Wednesday, February 25, 2004


Programming jobs are heading overseas by the thousands. Is there a way for the U.S. to stay on top?

Stephen Haberman was one of a handful of folks in all of Chase County, Neb., who knew how to program a computer. In the spring of 1999, at the height of the Internet boom, the 17-year-old whiz wanted to strut his stuff outside of his windswept patch of prairie. He was too young for a nationwide programming competition sponsored by Microsoft Corp. (MSFT ), so an older friend registered for him. Haberman wowed the judges with a flashy Web page design and finished second in the country. Emboldened, Stephen came up with a radical idea: Maybe he would skip college altogether and mine a quick fortune in dot-com gold. His mother, Cindy, put the kibosh on his plan. She steered him to a full scholarship at the University of Nebraska at Omaha.

Half a world away, in the western Indian city of Nagpur, a 19-year-old named Deepa Paranjpe was having an argument with her father. Sure, computer science was heating up, he told her. Western companies were frantically hiring Indians to scour millions of software programs and eradicate the much-feared millennium bug. But this craze would pass. The former railroad employee urged his daughter to pursue traditional engineering, a much safer course. Deepa had always respected her father's opinions. When he demanded perfection at school, she delivered nothing less. But she turned a deaf ear to his career advice and plunged into software. After all, this was the industry poised to change the world.

As Stephen and Deepa emerge this summer from graduate school -- one in Pittsburgh, the other in Bombay -- they'll find that their decisions of a half-decade ago placed their dreams on a collision course. The Internet links that were being pieced together at the turn of the century now provide broadband connections between multinational companies and brainy programmers the world over. For Deepa and tens of thousands of other Indian students, the globalization of technology offers the promise of power and riches in a blossoming local tech industry. But for Stephen and his classmates in the U.S., the sudden need to compete with workers across the world ushers in an era of uncertainty. Will good jobs be waiting for them when they graduate? "I might have been better served getting an MBA," Stephen says.

U.S. software programmers' career prospects, once dazzling, are now in doubt. Just look at global giants, from IBM (IBM ) and Electronic Data Systems (EDS ) to Lehman Brothers (LEH ) and Merrill Lynch (MER ). They're rushing to hire tech workers offshore while liquidating thousands of jobs in America. In the past three years, offshore programming jobs have nearly tripled, from 27,000 to an estimated 80,000, according to Forrester Research Inc. (FORR ). And Gartner Inc. figures that by yearend, 1 of every 10 jobs in U.S. tech companies will move to emerging markets. In other words, recruiters who look at Stephen will also consider someone like Deepa -- who's willing to do the same job for one-fifth the pay. U.S. software developers "are competing with everyone else in the world who has a PC," says Robert R. Bishop, chief executive of computer maker Silicon Graphics Inc. (SGI ).

For many of America's 3 million software programmers, it's paradise lost. Just a few years back, they held the keys to the Information Age. Their profession not only lavished many with stock options and six-figure salaries but also gave them the means to start companies that could change the world -- the next Microsoft, Netscape (AOL ), or Google. Now, these veterans of Silicon Valley and Boston's Route 128 exchange heart-rending job-loss stories on Web sites such as Suddenly, the programmers share the fate of millions of industrial workers, in textiles, autos, and steel, whose jobs have marched to Mexico and China.

"Leap of Faith"
This exodus throws the future of America's tech economy into question. For decades, the U.S. has been the world's technology leader -- thanks in large part to its dominance of software, now a $200 billion-a-year U.S. industry. Sure, foreigners have made their share of the machines. But the U.S. has held on to control of much of the innovative brainwork and reaped rich dividends, from Microsoft to the entrepreneurial hotbed of Silicon Valley. The question now is whether the U.S. can continue to lead the industry as programming spreads around the globe from India to Bulgaria. Politicians are jumping on the issue in the election season. And it will probably rage on for years, affecting everything from global trade to elementary-school math and science curriculums.

