Monday, July 05, 2010

Creation of Jobs: Changing perspectives?

As employment in US fell for the first this year in US, the July issue of the Bloomberg Businessweek has a great article by Mr Andy Grove, the former Intel chief-who says that 'job-centric' leadership and incentives are needed to expand US domestic employment again!

The article is a way worthy read for all and here are my key takeaways from the same.

- "The underlying problem isn't simply lower Asian costs. It's our own misplaced faith in the power of start ups to create U.S. jobs.

Start ups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up."

"For every Apple worker in the U.S. there are 10 people in China working on i Macs, i Pods, and i Phones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology (STX), and other U.S. tech companies."

-."There's more at stake than exported jobs. With some technologies, both scaling and innovation take place overseas.

A new industry needs an effective ecosystem in which technology know how accumulates, experience builds on experience, and close relationships develop between supplier and customer. The U.S. lost its lead in batteries 30 years ago when it stopped making consumer electronics devices. Whoever made batteries then gained the exposure and relationships needed to learn to supply batteries for the more demanding laptop PC market, and after that, for the even more demanding automobile market. U.S. companies did not participate in the first phase and consequently were not in the running for all that followed.

Not only did we lose an untold number of jobs, we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today's "commodity" manufacturing can lock you out of tomorrow's emerging industry."

-" In a thorough study of the industrial development of East Asia, Robert Wade of the London School of Economics found that these economies turned in precedent-shattering economic performances over the '70s and '80s in large part because of the effective involvement of the government in targeting the growth of manufacturing industries."

Mr Grove's mantra:

"Long term, we need a job-centric economic theory—and job-centric political leadership—to guide our plans and actions.

We should develop a system of financial incentives: Levy an extra tax on the product of off shored labor. "

Interestingly, just last month there was a news report that although India has become synonymous with outsourcing, Indian companies created nearly 60,000 jobs in the US between 2004-09 through nearly 500 investment and acquisition deals worth USD 26.5 billion. Highlighted in a report, "How America Benefits from Economic Engagement with India,' released by influential Congressman Jim McDermott in the presence of India's Deputy Ambassador to the US Arun Singh, it is noteworthy that the software and IT services sector, which account for bulk of the outsourcing deals, received less than 15 per cent of the total investment; the investments mainly were in mining, manufacturing, and other industries!!

Is the nature of jobs changing?

Personally, I have a strong hunch that technology is indeed a double -edged sword. While automation helps in speeding up processes, what it does-is it makes quite a few jobs redundant-while creating a slew of new roles. For instance, in contrast to the dozens of 'turners' and 'fitters' that one saw in a engineering firm of the yore- the new CNC machines call for perhaps a handful of differently skilled technicians -who write simple code. I recall -if in the 80s, one had a bunch of accounts assistants who would burn the midnight oil to compile the balance sheet-today, the accounts department has a different look altogether!

Globalisation, technology, telecommuting, collaboration, ...contribute to the changing nature of jobs. If one were to look at the past eighteen months at the way most companies tightened up their belts, the most number of jobs that were axed -were the middle 'managers'! In India alone, the amount of talent that suddenly became available at the 15-30lakhs salary-is a revelation. Most companies preferred to retain 2-3 'doers' instead of a 'manager'!

Thanks to the economic downturn, attributed entirely to some 'financial magicians in the banking sector' some Governments have made a lot of changes in the statutory regulations & compliances required by the industry. Do these not throw a different nature of professionals ?

Would it mean that there would be more emphasis on the quality of jobs- rather than mere quantity? Would recruitment go beyond traditional methods of reacting to the responses? Wouldnt it be better to be pro-active and engage in 'talent scouting' and 'fish where the fish are'?

I shall be glad to hear your views...

PS It is almost a sense of deja vu. In an earlier post I wrote in October last year, referring the article by Dr Vivek Wadhwa on the "reverse brain drain", I had alluded to the above topic!

1.In the 15yrs since 1994- US had slid from being the topmost destination of R&D to being the 17th in 2007.

2. There has been a steady decline in the US citizens choosing careers in the STEM (Science, Technology, Engineering and Maths)-as they were filled up more by immigrant students.

My own theory now is that perhaps the outsourcing of manufacturing in the seventies/eighties to lesser developed countries -were the precursor, for American students following careers in management & law-as manufacturing and R&D jobs had begun to dwindle...

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