Escalating offshore salaries – what’s the problem?
Yet another bug-bear of the anti-globalization movement is that costs are escalating so fast that in a short space of time, the costs will catch up with the west and therefore it’s not worth undertaking in the first place. There are two points to consider here:
1) So what? Globalization is about more than cost; the fact is that there are not enough “smarts” in the west to fuel services companies’ growth ambitions. No matter what governments say, there is an acute shortage of skills across almost all high end knowledge based sectors so the reality is that successful companies will need to scour the globe for the best talent if they are to thrive and survive.
2) Do the numbers. Take a smart, experienced and capable person with around 6 years of relevant experience on a great salary of say $20k per annum. Compound that up 20% a year for the next 5 years and what have you got? $50k per year. I reckon that person has got to be worth at least $50k pa in 2011, particularly when you consider what a high quality individual with 11 years experience is going to cost you in the west! Assuming 5% wage inflation in the west, and a starting salary of $80k, the cost at the end of 2011 will be $102k
So next time some one talks about this as a reason not to, get the calculator out and do a simple compound interest calculation!
Diary of a globalization champion 
One of the greatest reasons for the shortage of smarts is our demographic time bomb that’s taking place. We now have a generation of 77 million being replaced by a generation of 55 million. The boomers being replaced by the xers. Add to that a growing job market and you have a shortage of smart people. I go to a lot of HR meetings and this is what they’re all talking about and they really don’t have a lot of answers.
Take a look at the railroad industry. In the next five years they will loose more than 50% of their management. Railroads are a booming industry because everything that comes in from China gets off loaded onto rail cars as the first step.
Steve, thanks for your comments. I’m trying to study the extent of the demographic time bomb you are describing. Beyond that, I’m trying to understand why fewer western kids are taking up science based subjects. Is it to do with a certain level of wealth? Is it a fear (mis-guided) that all those jobs are going offshore anyway? Is it really a problem or am I imagining it? Will the acute labor shortages work themselves through in the next recessionary period anyway?
These are some of thoughts on my mind and subjects of future entries once I have some data
I’d start with the Bureau of Labor Statistics. There site is filled with good stuff on the issues you talk about. It’s mostly raw data so you get to do the analysis. It’s a lot less biased that way.