Trickle Down Recessionomics

The NYT has an interesting story on how the US’s recession will affect the folks in the Desh most directly linked to our economy –

The DJ ain’t gettin’ as much play

BANGALORE, India — After years of being blamed for job losses in America and elsewhere, India’s high-tech companies and outsourcing firms are going through a downturn of their own. The global slowdown is forcing them to reduce hiring, freeze salaries, postpone new investments and lay off thousands of software programmers and call center operators.

Of course, as with many things in life, an economic “crisis” is often a relative thing. In the 70s & 80s, for example, the Natural and NAIRU rates (essentially the lowest possible unemployment rate w/o screwing other things up) were widely thought to be around 6%. Our recent 6.5% uptick in unemployment, by those standards, would have been seen as a blessing. And in a global context, the most recent US unemployment rate would literally be a godsend. For ex., France’s official unemployment rate - even in boom times – is way above this and the unofficial rate is probably closer to 10%.

So with that economic relativism in mind, what does a crisis look like through the eyes of Infosys? A mere 13-15% growth –

Infosys recently scaled back its projections for the year, telling investors that it now expects revenue to expand 13 to 15 percent, instead of the 19 to 21 percent it had forecast and far below the 30 percent annual expansion the company had been used to.

Even India’s broad economic growth forecast is still pretty heady (of course, this reflects the fact that the Desh is coming from a pretty low base) –

Goldman Sachs lowers India’s growth forecast to 6.7%

New Delhi: A day after Prime Minister Manmohan Singh said India’s growth may come down “somewhat” this fiscal, Goldman Sachs lowered its forecast to 6.7 percent from the earlier 7.5 percent on account of the impact of global financial crisis.

The leading investment banker and corporate consultancy has also revised the growth numbers for the next fiscal to 5.8 percent from 7 percent, in a clear sign that the global slowdown is impacting India more seriously than predicted earlier.

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p>Still, that doesn’t mean that folks aren’t getting hit where it really hurts -

In a country where most marriages are arranged by parents, the downturn has even taken a toll on the matrimonial prospects of those in technology outsourcing. “Because there is no job guarantees for I.T. people, for the last six months brides’ families have not been accepting grooms from this background,” said Jagadeesh Angadi, a matchmaker in Bangalore.

42 thoughts on “Trickle Down Recessionomics

  1. Gone are the days of IT managers, now the prospects of TI Cycle owners will look up again!

  2. For ex., France’s official unemployment rate – even in boom times – is way above this and the unofficial rate is probably closer to 10%.

    Right, when is the unemployment rate not high in France? Bit of trivia: while in France at a dinner or cockail party, conversations will never come ’round to what you do for a living. One can’t and won’t assume your employed.

  3. Of course, France being France even the unemployed people can find change for going out to dinner or cocktail parties.

    And they get healthcare.

    So I guess being unemployed aint quite as bad for them as it is for us Americans.

  4. The french have unrealistic expectations about employment and benefits. Remember the classic tom friedman remark – “(french workers) trying to preserve a 35-hour work week in a world where Indian engineers are ready to work a 35-hour day.” I hope i dont wind up with a head butt to the chest.

  5. Of course, France being France even the unemployed people can find change for going out to dinner or cocktail parties.

    Or the unemployed have friends that host dinners ; ) Pavan, would like to come by for an aperitif*?

    *And no, that’s not what the kids are calling it these days.

  6. I read somewhere that in countries like China and India that have huge populations, the number of people eligible for employment each year are staggering numbers. With this in mind, even a 1% or 2% drop in growth rates will cause a large number of people to be unemployed. This 1% to 2% drop is equivalent to seeing a negative number in developed countries. I thought it was an interesting analysis.

  7. Our recent 6.5% uptick in unemployment, by those standards, would have been seen as a blessing. And in a global context, the most recent US unemployment rate would literally be a godsend. For ex., France’s official unemployment rate – even in boom times – is way above this and the unofficial rate is probably closer to 10%.

