No jobs for the back room boys

BT workers threatening to go on strike over the potential loss of British jobs to call centres in India should be thanked for raising an important moral dilemma: that the beneficiaries of globalisation are both big business in developed countries and poor workers in developing nations.

It is an uncomfortable truth that BT pays its Indian staff less than its British employees and makes them work longer hours. But it is also true that badly paid jobs are better than no jobs at all.

So if you phone BT's directory inquiries service, you may soon hear a voice that speaks pukka English, but whose owner is likely to be an Indian on the subcontinent. The reason is that nations such as India, China and Malaysia have a large pool of skilled, English-speaking workers who cost a small fraction of their western counterparts. For many countries, which are poor now and want to be rich later, such jobs and the export earnings they generate are vital.

In many industries, low wages allowed poor countries to break into world markets. Once nations that had previously made a living selling cotton or coffee started producing T-shirts and trainers - and their populations got richer. China's ascent, and the fact that hundreds of millions of its people have been lifted out of poverty, is due to the fact it is now the world's workshop. Now states that produce highly numerate, highly literate graduates can attract work for them and in turn get cash to fund social programmes.

During the 1990s, the focus of the anti-globalisation movement was on the sweatshop conditions that many workers endured in poor nations. This was a potent image and one that carried political weight as blue-collar workers in the west saw their jobs disappear to faraway places.

In the 21st century, it is white-collar employees who are under threat. The process is likely to accelerate over the next few years, especially in the services sector, which has come to dominate the British and American economies.

This is to do with the bottom line of some the western world's most borderless and most profitable financial services companies. Citigroup has been developing "offshore-processing hubs" for five years, transferring work once done in the west to the east. It already employs 3,000 people in India. Over the past half a decade, costs have grown by $12bn while revenue rose by nearly $35bn. The bank is the world's most profitable company. General Electric, one of the world's largest conglomerates, employs 11,000 people in the subcontinent and the company has a target to outsource 70% of its work.

It is not just the traditional back office work, which combine telephone and administrative skills, that is migrating abroad. Countries like India offer much reduced labour costs even for MBA graduates. Leave one of the best Indian universities, which score as highly as top western rivals, with an MBA, and you'll receive an average take-home pay packet of just $12,000, compared to a starting salary of $100,000 for graduates of Harvard Business School. The results of this trend can be seen on Wall Street, where banks such as JP Morgan have announced plans to outsource some of their stock market research to Bombay.

With stock markets stagnant, the push to shift business to lower-cost locations becomes stronger. Mature industrial economies face some difficult choices. A recent paper by accountants Deloitte & Touche estimated that 2m financial service jobs could disappear to the Indian Ocean rim, from South Africa to Malaysia, in the next five years.

Firms send work abroad not just because they can, but because lower costs lead to lower prices for consumers. Companies know that if they do not, their competitors will. Insurers, banks and airlines have all moved operations. Business is now so mobile that many other firms will follow.

Fighting this process would require an alliance between anti-globalisers and bankers about to lose their jobs, but it could happen - because the battle to enrich poor nations is fought not with the dismal science of economics, but with the hot emotions of politics.

In the US, arch-advocate of free trade, five states are considering legislation to ban outsourcing of local government data-processing contracts to companies in developing countries.

Congress is studying a bill that will prevent foreign software companies from working at the American offices of their US customers. In Britain, Labour MPs and rightwing columnists have called for measures to protect those great British industries: call centres and low-level IT development.

All this misses a point. The question that should be asked is: what will replace the jobs lost? Ninety thousand jobs could disappear if call centres were to depart from British shores. The blow to the economy is made worse by the fact that telephone work has created much-needed (though poorly-paid) work in areas where manufacturing jobs were previously lost.

Here government has a role, gearing Britain up for the next wave of industrial development. This means subsidies and policies aimed at fostering emerging technologies, creating well-paid jobs which industry - with help from the state - should train people for. Britain should also learn from other nations, where labour unions can accept the renewal of business practices on the condition that staff do not bear an unfair share of the costs involved in change.

Richer, economically-more advanced nations have history on their side. They have better infrastructure and technical know-how, bigger markets with easy access to key suppliers, political stability and a developed rule of law. Also, their societies have long understood the trade-offs between economic gain and political pain. These factors once outweighed the advantages of low wage rates in less developed countries; the trick is to re-energise western economies so that they do so once again.