Thursday, November 1, 2007

Offshoring - Guestworking and the U.S. Dollar

Fear of offshoring has fueled the highly-skilled guest-worker movement in the USA. My estimate of computer-related occupations, suggests that in 2005, 52.4% of the U.S. jobs in computer-related occupations, were held by non-citizens.

There is now a 1 in 2 chance, that any computer-related job sent offshore, will be the job of a non-citizen. Furthermore, the declining U.S. Dollar is causing the offshore and guest-worker threat to be diminished. The purchasing-power of U.S. Dollar based corporations has been impaired.

Protectionist policies, like buying up all of the available foreign talent (starving the competition) and benching domestic talent is going to become very expensive, considering the crude oil based, 50-cent dollar.

USD Crude Oil, Annual Peak (nominal)
Crude oil 2001 = $23.00
Crude oil 2007 = $58.05 (partial year)
(Crude oil 10/26/2007 = $91.31)

U.S. Dollar Exchange rate:
(01/02/2001) $1.00 USD = 1.058075 EURO
(10/31/2007) $1.00 USD = 0.691273 EURO

Shifting gears, the cost of offshore labor has become more expensive. The Chinese Yuan is pegged, relative to the USD, so I'll use the Euro as the control.

(Assumes Chinese and Indian offshore workers have NOT received any salary-raises)

1/2/2001 to 10/30/2007
Change Indian Rupee to USD 18.80%
Change Indian Rupee to EURO -22.16%
USD to Rupee (as compared to Euro) -40.96%

Change Chinese Yuan to USD 2.12%
Change Chinese Yuan to EURO -33.08%
USD to Yuan (as compared to Euro) -35.21%

Placing yourself in the shoes of the guest-worker, who is expected to send Rupees or Yuan home to your family, in which currency would you prefer to be paid? The USD or the Euro?

Even without a salary increase, an offshore worker in India is now almost 41% more expensive than in 2001, a Chinese offshore worker is over 35% more expensive to U.S. Dollar based corporations.


1 Indian Rupee = U.S. $0.0214181
1 Indian Rupee = E.U. $0.0226621

1 Chinese Yuan = U.S. $0.1208141
1 Chinese Yuan = E.U. $0.127831

1 Indian Rupee = U.S. $0.025444
1 Indian Rupee = E.U. $0.0176401

1 Chinese Yuan = U.S. $0.1233811
1 Chinese Yuan = E.U. $0.085539

No comments: