The perils of offshoring â for Indian finance workers?

The Australian covered the story today of Australian finance unions teaming up with Indian finance workers to ensure that there isn’t any nasty offshoring going on by banks. I can see why Australian unions might do it, but I can’t quite see what’s in it for the Indian union members. But that’s solidarity for you.

Finance Sector Union national secretary Paul Schroder said the joint declaration was designed to promote solidarity of bank and finance sector employees in the region and prevent employers from pitting one country’s workers against another. “This is a phenomenon that requires international co-operation between the unions,” Mr Schroder said. “Nobody supports there being offshoring at the expense of domestic workers.” Mr Schroder said the agreement carried force because India’s bank employees, unlike its call centre and IT workers, were one of the most unionised in the world, with 90 per cent of the workforce signed up. “They are very happy to have investment in jobs but that shouldn’t be at the expense of workers elsewhere,” he said.

Finance and insurance industry compensation per employee is around 80% above the figure for all employees.  Still to the (I expect very limited) extent that the agreement works, it will help lift the remuneration of those employees – and reduce the remuneration of the others. And it will reduce the remuneration of the Indian finance workers – presuming that they get paid less than Australian finance workers.

This entry was posted in Economics and public policy. Bookmark the permalink.
Subscribe
Notify of
guest
16 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
SJ
SJ
14 years ago

Nicholas Gruen Says: “…it will reduce the remuneration of the Indian finance workers…

This generalisation doesn’t work.

It would be more correct to say that it might reduce the prospective income of future un-unionised Indian finance workers.

Bring Back CL's blog
Bring Back CL's blog
14 years ago

the large problem of outsourcing to India for banks is that information will get to some people that shouldn’t given the corruption involved.

Patrick
Patrick(@patrick)
14 years ago

If you believe union propaganda it will. Because they are completely trustworthy, of course.

Frankly, I have just as much trust in Indians as I do in Australians. Especially because in India the relative social status of the work is doubtlessly higher, which to mind suggests that they are less likely to be corrupt. Although if they are so highly unionised ….(couldn’t resist).

Sacha
14 years ago
Bring Back CL's blog
Bring Back CL's blog
14 years ago

so speaks a man who has never tried to get through an airport in India.

It is notoriously corrupt but getting better.

Paul Frijters
Paul Frijters
14 years ago

from my limited knowledge of this aspect of labour economics, I’d say such agreements are almost entirely symbolic. They make some people feel good but there is no credible mechanism to enforce them. Like the Kyoto targets. The amazing thing from a rational economic perspective is the popularity of such symbols.

Patrick
Patrick(@patrick)
14 years ago

What’s irrational about liking low-cost symbols?

Paul Frijters
Paul Frijters
14 years ago

the puzzle for an economist is that you value symbols at all. Economists refer to unimplementable agreements as cheap talk, of no value at all. I’d be hard put to find you an applied economic model where symbols come out as being valued. Perhaps in the self-esteem literature?

SJ
SJ
14 years ago

Nicholas, my interpretation of this sentence:

Mr Schroder said the agreement carried force because India’s bank employees, unlike its call centre and IT workers, were one of the most unionised in the world, with 90 per cent of the workforce signed up.

is that the unionised Indian workers are opposed to the call centres because they recognise the potential for their own jobs to be outsourced within India at lower pay rates.

For your interpretation to hold, you’d need to present evidence that there was already close to full employment for Indians qualified to work in call centres.

SJ
SJ
14 years ago

Hmm. Nicholas, I’m having second thoughts.

From Brad DeLong: How Fast Can India Grow?

Sacha
14 years ago

Something I don’t understand about all the Daily Telegraph and SMH-type media reports of jobs being offshored is that they seem to only consist of moaning and groaning on the behalf of the people whose jobs are disappearing (which is understandable – I’d be annoyed if my job went overseas, which it might do!), soundbite grabs of trade union leaders warning about the dangers of sending work where its quality can’t be guaranteed, and PR spin from the relevant companies.

I don’t think I’ve ever read in these media reports how people in high-wage countries could respond to jobs offshoring, apart from the “trade union solidarity” approach benefitting the less worse-off workers referred to in the story Nicholas referred to in his post. It’s very unsatisfactory and it’d be nice to read about non-protectionist responses.

Sacha
14 years ago

I wouldn’t be surprised if responses to jobs being offshored is one of the small themes of this year’s federal election, especially given its sometimes appearance on the front pages of newspapers such as the Daily Telegraph.

trackback

[…] being offshored Nicholas Gruen wrote this post at Club Troppo on a story in the Australian about an agreement between the Australian Finance […]

Paul Frijters
Paul Frijters
14 years ago

complaining against off-shoring smacks of Ludism: a rearguard action against an almost inevitable development. Preventing off-shoring of simple administrative jobs that only need a modicum of sense and good English would need more than just tarriff walls because what’s off-shored are services that come in via phone and the internet. It would thus need electronic isolation too. Cant be done.
The off-shoring that might make things interesting is health services. Health is a growth industry where many services consist of fairly predictable standardised procedures. It is furthermore the type of service that small regions abroad could specialise in implying that particular cities aborad could choose to engage in particular health services. Its only happening very low-scale now, but there’s no reason why in the future we couldn’t outsource hip replacements, heart operations, etc. These services could even be offered by travelling large medi-ships. This would circumvent the strong market distortions present in this country and elsewhere. That would really lead to political tension.