NCPA - National Center for Policy Analysis

Globalizing The Services Sector

February 1, 2002

Workers in poor countries aren't just sewing sneakers anymore. Thanks to the telecommunications revolution, workers in Hong Kong, the Philippines, Belorussia and even Ghana can handle accounting, finance, customer service and research via their computers just as well as their counterparts in Minneapolis.

The implications of a global boom in services are immense -- not only for the companies which take advantage of the current opportunities, but also for the millions of workers whose wages will lift them from poverty to middle-class status or greater.

  • In India, 10,000 General Electric Corp. employees handle accounting, claims processing, customer service, credit evaluation and research for GE around the world.
  • The Philippines, Jamaica, Estonia, Hungary and the Czech Republic are also establishing themselves as low-cost call centers.
  • Companies such as Hong Kong Shanghai Bank Corp., British Airways, American Express, America Online and McKinsey & Co. are already reporting savings of up to 60 percent in low-wage markets.
  • But the global competition for people with education, skills and dedication means increasing amounts of rupees, pesos or yen in workers' pay envelopes.

The change has been quick. Thanks to powerful fiber optics, businesses that could hardly get a dial tone a decade ago can link into the world. In 2000, 49 countries had competitive telecom markets - up from just 6 in 1990.

Labor unions and other anti-globalization forces predict that the process will depress U.S. wages to Third World levels. But if productivity in the U.S. keeps increasing, wages will as well. And the ability to buy inexpensive services from low-cost locations increases productivity.

Source: Douglas Lavin (Inductis Co.), "Globalization Goes Upscale," Wall Street Journal, February 1, 2002.


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