The Outsourced Economy and Rising Inequality
An article in The New York Times draws interesting parallels about top American companies now (like Apple, Google, Facebook) and 30 years ago (Kodak, IBM, AT&T) and provides an important lesson in changes to corporate ethos and their impact on workers.
While top companies have always focused on developing innovative technologies, creating highly marketable products, and shaping promotional campaigns towards market dominance, the modern corporations are clinically focused on their core competencies and outsource all other activities.
The New York Times article tells the story of Gail Evans who was a janitor in the Kodak Corporation headquarters in Rochester, New York who ultimately ended up as the Chief Technology Officer of the company. Her success story was helped in large measure by the corporate culture of prevalent at the time, which focused on having full-time permanent employees with company support for career development as part of the employment condition. Ms Evans was able to study computing part-time and move across to information technology services from janitorial work when her managers recognized her aptitude.
In contrast, modern day janitorial staff in companies are outsourced workers from service companies that are not supported for career advancement or skills development. This relegates such workers to an existence that is extremely difficult to change from.
The author of the article, Neil Irwin, identifies this as a major reason for the rising inequality and declining social mobility of among the modern day workforce. While corporations are driven by objectives of productivity, adaptability and flexibility in their quest for profitability and enhanced shareholder value, policymakers have the responsibility to create regulatory frameworks that ensure societal fairness and ensure pay and benefits of workers are not on a never ending downward spiral. In this endevour, professional organizations in countries such as IESL in Sri Lanka can be strong partners for developing farsighted policies.
Reference: To Understand Rising Inequality, Consider the Janitors at Two Top Companies, Then and Now by Neil Irwin in The New York Times, 3rd September 2017.
While top companies have always focused on developing innovative technologies, creating highly marketable products, and shaping promotional campaigns towards market dominance, the modern corporations are clinically focused on their core competencies and outsource all other activities.
The New York Times article tells the story of Gail Evans who was a janitor in the Kodak Corporation headquarters in Rochester, New York who ultimately ended up as the Chief Technology Officer of the company. Her success story was helped in large measure by the corporate culture of prevalent at the time, which focused on having full-time permanent employees with company support for career development as part of the employment condition. Ms Evans was able to study computing part-time and move across to information technology services from janitorial work when her managers recognized her aptitude.
In contrast, modern day janitorial staff in companies are outsourced workers from service companies that are not supported for career advancement or skills development. This relegates such workers to an existence that is extremely difficult to change from.
The author of the article, Neil Irwin, identifies this as a major reason for the rising inequality and declining social mobility of among the modern day workforce. While corporations are driven by objectives of productivity, adaptability and flexibility in their quest for profitability and enhanced shareholder value, policymakers have the responsibility to create regulatory frameworks that ensure societal fairness and ensure pay and benefits of workers are not on a never ending downward spiral. In this endevour, professional organizations in countries such as IESL in Sri Lanka can be strong partners for developing farsighted policies.
Reference: To Understand Rising Inequality, Consider the Janitors at Two Top Companies, Then and Now by Neil Irwin in The New York Times, 3rd September 2017.
The GINI Coefficient measures the distribution of income on a scale from zero (where income is perfectly equally distributed among all members of a society) to one (where a single person possesses all the income).
ReplyDeleteHowever, how statistically strong is the causality. Whats a country's outsourcing index explanation power over its GINI Coefficient
DeleteTo establish an accurate causality, data for Gini Coefficient and Outsourcing Index variations over a substantial period of time needs to be looked at. While the public availability of such data is limited, the study by Moatsos and Baten on Correlation between Gini coefficients and GDP per capita has interesting conclusions (http://englishbulletin.adapt.it/wp-content/uploads/2014/10/oecd_2_10_2014.pdf). Public access to detailed outsourcing index movement is even more limited while companies such as ISG and the Outsourcing Institute hold such data. The "World Inequality Report" compiled by the economists Lucas Chancel and Thomas Piketty due later this year might shed more light on the statistical correlations of these important economic activity indicators.
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