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America will continue to bleed jobs

Posted on 02/01/2003 11:27:51 PM PST by FightingForFreedom

Wages will not equalize between U.S. and foreign countries for a very long time, if ever. The problem is supply differences. The 100 million or so American workers are vastly outnumbered by the potential number of Chinese, Indian, and other developing nation's manufacturing and knowledge workers. The standard of living differential is also too great. The balancing act for U.S. and multi-national businesses that are outsourcing our jobs is to make sure they don't kill the golden goose (the American consumer) before they've generated an even bigger goose to take to slaughter in China, India, and other targeted markets. Remember, producing cheaply means nothing if there's nobody to buy the products. And no one has been as well-trained as the American consumer to buy, buy, buy, no matter how much in debt one becomes! As a software engineer, I've seen this problem coming for at least 5 years now, but it was well masked by the artificial high-tech bubble through March 2000. I'm not sure that there is an answer at this point -- the genie is out of the bag, so to speak. Once one company in an industry has convinced the govt to open a market in one undesirable country or other, all other companies with which it competes are forced to do the same. Bottling up the genie is notoriously difficult.


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1 posted on 02/01/2003 11:27:51 PM PST by FightingForFreedom
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To: FightingForFreedom
The screed is close to incoherent, and has almost no nexus to anything to do with economic reality or theory. It has echoes of a dead German philosopher who wrote books in England of massive malignant influence that have since been totally discredited.
2 posted on 02/01/2003 11:34:22 PM PST by Torie
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To: Torie
What is it with these anti-trade people? I just don't get it. It's as if they learned economics by reading bumper stickers printed by the teamsters union. Yikes!
3 posted on 02/01/2003 11:41:37 PM PST by 1tin_soldier
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To: FightingForFreedom; Willie Green
The 100 million or so American workers are vastly outnumbered by the potential number of Chinese, Indian, and other developing nation's manufacturing and knowledge workers. The standard of living differential is also too great.

That's the problem. And we keep spending our American dollars at Wal-Mart and similar outlets using third world country employees because they're cheaper and American factories paying American cost-of-living wages can't compete. And in the mean time, even many lower paying jobs are being taken over by illegals, because our borders are a joke.

4 posted on 02/01/2003 11:42:01 PM PST by xJones
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To: Torie; Admin Moderator
Let's hear it for the power of Zot!
5 posted on 02/01/2003 11:43:23 PM PST by Bella_Bru
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To: FightingForFreedom
This is a topic I have been giving much thought to lately.

Even the other day, I read of a factory closing in Mexico, because the company wanted to move the facility to China where they could pay even less wages and therefore make more profit. I've noticed in the past few years that wages in our country have gone steadily down. I remember about 8 years ago, people who had computer degrees and programming skills could get out of college and make fabulous salaries. Now, many of those same people have been laid off, and people working in that idustry are not making nearly as much as they used to. This all seems to have happened so quickly.

So as you've pointed out, what is going to happen when the average American can no longer afford trips to the mall, and they really have to start watching their pennies? It seems to me that greed has gotten out of hand with the big multi-national companies, and America will never again see the standard of living it once had. Pat Buchanan was so right on that issue. We're all going to be a little poorer from now on. Even those of us with stocks are seeing them rapidly devalue.

It reminds me of the greedy monkey who wanted all the cookies in the cookie jar, so he stuck his whole hand in there to try to take out all the cookies, but as a result his hand got stuck in the jar and he couldn't get it out and so couldn't get any cookies. These companies need to wake up or perhaps I should say wise up.

6 posted on 02/01/2003 11:46:16 PM PST by DBtoo
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To: Torie
Are you saying this is not happening? Or is it forbidden for conservatives to have such ideas? It shouldn't be a republican or democrat issue, as it affects all of us. It's a matter of being sensible.
7 posted on 02/01/2003 11:49:51 PM PST by DBtoo
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To: Torie
With all due respect, I don't think the author is talking about Marxist ideology, nor does the single paragraph reek overtly of anti-trade bias, nor is it incoherent as far as it goes;

I just think his is a "population demographics" argument, which, unfortunately, has some merit, some grain of truth.

If the intent of the author is anti-free trade, then I join your critique, but I still don't see any Marxist theme here whatsoever.

8 posted on 02/01/2003 11:52:44 PM PST by FReethesheeples
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To: FightingForFreedom
So what's the solution? Government intervention to protect code monkeys? I'm guessing that a large percentage of programming will move offshore in the next 10 years or so.

Companies are already solving the cultural and QA problems, and as a result programming costs are going to go down.

There will still be room for people who can add value, perhaps in the architecture or integration space, but the days of spike-haired college dropouts making $100k+ to write Java craplets for websites are gone.

It's all about the value you deliver.
9 posted on 02/01/2003 11:53:54 PM PST by cryptical
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To: Bella_Bru; Admin Moderator
Give me a break. I can't believe all these people who want to run and scream to Moderator because they do not agree with what someone has posted.

I lived in Houston for many years, and saw this happen first hand. Immigrants have taken over many occupations there, and as a result the pay scales have gone way down. This country is becoming more third world everyday, and soon we will have a similar standard of living. There is no doubt it is headed in that direction.

10 posted on 02/01/2003 11:54:00 PM PST by DBtoo
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To: DBtoo
I read about China setting up manufacturing in North Korea because Chinese wages were getting higher.

That $10,000/yr engineer costs ALOT more than that to Microsoft once the service bureau gets its cut. And how long will the engineer stay with $10K? Engineers in the Phillipines or India will have their wage rise to meet the wages eningeers in Italy or the US Midewest.

Check out a place like Madrid, Spain. Its an expensive place for housing. The costs of buying a CD or a computer in Spain is alot like the cost of one in the US. A programmer there is not going to get a wage terribly much lower than in the US.