    The US unemployment figures are calculated by the Current Population Survey. Unless we know about how the unemployment rates in France are calculated, these numbers might be misleading. Of course the unemployment rate in the US has been calculated on the same basis for a very long time so we have a relative picture of unemployment within the US.

  8. We don’t have healthcare in the US and France does? I thought we both had one?

    PS: I refuse to have a health care debate at SM, so don’t flame me for that, I ain’t answering. Nothing makes my head hurt than a thread where the lefties quote whatever they read at TPM and the righties quote whatever they read at Tyler Cowen or Instapundit. And the students parrot their mentors or whatever book they read last week. I’d rather eat glass than have a desi SM health care discussion…..

    Carry on!

  9. 8 · MD said

    I’d rather eat glass than have a desi SM health care discussion…..

    And I would rather smoke grass than..

  10. 8 · MD said

    We don’t have healthcare in the US and France does? I thought we both had one? PS: I refuse to have a health care debate at SM, so don’t flame me for that, I ain’t answering. Nothing makes my head hurt than a thread where the lefties quote whatever they read at TPM and the righties quote whatever they read at Tyler Cowen or Instapundit. And the students parrot their mentors or whatever book they read last week. I’d rather eat glass than have a desi SM health care discussion….. Carry on!

    You have a funny way of refusing to have debates.

    I’m just saying, I don’t think I’ve ever met an unemployed person with healthcare who didn’t get it from his/her parents.

    Pavan, would like to come by for an aperitif*?

    Can’t. Typical American 60 hour work week and all.

  11. Pavan – that’s because I’ve had almost every variation of every debate on SM already! So, I guess what I need is a new hobby. Or a life, actually.

    Take care all, have a nice non-glass eating weekend, unless glass-eating is your thing. In that case, do your own thing, peoples.

    (Okay, I will add one point to the debate – I think we should have floating cruise boats filled with good docs who go from nation to nation, charging the rich ones who can pay (but less than the inflated costs of their country) and using the excess to pay for operations and help the poor in different zones. Well, that’s if they clear up that whole pirate thing).

  12. 11 · MD saidPavan – that’s because I’ve had almost every variation of every debate on SM already! So, I guess what I need is a new hobby. Or a life, actually. Take care all, have a nice non-glass eating weekend, unless glass-eating is your thing. In that case, do your own thing, peoples. (Okay, I will add one point to the debate – I think we should have floating cruise boats filled with good docs who go from nation to nation, charging the rich ones who can pay (but less than the inflated costs of their country) and using the excess to pay for operations and help the poor in different zones. Well, that’s if they clear up that whole pirate thing).

    Don’t you hate it when other people steal your ideas?

  13. Does MSF have a floating boat? I did not know that. That would be cool. I was thinking one of those Alaska cruise boats and they could have casinos, too, to pay for the operations. So, rich person, play blackjack, get your hip fixed, help someone else pay for an operation…

    Stay clear of the pirates, MSF, you people are amazing!

  14. What point is this post trying to make? Discussed are employment figures in industrialised countries, revenue figures at one Indian company in a small leading sector, and GDP growth projections for the formal Indian economy. Most employment in India is in the rural sector, so that’s where you’d have to look to figure out what’s going on in terms of the effects on people; companies like Infosys employ a tiny fraction of people in India (written in 2002):

    In India unemployment rates are not high. The rate is around 6%. This is because unemployment rates are based on time criterion. Poor people are too poor to be unemployed for a long time. Instead, we have the concept of ‘working poor’. In other words many people are working at low wages and low working conditions in agriculture and the informal sector. Therefore, the challenge is to shift these workers to higher productivity (therefore higher wage) sectors and also create new jobs in the non- agriculture sector. Thus, the real nature of the unemployment problem is not that people are not ‘employed’ in some activity but that large number of those classified as employed are engaged in low quality employment, which does not provide adequate income to keep a family above the poverty line. The employment strategy we need therefore is not a strategy that ensures an adequate growth in the volume of employment, but one that ensures a sufficient growth in quality employment opportunities. Allowing the poor to contribute to and benefit from increased growth rates will pose particular challenges, as employment in India is largely unorganised, rural and non-industrial in nature. It will be necessary to ensure that government policy and programmes recognise the perceptions and priorities of the poor, improve productivity and create diversified opportunities to earn income

