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2006 February 19 Sunday
Companies Shifting Research To China And India

US and European multinationals in 15 industries are planning to shift R&D work out of America and Europe.

A new study that will be presented today to the National Academies, the nation's leading advisory groups on science and technology, suggests that more and more research work at corporations will be sent to fast-growing economies with strong education systems, like China and India. In a survey of more than 200 multinational corporations on their research center decisions, 38 percent said they planned to "change substantially" the worldwide distribution of their research and development work over the next three years with the booming markets of China and India, and their world-class scientists, attracting the greatest increase in projects.

They claim they aren't doing it for lower salaries. One of the conductors of this study quoted in the article was gullible enough to believe them. But the companies want to pay the least amount of money per high IQ worker as they can manage. It is as simple as that.

Looked at on a world scale there is a benefit to this trend in terms of accelerated technological development: More high IQ workers total will be employed doing research and development. Why? Companies will hire more researchers if price per researcher is lower.

However, even as companies outsource they will lead the drumbeat for more science and engineering education in the United States. Part of this is patriotism. Part of the motive for the call for more technical education is a desire for a larger supply of smart technical workers so that employers can pay each worker less in the United States too.

The American executives who are planning to send work abroad express concern about what they regard as an incipient erosion of scientific prowess in this country, pointing to the lagging math and science proficiency of American high school students and the reluctance of some college graduates to pursue careers in science and engineering.

Some of that reluctance among Americans to pursue technical educations is due to lower salaries driven by both a shifting of technical work abroad and the import of foreign technical workers to do the work in the United States at lower salaries than natives get paid. Another problem is demographic trends that are leading to a dumber population. But the inequality taboo enforced by intellectuals on America's political left effectively has removed the most important evidence about America's long term problems outside of the sphere of public debate. As a result not only the population but the political debates have become dumb and dumber.

Share |      By Randall Parker at 2006 February 19 10:58 AM  Economics Globalization

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Invisible Scientist said at February 19, 2006 5:09 PM:

One of the theories about the decline and collapse of the Roman Empire was that the upper class was practicing birth control, and was becoming lazy overall. In a few generations, the intelligent people who were capable of managing the Empire diminished in number and quality. The same thing might be happening in the USA.

John S Bolton said at February 19, 2006 11:40 PM:

None of these things are fated, though. What this propaganda offensive from the corporate outsourcers is highly unlikely to mention, is that they get to deduct R&D expenses. If they're going to do technology transfer to hostile countries like China, and expect Americans to still support them getting this deduction for sending that work to such countries, they could be quite mistaken.

Jorge D.C. said at February 20, 2006 12:39 AM:

US and European multinationals in 15 industries are planning to shift R&D work out of America and Europe.

As you might expect...multinational corporations are practicing the opposite of economic nationalism. Therefore an economic dismantling of the nation logically follows.

And 1-1=0

Jorge D.C. said at February 20, 2006 12:54 AM:

The American executives who are planning to send work abroad express concern about what they regard as an incipient erosion of scientific prowess in this country...

HA HA HA HA. American executives were also very concerned about what they regarded as an incipient erosion of meat packing prowess in this country 20 years ago.

They did something about that, too.

Make no mistake: the corporate American executive of today is internationalist (culturally leftwing) to the core.

Kenelm Digby said at February 20, 2006 4:47 AM:

Akio Morita, the founder of Sony, way, way back in 1986 made the obvious point, often repeated before and since about the relative ratios of lawyers to engineers in the USA and Japan.
Absolutely nothing has changed since then.
To put it bluntly, lawyers create no wealth - in fact they vitiate wealth that has been created.
Engineers are the vanguard for progress and wealth creation.

Ned said at February 20, 2006 5:57 AM:

George Bush recently called for improvements in science/engineering education in the US. While this may be of some value, it won't address the real problem. Relatively few high-IQ Americans pursue careers in science and engineering because the pay is pretty bad and job security is lacking. Since science is truly borderless, many of these jobs go overseas or, alternatively, H-1B visaholders are imported to do the work for a fraction of what Americans earn (Microsoft is one of the worst offenders here - think about this the next time you hear Bill Gates bemoaning the sorry state of science/engineering education in the US). Americans who become lawyers are making a rational economic decision - the demand for attorneys is huge and the pay is pretty good - much better than for scientists or engineers. Plus law school is only three years, while getting a science or engineering Ph.D. takes at least four or five. So many people enter the legal profession and endure the often sleazy and mind-numbing work in order to have a secure job that pays well. In this, they have behaved rationally. The corporations that send work overseas or that import foreigners to do it are also behaving rationally - why should they pay a much higher price for science or engineering when it can be done more cheaply in India (or by Indians in the US)?

Invisible Scientist said at February 20, 2006 4:32 PM:

According to this web site, the median income of lawyers is not astronomic, compared to successful engineers and scientists.
But it is true that it takes a lot of hard work to become a scientists. Much more than the 5 years of graduate work.
But in any case, the beginning lawyers have rather mediocre salaries, comparable to decent engineers.

In May 2004, the median annual earnings of all lawyers were $94,930. The middle half of the occupation earned between $64,620 and $143,620. Median annual earnings in the industries employing the largest numbers of lawyers in May 2004 were as follows:
Management of companies and enterprises $126,250
Federal Government 108,090
Legal services 99,580
Local government 73,410
State government 70,280

Median salaries of lawyers 9 months after graduation from law school in 2004 varied by type of work, as indicated in table 1.
Table 1. Median salaries of lawyers 9 months after graduation, 2004 Type of work Salary

All graduates

Type of work

Private practice


Judicial clerkship and government


Source: National Association of Law Placement

Salaries of experienced attorneys vary widely according to the type, size, and location of their employer. Lawyers who own their own practices usually earn less than those who are partners in law firms. Lawyers starting their own practice may need to work part time in other occupations to supplement their income until their practice is well established.

Most salaried lawyers are provided health and life insurance, and contributions are made to retirement plans on their behalf. Lawyers who practice independently are covered only if they arrange and pay for such benefits themselves.

Patrick said at February 25, 2006 9:04 PM:

Of course there is nothing stopping people from outsourcing most legal work either. And it is happening.

One can easily imagine a firm of a couple of lawyers in the first world who stick their name on all the research, briefs and background work done in India or South Africa.

There are some difficulties: Law needs to be done in English, engineering works fine if it was done in Mandarin, Urdu or Tamil. Also, the lawyers will be faster to introduce protectionism, but that can only be enforced for the section that needs a lawyer's physical presence.

Russ said at February 27, 2006 7:59 AM:

It may be true the lawyers do not create wealth, they make wealth more efficient. The entire financial world is stabilized and streamlined by the threat of lawyers enforcing contracts. For example: During and after the American S & L crisis of the 80s, legions of attorneys sprang into action, representing all parties, sorting out the issues as quickly as possible, mostly through settlements due to the threat of trial. Everyone walked away and moved on with their life, the crisis didn't have a deep, permanent impact on the US ecoomy. During Japan's bank crisis of the 1990s they had no such private remedy, a disinterested government plodded along and this crisis held down the Japanese economy for over a decade.

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