Countering the doomsayers, optimists from San Jose, Calif., to Bangalore see the offshore wave as a godsend, the latest productivity miracle of the Internet. Companies that manage it well -- no easy task -- can build virtual workforces spread around the world, not only soaking up low-cost talent but also tapping the biggest brains on earth to collaborate on complex projects. Marc Andreessen, Netscape Communications Corp.'s co-founder and now chairman of Opsware Inc. (OPSW ), a Sunnyvale (Calif.) startup, sees this reshuffling of brainpower leading to bold new applications and sparking growth in other industries, from bioengineering to energy. This could mean a wealth of good new jobs, even more than U.S. companies could fill. "It requires a leap of faith," Andreessen admits. But "in 500 years of Western history, there has always been something new. Always always always always always."

This time, though, there's no guarantee that the next earth-shaking innovations will pop up in America. Deepa, for example, has high-speed Internet, a world-class university, and a venture-capital industry that's starting to take shape in Bombay. What's more, her home country is luring back entrepreneurs and technologists who lived in Silicon Valley during the bubble years. Many came home to India after the crash and now are sowing the seeds of California's startup culture throughout the subcontinent. What's to stop Deepa from mixing the same magic that Andreessen conjured a decade ago when he co-founded Netscape? It's clear that in a networked world, U.S. leadership in innovation will find itself under siege.

The fallout from this painful process could be toxic. One danger is that high-tech horror stories -- the pink slips and falling wages -- will scare the coming generation of American math whizzes away from software careers, starving the tech economy of brainpower. While the number of students in computer-science programs is holding steady -- for now -- the elite schools have seen applications fall by as much as 30% in two years. If that trend continues, the U.S. will be relying more than ever on foreign-born graduates for software innovation. And as more foreigners decide to start careers and companies back in their home countries, the U.S. could find itself lacking a vital resource. Microsoft CEO Steven A. Ballmer says the shortfall of U.S. tech students worries him more than any other issue. "The U.S. is No. 3 now in the world and falling behind quickly No. 1 [India] and No. 2 [China] in terms of computer-science graduates," he said in late 2003 at a forum in New York.

Fear in the industry is palpable. Some of it recalls the scares of years past: OPEC buying up the world in the '70s and Japan Inc. taking charge a decade later. The lesson from those episodes is to resist quick fixes and trust in the long-term adaptability of the U.S. economy. Job-protection laws, for example, may be tempting. But they could hobble American companies in the global marketplace. Flexibility is precisely what has allowed the U.S. tech industry to adapt to competition from overseas. In 1985, under pressure from Japanese rivals, Intel Corp. exited the memory-chip business to concentrate all its resources in microprocessors. The result: Intel stands unrivaled in the business today.

While the departure of programming jobs is a major concern, it's not a national crisis yet. Unemployment in the industry is 7%. So far, the less-creative software jobs are the ones being moved offshore: bug-fixing, updating antiquated code, and routine programming tasks that require many hands. And some software companies are demonstrating that they can compete against lower-cost rivals with improved programming methods, more automation, and innovative business models.

For the rest of the decade, the U.S. will probably maintain a strong hold on its software leadership, even as competition grows. The vast U.S. economy remains the richest market for software and the best laboratory for new ideas. The country's universities are packed with global all-stars. And the U. S. capital markets remain second to none. But time is running short for Americans to address this looming challenge. John Parkinson, chief technologist at Cap Gemini Ernst & Young, estimates that U.S. companies, students, and universities have five years to come up with responses to global shifts. "Scenarios start to look wild and wacky after 2010," he says. And within a decade, "the new consumer base in India and China will be moving the world."

People Skills
To thrive in that wacky world, programmers like Stephen must undergo the career equivalent of an extreme makeover. Traditionally, the profession has attracted brainy introverts who are content to code away in isolation. With so much of that work going overseas, though, the most successful American programmers will be those who master people skills. The industry is hungry for liaisons between customers and basic programmers and for managers who can run teams of programmers scattered around the world. While pay for basic application development has plummeted 17.5% in the past two years, according to Foote Partners, a consultant in New Canaan, Conn., U.S. project managers have seen their pay rise an average of 14.3% since 2002.