    For broader economic effects, you’d have to look far beyond GDP growth to the effects on the development of linked sectors, the political ramifications of inflation in fuel or food prices or other necessities, what impact this will have on labor, capital, and total factor productivity, etc. If you rely solely on GDP, I would use GDP per capita and use it solely to understand how this affects the length of time it would take for India to have the possibility of standards of living that exist in industrialized countries – but for GDP a drop to 6.7% is pretty dramatic in those terms from the 8-10 percent its been – particularly when this is just the beginning.

  15. Can’t. Typical American 60 hour work week and all.

    Be that way. But I’ve just set down my glass of cotes du rhone to tell you this. The healthcare system en France, isn’t really free and everybody working s 35 hour week is a myth. Really? A 60 hour work week? There’s freedom in poverty.

  16. I’m not clear on the point of this post, and I generally don’t comment on this blog, but mention of the NAIRU is a concept that cannot pass without a criticism.

    The idea of the NAIRU is a staple of a Friedman-Phelps theory that, well, nowadays has dubious empirical support. What’s the NAIRU, well, it’s the actual rate of inflation of course: so say the demagogues. The more sophisticated, perhaps some with a MS in economics — or even worse a PhD from Chicago — assert that the NAIRU is determined by structural factors like the unemployment insurance system; when the duration of unemployment insurance increases, then the NAIRU increases too. One problem is that several empirical studies show that the inflation-unemployment trade-off is much reduced in capitalist countries with wage coordination (e.g. Sweden).

    The NAIRU is a figment in the imagination of a particular school of economists. You know, the types that think that all market participants have rational expecations, and, umm, posit that bubbles, panics, and manias are impossible. There’s nothing like a crisis to clear the underbrush.

  17. Finally, there is at least one other genius in America who agrees with me that we are a planet of whiners, and are just going through a mental recession. Heckuva job, brownie!

  18. 15 · bess said

    glass of cotes du rhone

    I fear I am too much of a philistine to understand this exotic cotes du rhone of yours. That don’t sound like no kind of ‘Merrikun to me.

  19. 8 · MD said

    We don’t have healthcare in the US and France does? I thought we both had one? PS: I refuse to have a health care debate at SM, so don’t flame me for that, I ain’t answering. Nothing makes my head hurt than a thread where the lefties quote whatever they read at TPM and the righties quote whatever they read at Tyler Cowen or Instapundit. And the students parrot their mentors or whatever book they read last week. I’d rather eat glass than have a desi SM health care discussion…..Carry on!

    The healthcare debate is over. The Cato/AEI/CEI/CFG cupboard of arguments is bare. When the GOPers in this cycle taunted the Kossacks about their healthcare policies and forecast doom should we switch over to a scheme as in Canada and UK, Kossacks actually provided hard data and real life experiences. That convinced very large segments of the electorate. If the GOP had drawn comparisons to Japan and France it might have lost the Deep South as well! From Jan 1/09 Alberta – the haughty autocrat’s Harper’s assumed home province (he is actually an Ontarian) is doing away with even the minimum personal contribution to the provincial healthcare scheme. The “market driven healthcare myth” is at the point of collapse. No maths can help you win the argument when you are rooting for a system that costs the maximum per capita, delivers the worst in class health outcomes, has the poorest in class health indicators, and has a sick pharma industry as well with a drying pipeline. BTW from 2009 Cuba will conduct gender change operations for free for its citizens.

    Healthcare is such a big part of the equation that it shakes up all conventional assumptions about unemployment. If a country offers universal healthcare shave off 3-5% from the unemployment %.

    All this of course entirely ignores the very different ways in which unemployment is reckoned in different places. That’s a subject for honest labour economists and not Cato hacks.