11 posted on 02/01/2003 11:56:27 PM PST by Dialup Llama
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To: DBtoo
What I am saying is that it is inevitable that low value added jobs will be exported to the extent exportable. That has been happening for about 50 years now, and real per capita incomes in the US go up about 1.5% anually not despite that, but in part, because of that. I would also point out that the US has become number one again in real per capita income on this planet, and is pulling away from the competition. That is because the things the US does well, it does extremely well (e.g. in the production of ideas, design, entertainment, finance, etc.) If we insisted on doing all those low value added jobs ourselves, our real standard of living would decline. It is the law of comparative economic advantage. And the idea that the US, or any nation except North Korea and Cuba, can be an economic autarky isn't doable in the information age even if a nutter like Pat Buchanan actually assumed power prior to assuming room temperature.
12 posted on 02/01/2003 11:56:35 PM PST by Torie
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To: cryptical
It hasn't only affected the computer industry. That is only one sector that has suffered among many.
13 posted on 02/01/2003 11:57:31 PM PST by DBtoo
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To: FReethesheeples
Most of it was Marxist. Predatory business driving down wages, and then engaging in seeking ever wider markets to make up for the slakened demand, fueling imperialism to take to slaughter in India and China and other targeted markets. The whole thing is BS.
14 posted on 02/02/2003 12:01:04 AM PST by Torie
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To: FightingForFreedom
As a software engineer, I've seen this problem coming for at least 5 years now, but it was well masked by the artificial high-tech bubble through March 2000.

I'm also a software engineer, and I'm not afraid of competition; I welcome it. The free market is not a zero-sum game. The more creative and entrepreneurial people there are everywhere in the world, and the more freedom and trade and production and technological advancements there are everywhere in the world, the better off everyone will be.

Economic illiterates have been singing your song for centuries. Alarmists such as yourself have been predicting gloom and disaster for America decade after decade, raising precisely the same fears as you raise. Yet decade after decade America's wealth and economic advantage over other, more socialistic nations continues to grow, because we have the most open society in the world and we don't try to seal ourselves off from low-wage competitors.

You might just consider the possibility that we are on the right track, and the rest of the world isn't.

15 posted on 02/02/2003 12:02:18 AM PST by dpwiener
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To: FightingForFreedom
very high tariffs will fix it
16 posted on 02/02/2003 12:04:03 AM PST by MissAmericanPie
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To: Dialup Llama
Oh my Lord! So now Chinese companies are moving their businesses to North Korea because it is even cheaper there? Where will it all end? Madagascar? I bet those people would be willing to work for pennies a day as many do in some African countries already. Better yet, why not return to slavery? I'm being sarcastic of course, but it is already close to that in parts of Asia.
17 posted on 02/02/2003 12:04:13 AM PST by DBtoo
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To: 1tin_soldier
"What is it with these anti-trade people? I just don't get it. It's as if they learned economics by reading bumper stickers printed by the teamsters union. Yikes!"

The typical response by a free-trader. Long on rhetoric and name-calling, and short on any sort of economic analysis.
18 posted on 02/02/2003 12:05:18 AM PST by applemac_g4
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To: DBtoo
Or is it forbidden for conservatives to have such ideas?

Protectionism of any kind has never been a conservative position. Historically conservatism has been free market, free trade, pro-business, and anti-union. The confusion seems to be traced back to the "Regan democrats" and the populist influence of the Buchanan faction of the conservative movement. The term "neo-con" is more applicable to this group than to any other. The common thread that binds is mostly on the "cultural" side of the fiscal/cultural conservative equation. Prior to Reagan, most of those holding PJB's views were staunch Democrats but their strongly held social values forced them into the GOP big tent and they brought their fiscal populism with them. It is an uneasy alliance.

19 posted on 02/02/2003 12:08:53 AM PST by Texasforever
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To: DBtoo
"what is going to happen when the average American can no longer afford trips to the mall, and they really have to start watching their pennies?"

The average American (and many who are not so average) already can't afford trips to the mall. That's why they use credit cards. The rise of massive amounts of consumer debt and the two-wage-earner family are the two main trends that have enabled this shell game to go on as long as it has.
20 posted on 02/02/2003 12:10:00 AM PST by applemac_g4
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To: FightingForFreedom
Brought this over from another site...it's from Businessweek.

The New Global Job Shift BusinessWeek ^ | FEBRUARY 3, 2003 | Pete Engardio



FEBRUARY 3, 2003

COVER STORY

The next round of globalization is sending upscale jobs offshore. They include basic research, chip design, engineering--even financial analysis. Can America lose these jobs and still prosper? Who wins? Who loses?

The sense of resignation inside Bank of America ('BAC')(BAC ) is clear from the e-mail dispatch. "The handwriting is on the wall," writes a veteran information-technology specialist who says he has been warned not to talk to the press. Three years ago, the Charlotte (N.C.)-based bank needed IT talent so badly it had to outbid rivals. But last fall, his entire 15-engineer team was told their jobs "wouldn't last through September." In the past year, BofA has slashed 3,700 of its 25,000 tech and back-office jobs. An additional 1,000 will go by March.

Corporate downsizings, of course, are part of the ebb and flow of business. These layoffs, though, aren't just happening because demand has dried up. Ex-BofA managers and contractors say one-third of those jobs are headed to India, where work that costs $100 an hour in the U.S. gets done for $20. Many former BofA workers are returning to college to learn new software skills. Some are getting real estate licenses. BofA acknowledges it will outsource up to 1,100 jobs to Indian companies this year, but it insists not all India-bound jobs are leading to layoffs.