Finding those high-status jobs won't be easy. Last summer, 34-year-old Hal Reed was so hungry for a programming job that he answered an ad in the Boston Globe for contract work at cMarket, a Cambridge (Mass.) startup. The pay was $45,000 -- barely more than an outsourcing company charges for Indian labor. But he took it. Fortunately for him, he was able to convince his new boss quickly that he was much more than a programmer. He could lead a team. Within weeks, his boss nearly doubled Reed's pay and made him the chief software architect. "He had great strategic thinking skills," says Jon Carson, cMarket' chief executive. "You can't outsource that."

To prepare students for the hot jobs, universities may need to revamp their computer-science programs. Carnegie Mellon University, where Stephen now studies, has already begun that process. His one-year master's program focuses on giving students the skills needed to manage teams and to play the role of software architect. Such workers are the visionaries who design massive projects or products that hundreds or even thousands of programmers flesh out.

The key players in the drama, including these two master's students, Stephen and Deepa, don't have the luxury to wait and see how it turns out. Their time is now. Deepa graduates in May from the Bombay campus of the Indian Institute of Technology, a top university nestled between two lakes. Stephen emerges three months later from the Pittsburgh campus of CMU.

The options they're eyeing illustrate the unfolding map of an industry in full mutation. A software career is no refuge for the faint of heart. Deepa, for example, could suffer if the U.S. government moves to block offshore development or if rocky experiences in foreign lands spark an industry backlash. And Stephen, if he misplays his hand, could find himself competing with lowballing Filipinos or Uruguayans.

For now, their stories reflect the moods in their two countries -- one with lots to lose, the other with a world to win. Deepa is brimming with optimism about the future, convinced that her opportunities are limited by nothing more than her imagination. She is thinking not only about the next job but about the startup that she'll found after that. Stephen, by contrast, is cautious. Even at 22, he's attuned to the risks of a global market for software talent. While confident he'll make a good living, he's plotting out a career that sacrifices opportunities for a measure of safety. Self-protection, an afterthought five years ago, is a pillar of his strategy.

Seeking a Niche
It's midday in the windowless basement labs at CMU's Wean Hall. Stephen, tall and lanky, wearing a white T-shirt tucked into jeans, leans back in his chair and ponders his future. He signed up for the master's program at CMU on the advice of a professor in Omaha who told him that graduates with an MS could land more interesting jobs and make more money. But now the big recruiters coming onto the snowy Pittsburgh campus -- companies such as Microsoft and Inc. (AMZN ) -- are hiring cheaper undergrads, he says, and barely giving the masters a look. Sure, other recruiters come knocking. Banks, he says with a grimace. Insurance companies. But the idea of working in a finance-industry tech shop leaves him cold. "I'm not even interviewing," he says.

The 17-year-old hotshot who was ready to skip college and make a mint has undergone quite a change. He's married, has witnessed the bumps in the world of software, and plans to establish "an upper-middle-class lifestyle, and maybe more" as a businessman. His plan is to carve out a niche for himself back in Omaha. He'll gather three or four colleagues and produce custom software for businesses in town, from hospitals and steakhouses to law firms. Omaha is plenty big, he says, for a good business, but it's remote enough to insulate his startup from offshore competition -- and even from the bigger competitors in Chicago.

Stephen understands the threat posed by smart and hungry programmers in distant lands. He was once such a programmer himself. From his senior year in high school all the way through college, he worked as a freelancer for a New York software-development company, Beachead Technologies Inc. Geoff Brookins, Beachead's young founder, spotted Stephen's prize-winning entry in the 1999 Microsoft Web-site design contest. He called Nebraska, sent Stephen some work, and was blown away. "He did two months of work in three days," he recalls. Brookins quickly signed him on at $15 an hour, ultimately paying him $45 an hour. Like the Indians, Stephen provided a low-cost alternative to big-city programmers -- but he had an advantage because he spoke American English and was only one time zone away from New York.