  20. 2 · la bonne bess said

    2 · la bonne bess on December 5, 2008 02:06 PM · Direct link · “Quote”(?) For ex., France’s official unemployment rate – even in boom times – is way above this and the unofficial rate is probably closer to 10%. Right, when is the unemployment rate not high in France? Bit of trivia: while in France at a dinner or cockail party, conversations will never come ’round to what you do for a living. One can’t and won’t assume your employed.

    I personally thought that this reflects in the French they are very cultured, mannerful, and also, not so shallow. In America, and especially true amongst Indo-Americans, the first question that they may ask you is either (1) what’s your surname (a proxy for what is your native language and/or caste), or (2) what do you do. These are pre-qualifiers for further discussions.

  21. So IT has turned out to be another over hyped thing like another ‘IT’ which turned out to be a set of two wheels – Segway.

    At this rate of job losses, India will have the largest number of single, broke and unemployed ex-IT professionals. I am assuming that the matrimonials will change from ‘IT professional working in Big IT Company wants a very beautiful, highly educated, highly paid, family-loving girl” to “Ex-IT professional formerly working in Big IT Company wants an working/employed girl”.

  22. boston_mahesh m’a dit:

    I personally thought that this reflects in the French they are very cultured, mannerful, and also, not so shallow. In America, and especially true amongst Indo-Americans, the *first* question that they may ask you is either (1) what’s your surname (a proxy for what is your native language and/or caste), or (2) what do you do. These are pre-qualifiers for further discussions.

    And (3) how much you make. I’ve witnessed these interactions many times. Boston_Mahesh, I would love to agree with you about the cultured, mannerful bit but having been told that I need to explain the reason behind the Bush Administration’s actions over the last eight years simply because I’m American, and then to discuss the American obesity issue ad infinitum – I just can’t. I will say, the French are not shallow and are more interested in what you think than what you do. (exhaustingly so)

  23. I personally thought that this reflects in the French they are very cultured, mannerful, and also, not so shallow. In America, and especially true amongst Indo-Americans, the *first* question that they may ask you is either (1) what’s your surname (a proxy for what is your native language and/or caste), or (2) what do you do. These are pre-qualifiers for further discussions.

    I was there recently and yes (ad nauseam), academics like Bernard Henri-Levy are celebrities (which makes you think about an America in which Peter Singer is accorded the same amount of awe/respect/accolades–not my ideal situation.) Of course I was associating with highly religious observant French who flipped many of the stereotypes (outside of borderline rude and disrespectful behavior) I learned from Fox News–no french, as i saw, were engaged in sail-boarding, New England snobbery, the awarding of purple stars under false pretenses or the ritualistic hatred of all things low-culture and American.

    Some things (working 90% of the work week for 90% of the pay) were possible while others (wearing a shawl covering your head to work) were curiously unacceptable.

  24. Any country that gave brie, Catherine Deneuve, and Eric Rohmer to the world is forgiven extreme xenophobia and religious suppression. Sadly for Merika, sausage on a stick and Michael Bay do not make the cut.

  25. I can’t wait to visit France in the next four years. Did you feel the Obama love en France?

    …no french, as i saw, were engaged in sail-boarding, New England snobbery, the awarding of purple stars under false pretenses or the ritualistic hatred of all things low-culture and American.

    hehe. We’re better off sticking to Adam Gopnik and David Sedaris for an accurate take on les Français.

    Of course I was associating with highly religious observant French who flipped many of the stereotypes

    argh. You hint at some interesting experiences but no details.

  26. 24 · Nayagan said

    which makes you think about an America in which Peter Singer is accorded the same amount of awe/respect/accolades–not my ideal situation.

    Why the Peter Singer hateration? His tracts persuaded me to go vegetarian, so I do have a certain fondness for his powers of argumentation.

  27. Rahul said:

    Any country that gave brie, Catherine Deneuve, and Eric Rohmer to the world is forgiven extreme xenophobia and religious suppression.

    And Lyon, France gave us Rachid Taha and Jean Yves Thibaudet – merci mille fois! The headscarf issue isn’t dead by a long shot as Islam is quickly taking over Catholicism as the number one religion of France. The counrty has a beautiful history of offering asylum – Napoleon opened the country up for Jews and one Pres.’s wife (Meitterand?) established laws protecting the lives and lifestyles of the gypsies.