Cut to India. In dazzling new technology parks rising on the dusty outskirts of the major cities, no one's talking about job losses. Inside Infosys Technologies Ltd.'s (INFY ) impeccably landscaped 22-hectare campus in Bangalore, 250 engineers develop IT applications for BofA. Elsewhere, Infosys staffers process home loans for Greenpoint Mortgage of Novato, Calif. Near Bangalore's airport, at the offices of Wipro Ltd. (WIT ), five radiologists interpret 30 CT scans a day for Massachusetts General Hospital. Not far away, 26-year-old engineer Dharin Shah talks excitedly about his $10,000-a-year job designing third-generation mobile-phone chips, as sun pours through a skylight at the Texas Instrument Inc. (TXN ) research center. Five years ago, an engineer like Shah would have made a beeline for Silicon Valley. Now, he says, "the sky is the limit here."

About 1,600 km north, on an old flour mill site outside New Delhi, all four floors of Wipro Spectramind Ltd.'s sandstone-and-glass building are buzzing at midnight with 2,500 young college-educated men and women. They are processing claims for a major U.S. insurance company and providing help-desk support for a big U.S. Internet service provider--all at a cost up to 60% lower than in the U.S. Seven Wipro Spectramind staff with PhDs in molecular biology sift through scientific research for Western pharmaceutical companies. Behind glass-framed doors, Wipro voice coaches drill staff on how to speak American English. U.S. customers like a familiar accent on the other end of the line.

Cut again to Manila, Shanghai, Budapest, or San José, Costa Rica. These cities--and dozens more across the developing world--have become the new back offices for Corporate America, Japan Inc., and Europe GmbH. Never heard of Balazs Zimay? He's a Budapest architect--and just might help design your future dream house. The name SGV & Co. probably means nothing to you. But this Manila firm's accountants may crunch the numbers the next time Ernst & Young International audits your company. Even Bulgaria, Romania, and South Africa, which have a lot of educated people but remain economic backwaters, are tapping the global market for services.

It's globalization's next wave--and one of the biggest trends reshaping the global economy. The first wave started two decades ago with the exodus of jobs making shoes, cheap electronics, and toys to developing countries. After that, simple service work, like processing credit-card receipts, and mind-numbing digital toil, like writing software code, began fleeing high-cost countries.

Now, all kinds of knowledge work can be done almost anywhere. "You will see an explosion of work going overseas," says Forrester Research Inc. analyst John C. McCarthy. He goes so far as to predict at least 3.3 million white-collar jobs and $136 billion in wages will shift from the U.S. to low-cost countries by 2015. Europe is joining the trend, too. British banks like HSBC Securities Inc. (HBC ) have huge back offices in China and India; French companies are using call centers in Mauritius; and German multinationals from Siemens (SI ) to roller-bearings maker INA-Schaeffler are hiring in Russia, the Baltics, and Eastern Europe.

The driving forces are digitization, the Internet, and high-speed data networks that girdle the globe. These days, tasks such as drawing up detailed architectural blueprints, slicing and dicing a company's financial disclosures, or designing a revolutionary microprocessor can easily be performed overseas. That's why Intel Inc. (INTC ) and Texas Instruments Inc. are furiously hiring Indian and Chinese engineers, many with graduate degrees, to design chip circuits. Dutch consumer-electronics giant Philips (PHG ) has shifted research and development on most televisions, cell phones, and audio products to Shanghai. In a recent PowerPoint presentation, Microsoft Corp. (MSFT ) Senior Vice-President Brian Valentine--the No. 2 exec in the company's Windows unit--urged managers to "pick something to move offshore today." In India, said the briefing, you can get "quality work at 50% to 60% of the cost. That's two heads for the price of one."

Even Wall Street jobs paying $80,000 and up are getting easier to transfer. Brokerages like Lehman Brothers Inc. (LEH ) and Bear, Stearns & Co. (BSC ), for example, are starting to use Indian financial analysts for number-crunching work. "A basic business tenet is that things go to the areas where there is the best cost of production," says Ann Livermore, head of services at Hewlett-Packard Co. (HPQ ), which has 3,300 software engineers in India. "Now you're going to see the same trends in services that happened in manufacturing."

The rise of a globally integrated knowledge economy is a blessing for developing nations. What it means for the U.S. skilled labor force is less clear. At the least, many white-collar workers may be headed for a tough readjustment. The unprecedented hiring binge in Asia, Eastern Europe, and Latin America comes at a time when companies from Wall Street to Silicon Valley are downsizing at home. In Silicon Valley, employment in the IT sector is down by 20% since early 2001, according to the nonprofit group Joint Venture Silicon Valley.

Should the West panic? It's too early to tell. Obviously, the bursting of the tech bubble and Wall Street's woes are chiefly behind the layoffs. Also, any impact of offshore hiring is hard to measure, since so far a tiny portion of U.S. white-collar work has jumped overseas. For security and practical reasons, corporations are likely to keep crucial R&D and the bulk of back-office operations close to home. Many jobs can't go anywhere because they require face-to-face contact with customers. Americans will continue to deliver medical care, negotiate deals, audit local companies, and wage legal battles. Talented, innovative people will adjust as they always have.

Indeed, a case can be made that the U.S. will see a net gain from this shift--as with previous globalization waves. In the 1990s, Corporate America had to import hundreds of thousands of immigrants to ease engineering shortages. Now, by sending routine service and engineering tasks to nations with a surplus of educated workers, the U.S. labor force and capital can be redeployed to higher-value industries and cutting-edge R&D. "Silicon Valley doesn't need to have all the tech development in the world," says Doug Henton, president of Collaborative Economics in Mountview, Calif. "We need very-good-paying jobs. Any R&D that is routine can probably go." Silicon Valley types already talk about the next wave of U.S. innovation coming from the fusion of software, nanotech, and life sciences.