The job let Stephen work on projects that normally would have been far beyond the reach of a student. One was to create IBM's (IBM ) Web page for its Linux operating-system technology -- a crucial arm of Big Blue's business. "Stephen was lead engineer on that project," Brookins says. The student also got to spend much of the summer of 2001 working at Beachead's office in New York City. It was a fun contrast to Nebraska, he recalls. But he stopped working for Beachead after he moved to Pittsburgh last summer.

It was there that Stephen got a strong signal that the prospects were dimming for programmers. When his wife, Amy, a fellow computer-science student from Nebraska, began looking for programming work, she came back to their suburban apartment disheartened. The only available jobs, she says, "would have paid me interns' rates." She ditched the profession and is now writing a Christian-themed novel.

Then, Stephen's old boss hammered home the dangers of coding for a living in a wired world. Beachead's competitors were finding cheaper labor offshore, and Brookins, to win contracts, had to match them. Last fall, he logged on to a Web site, RentACoder, a matchmaking service between employers and some 30,000 programmers around the world. There, Brookins found a 27-year-old Romanian named Florentin Badea, a star from Bucharest's Polytechnic University and the 11th-ranked programmer on the whole site. Badea was willing to charge just $250 for a project that would have cost $2,000, Brookins estimates, if Stephen had done it.

Those same global forces, Stephen admits, could eventually hollow out his business in Omaha. Already, Indian tech-services outfits such as Infosys and Wipro are competing head-to-head with U.S. companies in this country. But Stephen is betting that by working closely with customers, he can whip bigger firms on quality and service. He says he'll give the venture six months to a year and then see what happens.

Ultrafast Track
Deepa sees a reverse image of Stephen's worldview. Where the prospects for U.S. tech grads seem to narrow as they peer into the future, she's looking down an eight-lane highway. Yet she faces her own set of challenges, she acknowledges, while sipping tea with her classmates in a breezy open-air cafeteria on the Indian Institute of Technology's Bombay campus. They don't want to be cogs in a software-programming factory -- India's role to date. Instead, they want India to be a tech powerhouse in its own right. "Good Indian engineers can do good design work, but we need a venture industry" so Indians can start their own companies, says Deepa. Her pals nod in agreement.

Deepa is positioned on India's ultrafast track. The country pins high hopes on the 3,000 students in the six Institutes of Technology. Their alumni are stars locally and worldwide -- including Yogen Dalal, a top venture capitalist at Mayfield, and Desh Deshpande, founder of Sycamore Networks and Cascade Communications. Within this elite, Deepa and her friends are a rarified breed. They aced the grueling national exams, ranking in the top 0.2% and winning places in the school of computer science. They're known as "toppers." The challenge for Deepa's small crowd is to move beyond the achievements of Dalal and Deshpande, who notched their successes for U.S. companies, and to make their mark with new Indian companies.

That means bypassing the bread-and-butter service giants, such as Tata, Infosys, and Wipro, that dominate the Indian stage. The jobs they offer, says Deepa, sound boring. To get their hands on exciting research and more creative programming, she and her friends are banking mostly on U.S. companies in India, including Intel, Texas Instruments, and Veritas. This summer, when Deepa graduates, she'll be a software engineer at the Pune operations of Veritas Software Corp. (VRTS ), a Silicon Valley storage-software maker. Her pay will start at $10,620 a year -- plenty for a comfortable middle-class life in India. "I'm living my dream," she says.

And thrilling her family. Her father, Arun Paranjpe, who grew up in Mhow, a tiny army-base town in central India, could afford only a bachelor's degree, which prepared him for work as an officer in India's railways. He regretted not advancing further and along with Deepa's homemaker mother, he pushed his two daughters toward advanced professional degrees. So while she studied Indian classical vocal music for nine years and escaped, when she could, to the cricket field, Deepa always finished at the top of her class in mathematics. That helped her land a plum spot in the computer-science program at Nagpur University.