  28. 28 · bess said

    The counrty has a beautiful history of offering asylum

    That’s an interesting factoid, my exposure to French politics has been largely in the Sarkozy era of Bushian anti-intellectualism and us-or-them talk. Hopefully, the wave that swept out Bush and John Howard will have an impact of some sort in France too.

    (I’ve been meaning to read “The Stillborn God” by Mark Lilla to garner some historical understanding of the contemporary European approach to religion in the public square.)

  29. 27 · Rahul said

    24 · Nayagan said
    which makes you think about an America in which Peter Singer is accorded the same amount of awe/respect/accolades–not my ideal situation.
    Why the Peter Singer hateration? His tracts persuaded me to go vegetarian, so I do have a certain fondness for his powers of argumentation.

    He is without a doubt very intelligent and could yet convince me, given enough time, that I am completely wrong (you’ll have to explain how what I’m supplying below persuaded you to go vegetarian). However the observation that much of his work hinges on, that human potential can be quantified and known prior to development, is absolute balderdash. That is completely aside from the fact that he is yet anther philosopher who says shocking things about his normative view of the world and yet doesn’t have the courage (relative to his convictions) to kill his Alzheimers-struck mother or live on $30K (while selling his houses and giving away the remaining $70k) as his work would seem to indicate. A highlight would be the 28 days figure (deduced magically..mengele…otherwise?) Or his back-and-forth with Micheal Berube (whose son, Singer might graciously grant,is on equal footing with the Angus steer he rescued last week by not eating it).

    most of the other highlights are here (don’t agree with JC about most things, especially that singer is dangerous, but he is worthy of contempt).

  30. There were Gypsy camps outside the city (remember the housing projects are situated at the edges of the city–sketch factor increases as you travel outwards) and gypsy beggars inside the city. I’m not sure how this is a positive legacy of the generous asylum policy, nor am I particularly jazzed about the fact that a good amount French view south asians (especially the 50k-plus sri-lankan tamils living there) as most Americans view the Mexican-Americans living here–likely a cook (no, not the celeb chef or heroic sous-chef but the unlucky fucker who does all the work and gets none of the credit), store clerk or dish-washer (and they’re right, sadly.) Or that those French who do not make that assumption are gob-smacked that this is so. My relative living there was married into a long-time Parisian family and they couldn’t believe the treatment she regularly receives (How dare you enter the line for this EU-sponsored language class! You don’t belong here! Oh wait, you’ve a British passport! Whatevs..).

    We were trying out old-women’s clothing in a shop called Damart and the white french lady attending just refused to measure my mother, stating that she could ‘eye-ball it’ and not backing down even when told that we were from overseas. When a black employee came to the rescue she was promptly scolded by the white employee for ‘leaving her post’ and then another old french lady waddled by the black employee and exclaimed, “Vive le Obama!” It was all quite bizarre.

  31. Why the Peter Singer hateration? His tracts persuaded me to go vegetarian, so I do have a certain fondness for his powers of argumentation.

    And here I was thinking it was because you live up to an Iyer standard ; )

    That’s an interesting factoid, my exposure to French politics has been largely in the Sarkozy era of Bushian anti-intellectualism and us-or-them talk.

    Here is an interesting article. In summary, Napoleon offered emancipation to the Jews but issues of integration were a problem – as it is today in regard to French Muslims.

    Hopefully, the wave that swept out Bush and John Howard will have an impact of some sort in France too.

    If history tells us anything, it will take 200 years.(so suggests Michael Goldfarb)

  32. Nayagan, I think it comes down to a difference of perspective on his works. My first exposure to his work was through “Animal Liberation” which is seriously argued on empirical grounds of animal suffering, does not tend to make extreme claims, and does begin with a moderate and carefully written summary of our “specieism” as well as our inconsistency in showing compassion to animals. I tend to look at some of his work that is considered more outrageous not as bald statements of his belief, but as logical endpoints of his thought, which he doesn’t necessarily expect people to emulate, but serve as an invitation to think about the choices we make in various facets of life, often without any introspection. This might be a more charitable interpretation than they deserve, but that’s how I think of him since I began reading him starting with more serious, moderate and reasonable essays. As for his views on giving, again, while some of his earliest essays were radical, he seems to have moderated many of his ideas substantially into guidelines that regular people can actually follow, without going to the extremes of his earlier posited utilitarian ideas. You might be interested in his essay in the NYT magazine a few years ago: What Should a Billionaire Give – and What Should You?