Globalization should also keep services prices in check, just as it did with clothes, appliances, and home tools when manufacturing went offshore. Companies will be able to keep shaving overhead costs and improving efficiency. "Our comparative advantage may shift to other fields," says City University of New York economist Robert E. Lipsey, a trade specialist. "And if productivity is high, then the U.S. will maintain a high standard of living." By spurring economic development in nations such as India, meanwhile, U.S. companies will have bigger foreign markets for their goods and services.

For companies adept at managing a global workforce, the benefits can be huge. Sure, entrusting administration and R&D to far-flung foreigners sounds risky. But Corporate America already has become comfortable hiring outside companies to handle everything from product design and tech support to employee benefits. Letting such work cross national boundaries isn't a radical leap. Now, American Express (AXP ), Dell Computer (DELL ), Eastman Kodak (EK ), and other companies can offer round-the-clock customer care while keeping costs in check. What's more, immigrant Asian engineers in the U.S. labs of TI, IBM (IBM ), and Intel for decades have played a big, hidden role in American tech breakthroughs. The difference now is that Indian and Chinese engineers are managing R&D teams in their home countries. General Electric Co. (GE ), for example, employs some 6,000 scientists and engineers in 10 foreign countries. GE Medical Services integrates magnet, flat-panel, and diagnostic imaging technologies from labs in China, Israel, Hungary, France, and India in everything from its new X-ray devices to $1 million CT scanners. "The real advantage is that we can tap the world's best talent," says GE Medical Global Supply Chain Vice-President Dee Miller.

That's the good side of the coming realignment. There are hazards as well. During previous go-global drives, many companies ended up repatriating manufacturing and design work because they felt they were losing control of core businesses or found them too hard to coordinate. In a recent Gartner Inc. survey of 900 big U.S. companies that outsource IT work offshore, a majority complained of difficulty communicating and meeting deadlines. As a result, predicts Gartner Inc. Research Director Frances Karamouzis, many newcomers will stumble in the first few years as they begin using offshore service workers.

A thornier question: What happens if all those displaced white-collar workers can't find greener pastures? Sure, tech specialists, payroll administrators, and Wall Street analysts will land new jobs. But will they be able to make the same money as before? It's possible that lower salaries for skilled work will outweigh the gains in corporate efficiency. "If foreign countries specialize in high-skilled areas where we have an advantage, we could be worse off," says Harvard University economist Robert Z. Lawrence, a prominent free-trade advocate. "I still have faith that globalization will make us better off, but it's no more than faith."

If the worries prove valid, that could reshape the globalization debate. Until now, the adverse impact of free trade has been confined largely to blue-collar workers. But if more politically powerful middle-class Americans take a hit as white-collar jobs move offshore, opposition to free trade could broaden.

When it comes to developing nations, however, it's hard to see a downside. Especially for those countries loaded with college grads who speak Western languages, outsourced white-collar work will likely contribute to economic development even more than new factories making sneakers or mobile phones. By 2008 in India, IT work and other service exports will generate $57 billion in revenues, employ 4 million people, and account for 7% of gross domestic product, predicts a joint study by McKinsey & Co. and Nasscom, an Indian software association.

What makes this trend so viable is the explosion of college graduates in low-wage nations. In the Philippines, a country of 75 million that churns out 380,000 college grads each year, there's an oversupply of accountants trained in U.S. accounting standards. India already has a staggering 520,000 IT engineers, with starting salaries of around $5,000. U.S. schools produce only 35,000 mechanical engineers a year; China graduates twice as many. "There is a tremendous pool of well-trained people in China," says Johan A. van Splunter, Philips' Asia chief executive.

William H. Gates III, for one, is dipping into that pool. Although Microsoft started later than many rivals, it is moving quickly to catch up. In November, Chairman Gates announced his company will invest $400 million in India over the next three years. That's on top of the $750 million it's spending over three years on R&D and outsourcing in China. At the company's Beijing research lab, one-third of the 180 programmers have PhDs from U.S. universities. The group helped develop the "digital ink" that makes handwriting show up on Microsoft's new tablet PCs and submitted four scientific papers on computer graphics at last year's prestigious Siggraph conference in San Antonio. Hyderabad, India, meanwhile, is key to Microsoft's push into business software.

This is no sweatshop work. Just two years out of college, Gaurav Daga, 22, is India project manager for software that lets programs running on Unix-based computers interact smoothly with Windows applications. Daga's $11,000 salary is a princely sum in a nation with a per capita annual income of $500, where a two-bedroom flat goes for $125 a month. Microsoft is adding 10 Indians a month to its 150-engineer center and indirectly employs hundreds more at IT contractors. "It's definitely a cultural change to use foreign workers," says Sivaramakichenane Somasegar, Microsoft's vice-president for Windows engineering. "But if I can save a dollar, hallelujah."

Corporations are letting foreign operations handle internal finances as well. Procter & Gamble Co.'s (PG ) 650 Manila employees, most of whom have business and finance degrees, help prepare P&G's tax returns around the world. "All the processing can be done here, with just final submission done to local tax authorities" in the U.S. and other countries, says Arun Khanna, P&G's Manila-based Asia accounting director.

Virtually every sector of the financial industry is undergoing a similar revolution. Processing insurance claims, selling stocks, and analyzing companies can all be done in Asia for one-third to half of the cost in the U.S. or Europe. Wall Street investment banks and brokerages, under mounting pressure to offer independent research to investors, are buying equity analysis, industry reports, and summaries of financial disclosures from outfits such as Smart Analyst Inc. and OfficeTiger that employ financial analysts in India. By mining databases over the Web, offshore staff can scrutinize an individual's credit history, access corporate public financial disclosures, and troll oceans of economic statistics. "Everybody these days is drawing on the same electronic reservoir of data," says Ravi Aron, who teaches management at the Wharton School at the University of Pennsylvania.