Now Deepa is ITT-Bombay's star in search technology -- and she's hoping that this specialty will be her ticket to a rip-roaring career. She routinely works till 3 a.m. in the department's new 20-pod computer lab, doing research on search engines. She admits the work at Veritas, at least initially, will involve more routine database tasks than the cutting-edge work she's hoping for. But if Veritas disappoints, a topper like Deepa will have plenty of other options. Both the search giant Google Inc. and the Web portal Yahoo! are setting up research and development centers in India this year. Deepa hopes to manage a research lab some day, and ultimately, she says, "I'd like to be an entrepreneur."

But she's an entrepreneurial revolutionary and family traditionalist at the same time. It's part of her balancing act. Consider her eventual marriage. As an attractive, professional woman, she'll make a prize catch in India's conservative marriage market. Deepa expects she will have an arranged marriage: Her parents will chose a suitable husband for her from within her own caste. But she is firm: Her husband would have to be an entrepreneur, or a tech whiz, and preferably in the same field, "so we can have a common platform and he can understand my work," she says.

Maybe one day the couple will be able to raise venture money together. While venture-capital investing didn't exist in India until a few years ago, the industry is starting to take root. In 2003, India's 85 venture-capital firms invested about $162 million in tech companies, according to estimates from the India trade group National Association of Software & Services Cos. That's up from zero in 1998. Still, it's miles short of the financial support available to Stephen and his classmates. The 700 U.S. venture firms poured $9.2 billion into tech startups last year, according to market researcher VentureOne.

Multicultural Edge
Diversity is another advantage the U.S. has over India. Take a stroll with Deepa through the leafy ITT campus, and practically everyone is Indian. Stephen's scene at CMU, by contrast, feels like the U.N. Classmates joke in Asian and European languages, and a strong smell of microwaved curry floats in the air. This atmosphere extends to American tech companies. With their diverse workforces, American companies can field teams that speak Mandarin, Hindi, French, Russian -- you name it. As global software projects take shape, with development ceaselessly following the path of daylight around the globe, multicultural teams have a big edge. Who better than U.S.-based workers to stitch together these projects and manage them? "These people can act as bridges to the global economy," says Amar Gupta, a technology professor at Massachusetts Institute of Technology's Sloan School of Management.

The question is whether the technology industry can respond quickly enough to a revolution that's racing ahead on Internet time. Stephen's former boss, Brookins, frets that the pace could overwhelm the coming generation of U.S. programmers, including his former Nebraska star. "He's a genius. He's the future of the country. [But] if the question is whether there's going to be a happy ending for Stephen, there's a big question mark there," Brookins says. Stephen is betting that quality and customer service will offset the cost advantage of having computer programmers 10 time zones away. He still sees software in the U. S. as a path to wealth -- "though I won't really know until I get out there," he says.

While Stephen is busy mounting his defenses, Deepa is setting out on the hard climb to build Silicon India. Much like their two countries, the leader is looking cautiously over his shoulder while the challenger is chugging single-mindedly ahead. No matter which way they may zig or zag, both of them are prepared to encounter rough competition from every corner of the globe. There's no such thing as a safe distance in software anymore.

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American business leaders share their thoughts on improving employment opportunities

"In theory, we all benefit when we can get services more cheaply abroad. But as a practical matter, there are huge costs of dislocated workers and job insecurity. The answer is not to try to stop outsourcing, but we do have to get serious about job retraining, lifetime learning, extended unemployment insurance and wage insurance. We may also want to not permit companies to deduct the expense of outsourcing from their income taxes, and use the savings to help workers who lost jobs."
Robert Reich, former Secretary of Labor, and professor of economic policy at Brandeis University .

