So AT&T is bringing 5,000 call center employees back to the U.S. and claims it will not send any more such jobs overseas. This is undoubtedly good for an economy desperate for jobs, but not for the reasons you might think, at least not directly, and probably not on a net basis, either.
Do not, for a second, think that AT&T is doing this for what I’d consider to be the “right” reasons, e.g. commitment to better customer service or to helping the U.S. economy; instead, this is an obvious move to win points with the government in efforts to get their T-Mobile deal approved (update as I write this: the Government just filed to block the deal on anti-trust grounds). Apparently the DoJ and other regulators are growing a pair. I generally consider this a good thing. Moving on…
AT&T has over 250,000 employees, a not-insignificant portion of them in wireless, while T-Mobile employes (tens of) thousands more. How many employees do you think are going to be laid off if the merger goes through? I’d say at least 5,000 when all is said and done is a pretty damn conservative estimate. It’s still early, but it looks like the Government has balked at AT&T’s “job creation” claims designed to detract not just from anti-trust concerns, but the inevitable “job destruction” that will inevitably result from a merger between two massive competitors. From a jobs perspective, industry consolidation is seldom a good thing, and with unemployment still so painfully high, so long as its not over-stepping its bounds, I don’t see this as necessarily a bad move by the Government. Despite claims from AT&T’s CEO to the contrary, I’m beyond skeptical that a combined entity will somehow save/create more jobs than individual ones will. I mean, wouldn’t job creation kind of defeat a not-insignificant part of the “rationale” (“synergies’) for the merger?
Anyway, while AT&T’s “job creation” announcement here is essentially a lie, I’ve long thought that eventually, due to factors like developing country wage inflation (relative to wage stagnation here in the U.S.), nexus of control problems, customer attrition/impatience dealing with “Michael” in Mumbai, etc, many jobs that have been outsourced in the past 10-20 years will eventually come back to the U.S. I don’t think we’re there yet, although there are some signs that we’re getting close. I suspect in the next few years we’ll see enough examples of IP theft (outright or “soft” theft), fraud, customer/brand damage, and wage inflation in developing nations that many US-based Multinationals seriously consider whether outsourcing was such a good idea. I further suspect for some firms, it will be too late, and they will have thoroughly shot themselves in the foot.
Its one thing to just outsource your call centers or back office operations, but when larger and “higher value” parts of the supply chain/company operations get outsourced, its going to be near impossible to bring them back, because the outsourcing firms are now the ones with the comparitive advantage and expertise, not the US/western firm that hired them years ago to cut costs in the short term. We shall see, but don’t be surprised when firms try to take back control of their now outsourced (formerly) core operations and find that its not possible, and if it is, will be far more difficult/costly than they expected. Ugliness will ensue and many firms will learn the hard way that seemingly “obvious” short-term decisions (outsourcing to countries with 1/40th-1/10th the labor costs of the U.S. and far lower/fewer regulatory burdens) have very painful consequences.