Architectural work is going global, too. Fluor Corp. (FLR ) of Aliso Viejo, Calif., employs 1,200 engineers and draftsmen in the Philippines, Poland, and India to turn layouts of giant industrial facilities into detailed specs and blueprints. For a multibillion-dollar petrochemical plant Fluor is designing in Saudi Arabia, a job requiring 50,000 separate construction plans, 200 young Filipino engineers earning less than $3,000 a year collaborate in real time with elite U.S. and British engineers making up to $90,000 via Web portals. The principal Filipino engineer on plumbing design, 35-year-old Art Aycardo, pulls down $1,100 a month--enough to buy a Mitsubishi Lancer, send his three children to private school, and take his wife on a recent U.S. trip. Fluor CEO Alan Boeckmann makes no apologies. At a recent meeting in Houston, employees asked point-blank why he is sending high-paying jobs to Manila. His response: The Manila operation knocks up to 15% off Fluor's project prices. "We have developed this into a core competitive advantage," Boeckmann says.

It's not just a game for big players: San Francisco architect David N. Marlatt farms out work on Southern California homes selling for $300,000 to $1 million. He fires off two-dimensional layouts to architect Zimay's PC in Budapest. Two days later, Marlatt gets back blueprints and 3-D computer models that he delivers to the contractor. Zimay charges $18 an hour, vs. the up to $65 Marlatt would pay in America. "In the U.S., it is hard to find people to do this modeling," Zimay says. "But in Hungary, there are too many architects."

So far, white-collar globalization probably hasn't made a measurable dent in U.S. salaries. Still, it would be a mistake to dismiss the trend. Consider America's 10 million-strong IT workforce. In 2000, senior software engineers were offered up to $130,000 a year, says Matt Milano, New York sales manager for placement firm Atlantis Partners. The same job now pays up to $100,000. Entry-level computer help-desk staffers would fetch about $55,000 then. Now they get as little as $35,000. "Several times a day, clients tell me they are sending this work off shore," says Milano. Companies that used to pay such IT service providers as IBM, Accenture (ACN ), and Electronic Data Services (EDS ) $200 a hour now pay as little as $70, says Vinnie Mirchandani, CEO of IT outsourcing consultant Jetstream Group. One reason, besides the tech crash itself, is that Indian providers like Wipro, Infosys, and Tata charge as little as $20. That's why Accenture and EDS, which had few staff in India three years ago, will have a few thousand each by next year.

Outsourcing experts say the big job migration has just begun. "This trend is just starting to crystallize now because every chief information officer's top agenda item is to cut budget," says Gartner's Karamouzis. Globalization trailblazers, such as GE, AmEx, and Citibank (C ), have spent a decade going through the learning curve and now are ramping up fast. More cautious companies--insurers, utilities, and the like--are entering the fray. Karamouzis expects 40% of America's top 1,000 companies will at least have an overseas pilot project under way within two years. The really big offshore push won't be until 2010 or so, she predicts, when global white-collar sourcing practices are standardized.

If big layoffs result at home, corporations and Washington may have to brace for a backlash. Already, New Jersey legislators are pushing a bill that would block the state from outsourcing public jobs overseas. At Boeing Co. (BA ), an anxious union is trying to ward off more job shifts to the aircraft maker's new 350-person R&D center in Moscow (page 42).

The truth is, the rise of the global knowledge industry is so recent that most economists haven't begun to fathom the implications. For developing nations, the big beneficiaries will be those offering the speediest and cheapest telecom links, investor-friendly policies, and ample college grads. In the West, it's far less clear who will be the big winners and losers. But we'll soon find out.

By Pete Engardio, Aaron Bernstein, and Manjeet Kripalani With Frederik Balfour in Manila, Brian Grow in Atlanta, and Jay Greene in Seattle
21 posted on 02/02/2003 12:10:40 AM PST by ETERNAL WARMING
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To: Texasforever
The term "neo-con" is more applicable to this group than to any other.

Yikes! Let me help you with some of this. I am the only card carrying out-of-the-closet neocon on this forum.

22 posted on 02/02/2003 12:11:35 AM PST by Torie
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To: ETERNAL WARMING
Yes, an ever higher percentage of the economic pie on this planet is transhipped by email or otherwise through telephone lines. Resistance is futile.
23 posted on 02/02/2003 12:14:42 AM PST by Torie
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To: Torie
Yikes! Let me help you with some of this. I am the only card carrying out-of-the-closet neocon on this forum.

LOL Sorry. I see you as a mirror image of the "Regan Democrat" neo-con. You are a socially liberal fiscally conservative with libertarian tendencies.

24 posted on 02/02/2003 12:16:18 AM PST by Texasforever
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To: Torie
Back in 1992 I was in the chemical industry in Texas, and I had to go to regular OSHA and HAZWOP classes. Back then, the guy who was our teacher told us that soon there would be little or no building of refineries in the US, because of the costs here and because of the environmental laws. He said they would start building them in places like Mexico and China. I didn't believe it; it just seemed like such a radical idea at the time. But he turned out to be right about that.

My friend who is still in Houston said there are so many people losing jobs, and there are lots of foreclosures on houses. And oddly, the hair industry (beauticians and barbers) also is now almost exclusively made up foriegners, especially Asians. A person can't make a living at that anymore either unless they want to rent an apartment with 10 other people. I've even driven by shops that advertise haircuts for $2.99. A person just can't live on that. Also, lots of people in the chemical and oil industries have been laid off, and research has been cut. And of course there are all those manufacturing jobs that have moved overseas leaving a bunch of unemployed Americans.

I guess I'm just an America Firster as this is my country and it's sad to see it deteriorate so.

