Information Technology Reference
In-Depth Information
Even if globalization is a good idea, there are reasons why a company may not
choose to move its facilities to the place where labor is the least expensive. Interestingly,
these arguments are more relevant to “blue-collar” jobs such as manufacturing than they
are to “white-collar” jobs such as computer programming. With automation, the cost of
labor becomes a smaller percentage of the total cost of a product. Once the labor cost
is reduced to a small enough fraction, it makes little difference whether the factory is
located in China or the United States. Meanwhile, there are definite additional costs
associated with foreign factories. If you include products in transit, foreign factories
carry more inventory than identical factories in the United States. There are also more
worries about security when the product is being made in a foreign country. For these
reasons, moving a factory to a less developed country is not always in the best interest of
a company [5].
In the 1990s, Intel's stock rose 3,900 percent, Microsoft's stock increased in value 7,500
percent, and Cisco System's stock soared an incredible 66,000 percent. That means
$1,000 of Cisco stock purchased in 1990 was worth $661,000 at the end of 1999. Investors
looking for new opportunities for high returns focused on
dot-coms,
Internet-related
start-up companies. Speculators pushed up the values of many companies that had never
earned a profit. Early in 2000, the total valuation of 370 Internet start-ups was $1.5 tril-
lion, even though they had only $40 billion in sales (that's
sales
, not profits) [48].
In early 2000, the speculative bubble burst, and the prices of dot-com stocks fell
rapidly. The ensuing “dot-com bust” resulted in 862 high-tech start-ups going out of
business between January 2000 and June 2002. Across the United States, the high-tech
industry shed half a million jobs [49]. In San Francisco and Silicon Valley, the dot-com
bust resulted in the loss of 13 percent of nonagricultural jobs, the worst downturn since
the Great Depression [50].
Even while hundreds of thousands of information technology workers were losing their
jobs, US companies hired tens of thousands of foreigners to work in the United States.
The US government grants these workers visas allowing them to work in America. The
two most common visas are called the H-1B and the L-1.
An H-1B visa allows a foreigner to work in the United States for up to six years.
In order for a company to get an H-1B visa for a foreign employee, the company must
demonstrate that there are no Americans qualified to do the job. The company must
also pay the foreign worker the prevailing wage for the job. Information technology
companies have made extensive use of H-1B visas to bring in skilled foreign workers
and to hire foreign students graduating from US universities.
In the midst of the high-tech downturn, the US government continued to issue tens
of thousands of H-1B visas: 163,600 in 2000-2001 and 79,100 in 2001-2002. Meanwhile,
the unemployment rate among American computer science professionals was about 5.1
percent. Many of the 100,000 unemployed computer scientists complained to Congress
about the large number of H-1B visas being issued. Some professional organizations