"If you're the CEO of a large company, your responsibility is to your shareholders and to have your company have the lowest costs possible. So if your competition is sending jobs overseas, you're almost forced to do the same. Otherwise you're not going to be able to sell your product."
Wayne Huizenga, chairman of Huizenga Holdings, on CNNfn last week.

"In the 1990s, some IT hardware production was offshored, taking jobs abroad. But when the components—disc drives, modems—came back to the U.S., they were 10% to 30% cheaper. That meant that many more U.S. businesses could afford to buy computers and use them to produce more of their products better, leading to more jobs in the U.S., especially for workers with IT skills who knew how to use the computers."
Catherine Mann, senior fellow, Institute for International Economics.

"Our system has had obvious strains ... We need to be forward-looking to adapt our educational system to the evolving needs of the economy. Protectionism will do little to create jobs, and if foreigners retaliate, we will surely lose jobs. We need to discover the means to enhance the skills of our work force and to further open markets here and abroad."
Alan Greenspan, chairman of the Federal Reserve Board, speaking in Omaha, Neb., last week.

"Let's compete—by training the best workers, investing in R. and D., erecting the best infrastructure and building an education system that graduates students who rank with the world's best. Our goal is to be competitive with the best so we both win and create jobs."
Craig Barrett, CEO, Intel Corp.

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Can they find a good employment line?

Of all people, George W. Bush, a son of a one-term President, should certainly understand the importance of getting the script and the staging just right when it comes to demonstrating how committed he is to helping Americans get and keep good jobs. The economy was improving on Election Day 1992, but voters could still recall images of George Herbert Walker Bush buying four pairs of socks at J.C. Penney the previous Christmas season and exhorting them to shop their way out of bad times. Or how, as he prepared to tee off at a Kennebunkport, Maine, golf course in the summer of 1991, the elder Bush declared the recession over and then blocked funding to extend unemployment benefits. Though people understand their President can't guarantee their jobs, they want to know that he's doing what he can and that, at a minimum, he's paying attention.

So this President Bush makes sure to plant himself as often as possible on the factory floor, surrounding himself with happy workers—as he did last week at a window-and-door factory in Tampa, Fla.—and touting the job-creating power of his tax cuts, even as he acknowledges that many people are still out of work.

But as hard as Bush tries to show that he is both optimistic about the economy and empathetic to the plight of people who haven't felt the turnaround yet, there are some discomforting realities. Chief among them: Bush looks certain to go into the election with the distinction of being the first President since Herbert Hoover to see the total number of jobs shrink during his term in office.

Democrats point that out often, like whenever they move their lips. "Everywhere I go, I'm meeting people who are talking about working harder, working longer, not getting ahead, wages frozen, health-care costs going up. People feel very anxious, as manufacturing has slipped away," Democratic front runner John Kerry told TIME. "During Clinton, we had 23 million jobs created. That's almost 3 million a year. Under Bush, we've lost 3 million in three years."

It does not help that a White House that has set the modern standard for message management has been sending up flares in recent days that illuminate for the most jittery Americans the fragility of their situation. First came the observation by Bush's top economist Gregory Mankiw that outsourcing jobs overseas is "probably a plus for the economy in the long run." That may be true in theory, but the statement was so impolitic that even such staunch Bush supporters as House Speaker Dennis Hastert were furious. "An economy suffers when jobs disappear," Hastert said. And so do politicians.

Jobs have always made or broken the political fortunes of Presidents, yet outsourcing packs a powerful new wallop. That's because it hits middle- and upper-income workers—software engineers, X-ray readers, financial analysts—who thought they were immune to the great job exodus to Mexico and China that has decimated blue collars over the past 25 years. These are people who believed they were safe in a global economy, because they worked with their minds, not with their hands. "Outsourcing is the ultimate nightmare issue for the White House, because it's a problem that every voter understands. It's extraordinarily difficult to solve—and impossible to solve in the short run," says Bruce Reed, president of the centrist Democratic Leadership Council, who was also Bill Clinton's chief domestic-policy adviser. And while Bush can blame many of the economy's woes on the vicissitudes of war, terrorism and corporate scandals, outsourcing is one problem that won't go away when those do.