25 posted on 02/02/2003 12:16:29 AM PST by DBtoo
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To: FightingForFreedom; DBtoo; Torie; FReethesheeples; cryptical; Dialup Llama; dpwiener; ...
PING TO #21

There are good reasons why our founders rejected the concept of Free Trade. It was proposed by Thomas Jefferson, and rejected by the rest. They didn't want to create a servant class. They didn't want elites. They wanted everyone to make a living.
26 posted on 02/02/2003 12:19:34 AM PST by ETERNAL WARMING
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To: ETERNAL WARMING
Please provide a link to any founder that mentioned free trade. This country was built on free trade.
27 posted on 02/02/2003 12:23:48 AM PST by Texasforever
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To: DBtoo
The nature of the job market is dynamic. That is a good thing, not a bad thing. Refineries are a nasty business. It is good to get rid of them. There are such a thing as high skilled barbers etc by the way. Mine charges 20 bucks, and she is worth it. Plus we talk politics. She is a hopeless right winger, but fun. In any event, the macro statistics of unemployement, per capita income, median income, etc in the US simply don't support your case on a macro level. Indeed, they refute it, totally. Production is simply hugely more efficient than it was, and I have seen it with my own eyes in my lifetime. Just think of those scanners at supermarkets. Not only is the checkout quicker and more accurate, but inventory control is expotentially more efficient and less wasteful. And so it goes.
28 posted on 02/02/2003 12:25:04 AM PST by Torie
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To: Torie
What I am saying is that it is inevitable that low value added jobs will be exported to the extent exportable.

On principle I agree with you, but it also depends on where we export those jobs to. The places we send those to is an investment in and of itself. It is an investment in market development supposedly where we will sell stuff.

Personally I think this discussion is only a surface discussion based on 'principles' rather than strategy. On principle, yeah we should trade. On strategy we are going to screw ourselves over in the worst kind of way if we are not careful. The rush into China has serious potential to screw us, and all of Asia if we don't balance our approach.

It probably won't change the overall trend of things, to be broad about it, but how we manage that conversion is what is key.

29 posted on 02/02/2003 12:26:23 AM PST by maui_hawaii
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To: DBtoo
I remember about 8 years ago, people who had computer degrees and programming skills could get out of college and make fabulous salaries. Now, many of those same people have been laid off, and people working in that idustry are not making nearly as much as they used to. This all seems to have happened so quickly.

And you think NAFTA and an influx of cheap manual labor did that? The Tech industry grew too fast, and on borrowed money. Supply shot way above demand, and now the industry is going through a correction. So what if computer people have to find other lines of work? It's better than having them work at something not valued.

30 posted on 02/02/2003 12:27:03 AM PST by 1tin_soldier
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To: dpwiener
There are also lots of PhD scientists who are losing their jobs, or are quitting because they can see their work getting cut in the near future. Many are leaving in disgust or fear of losing their position. Quite a few have left industry and gone into teaching. And Chemical and Engineering News just came out with a report that most chemistry professors are now adjunct profs. so that the universities don't have to pay them benefits. Of course I'm sure the diversity teachers are treated like gods.

The only scientists who are doing well now are the biochemists. If I could be 18 all over again I would go into that field. But who knows? Maybe they'll want to move all that work to cheaper countries as well, although I don't know if they would find so many bright and resourceful people as we have here.

31 posted on 02/02/2003 12:29:35 AM PST by DBtoo
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To: Bella_Bru
"Let's hear it for the power of Zot!"And pigs fly..
32 posted on 02/02/2003 12:29:56 AM PST by Windsong
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To: applemac_g4
You call the opening post economic analysis? Yer analysis maybe.
33 posted on 02/02/2003 12:30:10 AM PST by 1tin_soldier
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To: 1tin_soldier
What is it with these anti-trade people?

Can't speak for anyone else but my complaint has more to do with how we are doing our trade, getting screwed over, not having fair trade, and hurting our own markets. My complaint is not anti-trade, but rather that we often end up with the short end of the stick on the deal.

I am questioning our strategy more than anything.

34 posted on 02/02/2003 12:30:19 AM PST by maui_hawaii
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To: FightingForFreedom; DBtoo; Torie; FReethesheeples; cryptical; Dialup Llama; dpwiener; ...
PING TO #21

There are good reasons why our founders rejected the concept of Free Trade. It was proposed by Thomas Jefferson, and rejected by the rest. They didn't want to create a servant class. They didn't want elites. They wanted everyone to make a living.
35 posted on 02/02/2003 12:33:28 AM PST by ETERNAL WARMING
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To: ETERNAL WARMING
Here's another post:

Title: Outsourcing America?
Source: VDARE
URL Source: http://www.vdare.com/guzzardi/outsourcing_america.htm
Published: Jan 31, 2003
Author: John Guzzardi
Post Date: 2003-02-01 14:34:36 by missjones
5 Comments



In 1965, fresh out of college, I went to work for the United States Steel Corporation.

How I ended up at Big Steel remains a mystery. There could not have been 100 people in Allegheny County who knew or cared less about steel than I did.

But I was willing and eager. Pittsburgh was the home of dozens of Fortune 500 companies—Westinghouse, National Steel, Alcoa, Jones and Laughlin Steel to name a few. Back then, a young man showing aptitude and spark had a pretty good chance.

I was hired as part of the sales training program. For the next 18 months our group of 20 trainees went from mill to mill along the eastern seaboard. In the mornings we watched wire, flat rolled and tin plate manufactured. And in the afternoon, we listened as product specialists told us why U.S. Steel made the best steel in the world.

At the end of a year and a half, we weren’t metallurgists but we knew a lot about steel.

My first assignment was in New York assisting a salesman who sold specialty steel to railroads. I processed the orders, checked the credit, followed up with the mill and fielded the phone calls. All the while, I was becoming savvier about life at a big corporation.

In the mid-1960s, U.S. Steel employed about 300,000 people. The workers had the powerful United Steelworkers of America in their corner. Their mill jobs were tough but they earned solid middle-class wages and had excellent health and retirement benefits.

