Live from MBA/CREF 2004: Don’t Begrudge India for Its Job Gains, Says Economist

ORLANDO -- With job creation in the U.S. still rather anemic, should America fret about service jobs being exported to India? The answer is no, says Tony Pierson, an economist with CIGNA Realty Investors, who argues the long-term effects are positive for consumers and Corporate America.

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"This whole thing is overblown. It always happens when you have an economic slowdown and a dearth of jobs, you blame some other country whether it be Japan or the emerging threat from Russia or China. Now, it’s India." The economist’s remarks came during a keynote address Tuesday before several hundred members of the Mortgage Bankers Association gathered at the Walt Disney World Dolphin hotel in Orlando for the 14th annual Commercial Real Estate Finance/Multifamily Housing Convention & Expo.

"Don’t begrudge jobs to India," emphasizes Pierson. He projects that India’s population will grow to surpass China as the world’s largest labor force over the next 20 years.

According to Cambridge, Mass.-based Forrester Research, 3.3 million U.S. service industry jobs and $136 billion in wages will move offshore to countries like India, Russia, China and the Philippines over the next 15 years. In the U.S., only 1,000 new jobs were created during the month of December, a tepid increase that many economists call statistically insignificant, the U.S. Department of Labor reports.

American business stands to benefit if it focuses on innovation and exports jobs that don’t add much value, says Pierson. "I have every expectation that the U.S. will continue to lead the world in innovation and value-added products and services that would lead to high-pay employment."

When an American company decides to move some of its back-office operations offshore, for example, the expectation is that company will achieve lower costs and higher profits, says Pierson. "Where do the profits go? If companies repatriate the profits into R&D and innovation in the United States, then that will be extremely positive for the U.S. economy for the long term. Track the profits, not just the jobs," he says. "Most U.S. corporations that go globally repatriate the profits back domestically."

And American consumers benefit by lower prices, he says. "Remember, there is more of us consuming the goods than there are employed in the industries moving overseas. So, we benefit as a society from those changes."

Lastly, the economist believes that creating wealth in other countries is an integral part of the war on terrorism. "It’s not just a military war that’s happening. There’s an economic war, too," says Pierson. "Creating wealth in other countries is a very positive thing."


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