But even as the Democrats denounce the phenomenon, the proposals they offer do little more than attack it at the margins. Kerry calls for a study to examine the problem and possible solutions. He would discourage outsourcing federal contracts and would require employees from outsourced call centers to identify their location so that consumers can respond to that information as they see fit. (His own campaign was embarrassed by a firm it had hired that was routing calls to Wisconsin voters through Canada.) North Carolina Senator John Edwards would also try a combination of browbeating and suasion: he would create a new Office for Corporate Responsibility at the Commerce Department to encourage companies to keep jobs here rather than outsourcing them.

Outsourcing isn't the only jobs issue the Bush White House has uncharacteristically bumbled lately. Another political land mine exploded when the 417-page Economic Report of the President, sent to Congress under Bush's signature, delivered the staggeringly optimistic forecast that the economy would create millions of jobs this year. When asked about the prediction, Bush backed away, avoiding a question about the number after his Treasury Secretary and Commerce Secretary cast doubt upon it. Yet another section of the report raised the important question of whether making a sandwich at a fast-food restaurant (some assembly required) should be reclassified as a manufacturing job—a prospect that brought immediate comparisons to Ronald Reagan's disastrous effort to classify catsup as a vegetable on school-lunch menus.

In an election year, or any other time, no one wants to hear that his or her job is gone forever. What makes the jobs issue particularly potent this year is the fact that the states with the biggest manufacturing job losses happen to be such swing states as Michigan, Ohio and Pennsylvania. Administration officials tout Bush's plans to strengthen community colleges and career centers and provide up to $3,000 to help displaced workers find new jobs. But as Edwards likes to point out as he stumps for the Democratic nomination, that's little comfort if there are no jobs waiting in your community when you get out of school. A 2001 Labor Department audit found that only 1 in 5 who participated in programs for displaced workers found jobs for which they had been retrained; nearly 40% ended up working part time or for less than they had earned before; 28% had not yet found any work at the end of their training.

So how would the Democrats ease the pain of outsourcing? Both Kerry and Edwards have put forth a set of proposals that focus on the tax code—closing loopholes that make it more profitable to move jobs overseas, offering new incentives to keep them here. But no one believes that companies are moving overseas simply to save money on their taxes. So increasingly the nomination battle, which grew more intense last week with Edwards' surprisingly strong second-place finish in Wisconsin, is turning toward which candidate would do more to toughen trade agreements. It's a debate Bush campaign officials confidently predict will backfire on the Democrats. "We have a new economy, and they have yesterday's wrong ideas," said Bush campaign manager Ken Melhman. Maybe so, but if Bush can't convince voters he's got some ideas too, one job that might disappear come November is his.

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Prosperity and its perils in the outsourcing hotspot

Steel-and-glass office buildings and sprawling corporate campuses are taking shape to handle the flood of new businesses and employees. Major players like IBM, Oracle and Intel are here, as are promising start-ups. At Sony World and Bose, techies are landing lucrative service gigs. It may sound like yesterday's Silicon Valley, but it's very much the present—in the high-tech mecca of Bangalore.

Booming Bangalore represents the Indian economy in fast-forward, one that is growing at more than 8% annually, double the rate of the U.S.'s. Of course, India is still poor by comparison—average annual per capita income is a mere $480 nationally. But the outsourcing wave from the U.S. has provided an outlet for the thousands of technically astute, English-speaking graduates pouring out of India's √©lite universities. These kids are earning—and spending—as never before.