The sales and administrative personnel rooted hard for the union at contract time. Whatever they got, we got. And those were the days when steel executives and the White House trembled when union leaders expressed discontent.

In 1970, I moved to Banker’s Trust where I learned the corporate finance ropes. I crunched numbers during my first year. But I moved quickly and steadily upward. I always was looking for greener pastures and when the opportunity to work in the corporate finance division of Merrill Lynch came, I grabbed it.

Fast forward to 2003. U.S. Steel and the other Pittsburgh corporate giants are all but gone. Gone too are the blue-collar jobs performed with pride and dignity for fair pay and benefits.

For the last twenty years, the focus at corporate America is on one thing only: cheap labor. There are no other considerations.

First shoe, low grade electronic and toy manufacturing were sent to developing countries. Then credit card receipt processing and writing software code went.

In the early 1990s, Silicon Valley howled that it could not find software engineers and accordingly needed to import workers from overseas. Congress complied by authorizing 65,000 H-1B visas annually. The total gradually increased to 115,000; then, 195,000.

Of course, the industry created the “shortage” by firing American workers and replacing them with the much less expensive foreign workers.

Even if there were a true shortage, do you think for an instant that Silicon Valley would hire the local high-school student and train him?

Fat chance.

Importing foreign workers to displace Americans is shameless. But now the other shoe has dropped.

Today, my old Banker’s Trust job would be done offshore. According to the February 3 Business Week cover story titled “The New Global Job Shift” all kinds of work can and is done anywhere.

Even Wall Street jobs paying $80,000 and up are getting easier to transfer. Brokerages like Lehman Brothers Inc. and Bear, Stearns & Co. for example, are starting to use Indian financial analysts for number-crunching work.

"You will see an explosion of work going overseas," says Forrester Research Inc. analyst John C. McCarthy. He goes so far as to predict at least 3.3 million white-collar jobs and $136 billion in wages will shift from the U.S. to low-cost countries by 2015.

All this is music to the ears of companies like Microsoft. Said Senior Vice President Brian Valentine the company could get “quality work at 50 to 60 percent of the cost,'' adding, “that's two heads for the price of one.'' Valentine also urged managers to “pick a project and outsource today.''

Added Sivaramakichenane Somasegar, Microsoft's vice-president for Windows engineering in reference to moving jobs to India said. "If I can save a dollar, hallelujah."

A backlash has already started. But will anyone listen?

New Jersey legislators are pushing a bill that would block the state from outsourcing public jobs overseas. At Boeing Co., [runner-up in our 2002 War Against Christmas Competition] an anxious union is attempting to block more job shifts to the aircraft maker's new 350-person R&D center in – Moscow!

And the Washington Alliance of Technology Workers (www.washtech.org) started a nationwide Internet campaign calling for the federal government to investigate the practice of U.S. technology companies sending jobs overseas.

If outsourcing is allowed to mushroom, then the American economy will slide into a long and deep recession.

The combination of cheap imported labor used by hotels, construction, meat and poultry processing, food and restaurant services and outsourcing high five figure salaried jobs is a formula for disaster.
36 posted on 02/02/2003 12:35:59 AM PST by ETERNAL WARMING
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To: maui_hawaii
It probably won't change the overall trend of things, to be broad about it, but how we manage that conversion is what is key.

There is no denying that the "trend" is chasing "cheap labor" and it will not be reversed untill the "cheap labor" market dries up. Japan was the first "cheap labor" market and it is now one of the most expensive labor markets in the world. Jobs are moving out of Mexico faster than the United States. These "cheap labor" markets are not permanent. Every one of these markets are vulnerable to the same market forces that we face here and as the expectations of the Indian programmer rise so will his demand for a higher standard of living and wage. It happened in Japan and Mexico and it will happen with India. This is no consolation to Americans that have seen their jobs outsourced but over time equilibrium will be such that the determination of where a job is done will not be based on the cost of labor but the quality of product.

37 posted on 02/02/2003 12:36:13 AM PST by Texasforever
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To: applemac_g4
Someone else today was bemoaning a situation that saw a 40k/yr U.S. employee loose his/her job to someone in another country making 3/k per year. Follow along now.....

If the 40k of which you spoke appeared out of thin air, you'd be correct. Unfortunately, it comes out of the pockets of your fellow Americans in the form of higher prices.

The fellow or gal who lost their 40k/yr job to someone making 3k/yr is now forced to seek employment elsewhere, possibly at a lower wage. Shall we say 25k/year? So that one easily identifiable person is 15k/yr worse off, I grant you.

On the other side of the equation, some less identifiable yet just as real person or segment of our population is 37k/yr better off. Net result, the U.S. is 22k/yr to the good. Multiply this by x number of million instances and we are substantially and demonstrably better off.

Dr. Walter Williams wrote a column just this week that might lend you some insight into this. You can access his column through TownHall.com. His article uses the sugar industry as an example of what trade restrictions do to the users and producers of sugar. I will grant you this country has many gainfully employed people in the sugar industry, but at what cost are we keeping them employed in that industry.

It is through natural market mechanisms such as this that we can best be certain that what we are producing is of desired benefit to our fellow citizens. They tried another method in the USSR for decades. They were hungry, cold, and poor and yet enjoyed the "benefits" of full employment.

Many principles of economics are similarly counter-intuitive. Ask yourself this one: if country A produces both widgets and wombats more efficiently than country B, how is it that both countries can benefit by trading widgets and wombats? Believe me, they can both benefit. "Basic Economics: A Citizen's Guide" will answer this question to your satisfaction while keeping you wildly entertained the entire time. Just read the chapter on trade.

38 posted on 02/02/2003 12:37:39 AM PST by 1tin_soldier
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To: MissAmericanPie
very high tariffs will fix it

Fix what? My excess money problems?

