http://www.newsday.com/business/printedition/ny-bcov123492018oct12,0,... More Is Less There's more productivity, but companies are finding highly skilled labor elsewhere - including overseas By Randi F. Marshall STAFF WRITER October 12, 2003 Perhaps everyone is asking the wrong question. For months now, experts and workers have been watching the economy grow, wondering when the hiring would kick in, as it always does after a recession ends and a recovery takes hold. But this time, the question may not be when the jobs will come back - but if they ever will. A combination of better technology, more productivity and a new focus on finding cheaper labor overseas has helped companies do the same work that they used to do with a much larger staff. Those trends show no sign of ending soon, which has led some people to speculate that something more permanent and more damaging is happening to the job market. One of them is Bruce Clark of Patchogue, who worries that he'll never find a high-level manufacturing job again. The 56-year-old electrical engineer lost his job at a radio station a year ago. Before that, all his experience had been in manufacturing. I find it kind of scary, Clark said of the tight market. It used to be there were plenty of jobs, and you'd go in for an interview, and you'd be hired on the spot. Now, you go in for an interview, and ... they might not hire anybody. People such as Clark are concerned that the work they were trained to do may disappear completely. I feel like I'm becoming obsolete, Clark said. The trouble is, I don't have the money or the time to go back to college or start training for a new career. Clark's fears are not completely unfounded, experts say. I don't think we'll see the jobs we're losing today ever come back, said Mark M. Zandi, chief economist at Economy.com in West Chester, Pa., an online provider of economic and financial analysis. It's fair to say that even in the best of times, job growth won't measure up to what we had come to enjoy, particularly in the 1990s. Most experts, including Zandi, are expecting the national marketplace to create at least some more jobs. Last month, the Labor Department said, employers added 57,000 jobs to their payrolls, a sign of a potential improvement in the job market, which has lost more than 2.6 million jobs since the beginning of the recession in March 2001. But future growth, even in an economic expansion, could be slow and stilted. Newly created jobs could be very different than those workers held before, requiring retraining and new skills. And there could be far fewer of them overall. The economy may never return to the go-go days of the late 1990s, when companies regularly added up to 400,000 jobs each month. Why not? For starters, U.S. businesses continue to do more with less. We're in a period of jobless expansion, where people can do much more than they used to, leading to huge productivity gains, said John A. Challenger, chief executive of Challenger, Gray & Christmas Inc., an international outplacement firm. What's more, when companies do hire, they don't necessarily do it here. We're no longer in an era of a U.S.-only work force - and that's also putting a crimp on job growth, Challenger said. Those trends are affecting industries from information technology and financial services to manufacturing. And they could have far-reaching implications. If you have too few jobs for the size of the available labor force, you're really raising the question of potentially declining living standards ... and subpar growth, said Long Island Association chief economist Pearl Kamer. Long Island gained 3,000 jobs in the 12 months ending in August, while New York City lost 62,600 positions in the same period. For now, businesses are more cautious, as they wait for an economic recovery to take hold and for the uncertainty to fully evaporate. But it is likely that they will remain slow to grow their work force in the future - more so than during previous economic highs. Perhaps, as Aeroflex president and chief financial officer Michael Gorin says, they've learned a lesson from the last boom and the bust that followed. A lot of people, including Aeroflex, got burned by having too many people, Gorin said. Some of the industries, like ours, hit a stone wall, and the air bags didn't deploy. Then, people had to take drastic measures. So, this time, Plainview-_base_d Aeroflex, which makes communications equipment, is being far more conservative. Gorin said, I think we're going to need to be tight until we really need the people - not in advance or in anticipation of that. In the meantime, Gorin is relying on his current staff to work harder and do more. That, coupled with better equipment and newer technology, is allowing Aeroflex to increase productivity without adding to its labor costs. Those productivity improvements are both good and bad, experts say. A spike in productivity, or the amount of output produced per hour worked, is generally applauded by economists, who see it as a sign that business is healthy. But it can be negative when it works as a deterrent to hiring or creates bad feelings among employees who might have to work harder and longer with less job security. At National Envelope, a manufacturer in Long Island City, productivity has picked up speed in the past few years but has become even more important during the recent downturn, according to chief executive Les Stern. There, new technology has allowed one machine to do the work - from cutting to printing to folding the envelopes - that 20 once did. That means that just one person is needed where 20 once worked, Stern said. It's always a labor intensive business, but it's certainly less labor intensive than it ever was before, Stern said. The economy has developed an economic version of the shortest distance between two points - technology, which gives you productivity. Despite the economic benefits, that trend gives executives such as Stern pause. We're a people business, said Stern, who has 5,000 employees. When people get hurt, we don't take a lot of satisfaction in that. We can't ignore the technology, and we can't ignore the progress, but we're not happy that there are less people than there were before. It's not only a matter of doing more with less, however. The ultimate goal is to do everything more cheaply - and everything is usually cheaper somewhere else. So, companies are finding workers abroad, offering them far lower salaries and fewer benefits. And it's not just customer service representatives and factory workers anymore. It's now including upper-middle- class jobs like financial analysts and software programmers, and other, more highly skilled workers who are joining American companies in places like India, China and Russia. Indeed, Cambridge, Mass.