Saturday, 6 October 2012

The Poisoning Roots Of The Techno-Boom

Salon has devoted a great deal of coverage to the outsourcing of technology jobs in recent months. So far the theme of the coverage, and of most of the letters written in response, has been the loss of high-paying jobs in the United States. But very little attention is being paid to a key point: The rush to outsourcing is undermining the economic foundation on which the United States’ technology sector is built.

To understand this, one has to realize that there is a difference between losing research and development (R&D) jobs and losing manufacturing jobs. Manufacturing jobs are a recurring expense, and any savings can be passed on direct to the product cost. R&D costs are nonrecurring expenses, and they are much harder to place a value on, because the process of creating a product is really the process of learning how to make a product. This knowledge may be used to build the next, greatly improved version, or even a whole new market. The accumulation of that kind of intellectual capital is crucial for the future health of a technology company and, by extension, an entire technology sector.

The technology industry converts new ideas into companies. The pool of engineers, and engineering students, and university programs training the students are the incubators that create these ideas. It is a symbiotic relationship: Engineers need companies to provide jobs, and investors need engineers to come up with the concepts to invest in. Companies should therefore consider engineering salaries an investment more than an expense. Historically it has been one of their best investments.

The catalyst for all this was the GI Bill. After WWII, a large number of returning veterans received a college education, often in the field of engineering. They received well-paying jobs, and in the next half century helped to create the aircraft industry, followed by the electronics industry, the space program and the software industry. They also created the technology our military and intelligence community rely on. Those well-paid jobs contributed to the creation of a large middle class, which is both a consumer and a tax base.

The system has worked well for 50 years, and everyone in this country has benefited, especially the people who have invested in it. But in the last couple of years investors have decided that the value of the contributions of technology workers can now best be measured by the lowest wage that can be paid them.

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