39 posted on 02/02/2003 12:39:13 AM PST by 1tin_soldier
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To: ETERNAL WARMING
That is ersatz history. Tariffs popped up and down, but were never a major force, except during a couple of relatively short periods. In any event, trade was less of an economic force than it has been in the last 40 years, in part because the US was such a huge and distant market, and transportation costs were much more important. The bottom line is that the US never economically benefitted from protectionism, and never will, and it never had any material social impact, egalitarian or otherwise, of the sort you suggest. That is ludicrous.
40 posted on 02/02/2003 12:39:22 AM PST by Torie
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To: Texasforever
Anything can get out of hand, including free markets. I think what will end up happening is that the poorer countries will become a tiny bit better off (they don't pay them much, but at least they have jobs to pay for basic foods) and the US economically will be much worse off. There should be a happy medium, although I have to agree Marxism is much worse and downright evil. However, if the free market does get out of hand, our ecomomy and way of life could come to resemble the Soviet Union of the 60s and 70s. In some ways it's already happening culturally.
41 posted on 02/02/2003 12:40:33 AM PST by DBtoo
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To: DBtoo
I guess I'm just an America Firster as this is my country and it's sad to see it deteriorate so.

So am I DB. Despite the rhetoric, the fact remains that half of all American workers now pay into the lowest tax bracket. That stat doesn't lie. It means people are trying to survive with minimum wage jobs, no benies. It means they have no disposable income to regenerate the economy. It means that the idiots are killing off their market faster than they're developing new ones. And that means there will be a severe worldwide collapse ahead.


42 posted on 02/02/2003 12:41:12 AM PST by ETERNAL WARMING
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To: Torie
One of the things I have openly proposed here on FR (as a 1st generation theory) is as follows:

1.)Raise the holy hell out of general tarriffs on goods. Triple them at least across the board.

2.)Second, at the same time that happens sign several free trade agreements around the globe with allies, friends, and those we can most easily develop into a strong middle class. Those FTAs will exempt those countries from #1 above.

This approach will cause these nations to get the bulk of investment and be the best option for overseas/foreign development. It will focus our resources like a lazerbeam on development. It will funnel resources to the best places for it.

It will have all the same perks, bells, and whistles as any other outsourcing. (cost cutting etc)

FTAs too by the way allow our corporations to have access to the market(s) we create. All those artificial barriers will be gone.

We export 75 cents to Mexico for every dollar we import from Mexico. With China we barely get 15 cents on the dollar.

Yet we have corporation after corporation leaving Mexico even to go to China. In the big picture, considering all things, I would think creating a trade cartel would be a good option.

As time goes on, we can control our exposure and entrance into places like China. Sure beats a bubble...like we are setting ourselves up for now. Now everyone is rushing to the lowest on the toem pole for as much labor as possible. My plan would remove barriers (as long as you stay in the family) but also put a floor on labor pricing. Net result for costs=zero difference.

We have to invest in the whole picture, not just plink one key on the piano over and over.

43 posted on 02/02/2003 12:46:39 AM PST by maui_hawaii
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To: ETERNAL WARMING
The current trends lead toward the democratic election of a tyrant. Tyrants win election by promising "the little guy" justice from the "oligarchy" when "the little guy" can't feed his family and the "Big Boys" look to have everything. A recent example is Chavez in Venezuela. Aristotle saw this as the inevitable end of democracy.
44 posted on 02/02/2003 12:50:19 AM PST by Iris7
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To: DBtoo
A person just can't live on that.

Are you saying foreigners aren't people? Could it possibly be that "foreigner" does the job better and more efficiently? I wish I could get a $2.99 haricut then go spend the other $10 I usually get charged by the barber on something else. The $10 doesn't just go away!

..... this is my country and it's sad to see it deteriorate so.

What? Our per capita real income is near an all time high and we have lifestyles that are the envy of the entire world. Anyone who wants a job can find a job (please don't tell me they can't). And things are deteriorating?

45 posted on 02/02/2003 12:51:19 AM PST by 1tin_soldier
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To: ETERNAL WARMING
Mr. Hoffa? Is that you?
46 posted on 02/02/2003 12:53:12 AM PST by 1tin_soldier
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To: Texasforever
see post #43

There is no denying that the "trend" is chasing "cheap labor" and it will not be reversed untill the "cheap labor" market dries up.

Or finally come to the realization that there is a WHOLE LOT of cheap labor, and hence decide not to drown ourselves in it. We should eat that elephant one bite at a time.

The difference between formerly cheap Japanese labor and China is all about size. The labor and costs and investments were contained in only an X size of place. In China resources are spread too thin.

In China it will take more money than we have to get them to that level. We can absorb small islands, not nations of billions of people.

BTW Japan is our biggest market in Asia.

47 posted on 02/02/2003 12:53:37 AM PST by maui_hawaii
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To: Torie
If only we could outsource lawyers. Now that, would make my day, to have a bunch of shuffle footed, parsing, thousansds of dollars per page dolts to be standing by the freeway ramps begging for money.
48 posted on 02/02/2003 12:59:06 AM PST by Leisler
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To: Torie; Texasforever
Just what is a neo-con anyway? That term has become very popular recently.
49 posted on 02/02/2003 1:00:00 AM PST by DBtoo
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To: ETERNAL WARMING
You said:

Despite the rhetoric, the fact remains that half of all American workers now pay into the lowest tax bracket. That stat doesn't lie. It means people are trying to survive with minimum wage jobs, no benies. It means they have no disposable income to regenerate the economy

And then we have this table of median family income (that is median, not mean, which means that half are above the number, and half below), in real dollars, and that is with the CPI overstating what is the real inflation rate. Do facts matter at all anymore?

You are right about one thing though. Federal income taxes have been reduced substantially on families that earn below the median income. Does that upset you?

50 posted on 02/02/2003 1:03:14 AM PST by Torie
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