-_base_d Forrester Research, which analyzes technology trends, predicts that in the next 15 years, 3.3 million U.S. service industry jobs with $136 billion in wages will move offshore, with information technology leading the way. Salaries tell the story: Companies can get a computer programmer in India for less than $6,000 a year - a 10th of what they'd pay one here. Offshore allows us to invest in higher value-added services and higher value-added salaries, said Forrester group director John C. McCarthy. The mega- trend here is that there are going to be certain job categories that are going to be phased out. Although McCarthy said productivity will have a bigger impact than outsourcing, workers appear more worried about the latter, and not without cause. According to The Outsourcing Institute in Jericho, companies could save 30 to 40 percent of their costs by outsourcing services abroad. Chief executive Frank J. Casale said, The trend for offshore has begun, and it will not stop regardless of the turnaround in the marketplace. For the most part, offshore outsourcing may not involve U.S. layoffs. But it will slow job growth here - and could shift the types of positions available in the future. It's equated to the garment industry in the 1940s and 1950s, when all those jobs left for overseas and never came back, said Multimatic Products Inc. vice president Howard Kipnes, in Hauppauge. The manufacturer of high-precision machine parts for the electronics and defense industries has shrunk to 20 or 30 percent of what it was at the high, now employing just 25 people. The company is shifting its focus to distribution. At first, we figured it was just a regular cycle - but it's not. Nor is it just manufacturing. Banking giant J.P. MorganChase, for instance, is creating more than 40 new junior analyst slots at a new research facility in Mumbai, India, without slashing any positions in the United States. It frees up the analysts here to do more of the qualitative work ... the positions in India are more of the quantitative work, said J.P. MorganChase spokeswoman Kristen Batteria. It allows the positions here to be more challenging and fulfilling for domestic employees. But the company's decision was also a financial one, since salaries in India are also significantly lower. Batteria said, We are behind the curve in outsourcing and at this point, it is something we have to consider to remain competitive. Some executives are still relying on local growth. In the second quarter, InfoSys International, a technology consulting firm, began hiring again. And chairman and chief executive Raj Mehta has no plans to stop his Plainview company's gains. Mehta said: Everybody has to get adjusted, but there will be new jobs, and we will hire new people. But other information technology companies have already joined the outsourcing trend. Islandia-_base_d Computer Associates plans to add several hundred workers to its software development centers in India and China. CA already has 300 employees in India. Liiamra Corp., a software development and consulting firm, employs five people in Manhattan and the Bronx - but is outsourcing 50 workers at a call center in Pakistan, according to chief executive Rashid Khan, a Pakistan native. If outsourcing could be stopped, or there was another alternative, it would be better, said Khan, 22. But we'd go out of business if I didn't do it. Khan says the Pakistani workers are earning roughly $3,500 a year, compared with the $35,000 to $40,000 New York City-_base_d employees would earn. Although he hopes to keep building a business here, Khan said that in the future, he's likely to hire just one U.S. worker for every 10 in Pakistan. Stories like Khan's worries job seekers such as Doreen Garrido. The 47-year-old Huntington Station computer consultant hasn't had a full-time job since just after the Sept. 11 terrorist attacks - and her occasional consulting jobs are earning about $40 an hour, less than half of what they used to pay. When I entered the field 12 years ago, they were clamoring for people, Garrido recalled. Now, they're hiring new graduates who are willing to work for no money. Or, she added, companies are hiring overseas. Career experts are telling Garrido and others to ramp up on new skills. But Garrido, for one, doesn't buy it. If I went back to school, she asks, are there going to be jobs when I'm done? Or are they going to be gone, too? What They Earn The average annual salaries of a computer programmer in select countries. Figures are in U.S. dollars. Mexioc $1,400 Venezuela $2,566 India $5,880 Pakistan $3,600-$6,100 Malaysia $7,200 Russian Federation $5,000-$7,500 Poland $4,800-$8,000 China $8,952 Canada $28,174 Singapore $33,504 Israel $15,000-$38,000 United States $63,331 SOURCE: U.S. Bureau of Labor Statistics, CIO magazine, Computer World When Jobs Return After a recession ends, job creation generally returns within several months - except for the most recent economic turndown. Here's what the job picture looks like 22 months after the last recession, compared with the same time period after previous recessions. Recession period March 2001-November 2001 22-month job picture (September 2003) Down 1,038,000 (-0.8%) Recession period July 1990-March 1991 22-month job picture (January 1993) Up 1,183,000 (1.08%) Recession period July 1981-November 1982 22-month job picture (September 1984) Up 6,555,000 (7.4%) Recession period November 1973-March 1975 22-month job picture (January 1977) Up 4,043,000 (5.3%)