purely because relative costs (and standards) of living are different, are fairly cheap for companies based in Western nations to employ, which must be acting in some way to keep wages down for IT workers in Western nations (I must say though as a programmer myself I’m certainly not complaining about my own wage – I actually don’t have a good explanation as to why my employer, who is based in the U.S., thinks I’m worth so much more than the sort of salary he would have to pay an India-based programmer).

A protective tariff has a negative effect because of rent seeking, but a general tariff is just a tax and I think a small tariff should be used to pay for customs costs.

I’m not sure the minimum wage is so uncontroversial, but I think a negative income tax helps keep the minimum wage at levels that will minimise distortions. Without the NIT the argument gets too focused on living standards.
http://en.wikipedia.org/wiki/Minimum_wage
http://www.house.gov/jec/cost-gov/regs/minimum/50years.htm
http://www.raiseminwage.org/id3.html

What do you mean by ‘protectionism’ in this instance? Are you supposing that a tariff could be charged on calls to foreign call-centres? And if so, how could you be so sure that such a tariff has any more of a negative effect than any number of other ways in which governments raise revenue?

Your concern about low skilled workers is best addressed by allowing wages to fall and topping up incomes with a negative tax. The alternatives are welfare traps and protectionism, and I think both have a greater cost to society than a negative income tax. No doubt somebody will beat me up for not believing in minimum wages, but price fixing is price fixing.

It’s not clear to me that a successful real-estate agent is particularly more skilled than a specialist call-centre technician.

“Low skilled jobs tend to move off-shore because there are more low skilled people there”

Ok, but it’s becoming increasingly the case that medium skilled jobs are tending to move off-shore too, because even if you need 2 or 3 low skilled off-shore workers to match the capability of one medium-skilled Western worker it’s still cheaper to do business that way. And it’s clearly not possible for ALL workers in every Western country to be so highly skilled that they can be competitive with workers in poorer countries. Now it’s true that eventually those poorer countries will become wealthy enough that wages and labor conditions there will eventually rise to the point that they are not too dissimilar to developed nations, but given the huge masses of labor available, that could take 4 or 5 decades at least, and it’s not entirely clear what the solution is for workers in Western countries only capable of low to medium-skilled jobs.

Low skilled jobs tend to move off-shore because there are more low skilled people there. Personally I want aussies to be high skilled if at all possible.

Well admittedly it would seem that if a call centre operator was capable of generating significantly more value for a company than the wages they were being paid then you’d think companies wouldn’t consistently understaff call-centres resulting in overlong waiting times for customers. But customer attitudes are a big part of this – every time a customer decides to stick with a particular company despite his or her frustrations with their call-centre, they are unwittingly pushing down call-centre operator wages. Indeed, if customers were less tolerant of poor service in general not only would we get better service, but the workers directly providing the services would almost certainly be paid better.
So why as customers are we so tolerant of poor service? Is it a sort of market failure?

Of course the other big downward pressure on call-centre wages is offshore labor – there are relatively few advantages that developed countries have as a location to set-up call-centres these days. Whereas of course real-estate agents don’t have to compete with anybody in India or the Phillipines. But, it must be said, nor do retail salespeople/assistants – though they do often have to compete with teenagers, which presumably exerts some amount of downward pressure on those wages.

I can’t see any argument to say that a working person contributes more to the economy than is reflected in a market wage. The market being the only way of valuing economic contributions. If the market wage for a call-center operator is low it must mean the value of the work is low. The political decision that there should be a minimum income addresses the issue of how we want society to work. Hopefully without unintended consequences about disincentives to work. I’d be especially happy to see a negative tax system for the low paid, but I hate pretending something is worth more than it is, or that people who have earned lots of money have an obligation to give something back to society. After all, the money was earned by giving something to society in the first place. I suppose some wag will point to the investment bankers who earned lots creating part of the financial crisis, but the give something back idea also gets applied to people like Harry Trigubof.

Re 25, Fred, where have I ever given the US top marks for anything? I appreciate the importance of access to education and especially good education but the public education system in the US has gone seriously downhill since WW2 (at least according to Jacques Barzun), why would I give them top marks for that? Not to mention all the other dysfunctional policies that they have in place on welfare, corporate support and protectionism.

The missing link is political ideology on redistribution. While structural change, freer markets and economic growth create “more room at the top”, the role of the state may be decisive in determining who fills these places – the existing poor or people from a relatively high social class to begin with.

The effects of education and health inequality in the US are compounded by relatively wide earnings differentials, growing corporate power and its frequent abuse and the relatively large proportion of trapped working poor.

On both health and education inequality, and on the issue of redistribution, the US is easily the worst.

Rafe, I don’t see there’s any “quest for equality of outcomes” – merely that rising inequality is a symptom of inadequate attention being given to helping those at the bottom raise their living standards. Partly this will come through enabling measures – better education/training/health treatment etc. etc., but partly it will come through redistribution. Just the nature of techological improvements will tend to mean that those with the most money will get better and better at creating more wealth than those with the least, and hence if we don’t want to live in an increasing unequal society (presumably it doesn’t bother you, but it certainly bothers me), there seems to be little choice but increasing levels of redistribution (which I prefer to think of as “the degree to which we consider our wealth to be shared”).

The USA is by far the worst offender on both counts. Yet you give it the top marks.

Australia is not a bad offender. We have not experienced a big increase in inequality in recent decades and we are close to average on the OECD count. But there is more that can be done by governments to reduce education and health opportunities if we want to.