But an economic party like this one has its hangovers, such as BOSS, or burnout stress syndrome, another Valley-like feature now found in Bangalore. When Ranit Bhalla, 25, a software engineer, joined tech giant Wipro four years ago, the work was so intense he often found himself sleeping and even bathing at the office. "For most of us who pushed hard to get ahead, we lived, ate and breathed our jobs," he says. After six months of 16-hour workdays, 3 a.m. dinners and gastric problems, his exhausted body finally gave out. He spent 15 days in a hospital and then needed counseling. Three out of 14 of the workers in his unit similarly burned out. Doctors cite high levels of substance addiction and relationship breakdowns among IT workers. "If you look at the stress levels in that environment and the hours they keep, you begin to see why these things happen," says Dr. Achal Bhagat, a psychiatrist at New Delhi's Apollo Hospital.

It's no easier on workers at the call centers that handle U.S. customer-service complaints. In a recent survey by India's Dataquest magazine, 40% said they suffered from sleep disorders, and 34% complained of digestive problems. "It's a tough life," says Shruti Kaushik, 21, an IBM call-center employee. Kaushik took the job seven months ago "to make some easy money," about $160 a month. But the credit-collection work isn't easy. "Things get monotonous; there are rude customers," she says. Combine those factors with the 10- to 12-hour night shifts that Indian IT workers pull so they can stay in synch with U.S. daytime hours—India is 10 1/2 hours ahead of Eastern time—and "it reduces life to a vacuum," says Bhagat. "Where's the time to lead a normal existence?"

To help alleviate stress, Wipro and other IT firms have hired dietitians and yoga and meditation teachers. But the outsourcing industry has a 60% rate of employee turnover per year. "I work hard, but this is no life," says Kaushik. Her solution: "I'm going to quit soon." It's a luxury most Indians would never have dreamed of.

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Is Your Job Going Abroad?

Rosen Sharma is sure about one thing. His nine-month-old company, Solidcore, a start-up that makes backup security systems for computers, could not survive without outsourcing. By lowering his development costs, the 18 engineers who work for him in India for as little as one-fourth the salary of their American counterparts allow him to spend money on 13 senior managers, engineers and marketing people in Silicon Valley. If he doesn't outsource, in fact, the venture capitalists who fund start-ups like his won't give him a nickel. Sharma's Indian-American team, tethered by a broadband connection, gets his product in front of customers faster and cheaper. "As a business, you have to stay competitive," he says. "If we don't do it, our competitors will, and they're going to blow us away."

But Sharma's sharp analysis loses its edge when he thinks about what decisions like his will mean someday for his children, a 2-year-old daughter and another on the way. "As a father, my reaction is different than my reaction as a CEO," he says. He believes that companies like his will always need senior people in the U.S., like the systems architects who design new products and the experienced salespeople who close deals. "But if you're graduating from college today, where are the entry-level jobs?" Sharma asks quietly. How do you get to that secure, skilled job when the path that leads you there has disappeared?

That's an issue that economists, politicians and workers are struggling with as the U.S. finds itself in the middle of a structural shift in the economy that no one quite expected. There must be a mix-up here. We ordered a recovery, heavy on the jobs, please. What we're getting is a new kind of homeland insecurity powered by the rise of outsourcing, a bland yet ominous piece of business jargon that seems to imply that every call center, insurance-claims processor, programming department and Wall Street back office is being moved to India, Ireland or some other place thousands of miles away.

To be sure, public anxiety and election-year finger pointing have blurred some important distinctions. To set them straight: most of the jobs that have shifted to places like Mexico and China in the past several decades have been in manufacturing, which is being done with ever increasing sophistication in low-wage countries. Some have also blamed trade-liberalization deals like the North American Free Trade Agreement (NAFTA), which the Labor Department estimates was responsible for the loss of more than 500,000 U.S. jobs between 1994 and 2002. That's a significant number but modest in comparison with the millions of jobs that are created and lost annually in the constant churn of the U.S. economy. Indeed, much of the job loss during the recent U.S. recession was cyclical in nature. But in recent years, one noteworthy segment of the economy began suffering from the permanent change of outsourcing (or offshoring), particularly the movement of service-industry, technology-oriented jobs to overseas locations with lower salaries. What puts teeth into the buzz word is the sense that getting outsourced could happen to almost anyone.