  33. The fact is recession in America(if that’s what it is officially now) or the general mess is affecting India, either through loss of American clients or due to tightening up of credit for business in India, I don’t know…. I can speak of jobs; I am graduating from one of the IITs this year and the campus placement is in season….. companies which are visiting campus this year are recruiting about a fifth or sixth of last year’s numbers(and lots of cos aren’t visiting at all) and average salaries are down as well….. mass recruiters of yesteryears are coming up with good ones like “we’re only visiting this year to maintain our long standing relationship with the institute”

  34. rahul,

    i’ve read it but I can’t follow you around that particular mulberry bush. just not my bag.

  35. There were Gypsy camps outside the city (remember the housing projects are situated at the edges of the city–sketch factor increases as you travel outwards) and gypsy beggars inside the city. I’m not sure how this is a positive legacy of the generous asylum policy, nor am I particularly jazzed about the fact that a good amount French view south asians (especially the 50k-plus sri-lankan tamils living there) as most Americans view the Mexican-Americans living here–likely a cook (no, not the celeb chef or heroic sous-chef but the unlucky fucker who does all the work and gets none of the credit), store clerk or dish-washer (and they’re right, sadly.)

    As for the Gypsy situ, it isn’t positive and it isn’t generous. It’s created trouble. Here’s what I understand. (From what I’ve been told by relatives in central France.) Gypsies can set up camp on your property, tap into your electrical lines, create a mound of trash and you, the property owner, will be the one to pay the electricity they use and be responsible for the clean up when the gypsies have moved on. Needless to say this fact or perception has caused severe resentment against the Gypsies.
    The view that South Asians are the Mexicans of France is new to me.

    We were trying out old-women’s clothing in a shop called Damart and the white french lady attending just refused to measure my mother, stating that she could ‘eye-ball it’ and not backing down even when told that we were from overseas. When a black employee came to the rescue she was promptly scolded by the white employee for ‘leaving her post’ and then another old french lady waddled by the black employee and exclaimed, “Vive le Obama!” It was all quite bizarre.

    Gasp…you said old women’s clothing. ha. Old waddling French ladies are a crusty bunch. I think she’d have acted that way if your mother were a WASPy American.

  36. Of course I should be saying Roma or Manouches, not Gypsies.

    I read recently that Heifer International is helping a Roma community in Slovakia. I hope to donate a goat.

  37. I tend to look at some of his work that is considered more outrageous not as bald statements of his belief, but as logical endpoints of his thought, which he doesn’t necessarily expect people to emulate, but serve as an invitation to think about the choices we make in various facets of life, often without any introspection.

    Certainly the shortest and sweetest exposition of Singer’s work I’ve seen lately.

    I read recently that Heifer International is helping a Roma community in Slovakia. I hope to donate a goat.

    good on you! a thoughtful holiday season gesture :) i will be donating to the human fund as usual, and being inventive with that festivus pole.

  38. Of course I was associating with highly religious observant

    so, nayagan, how was that particular congress?

  39. “so, nayagan, how was that particular congress?”

    What do you do when visiting family?

  40. everybody working s 35 hour week is a myth.

    That might be, but we’ve reached the French ideal here in America in our delightful non-recession.

    Note also that the length of the typical workweek dropped to 33.5 hours. That’s the shortest number of hours since the Department of Labor began keeping records on hours worked, back in 1964. A significant number of people are working part-time who’d rather be working full time. Coupled with those who are too discouraged even to look for work, I’d estimate that the percentage of Americans who need work right now is approaching 11 percent of the workforce. And that percent is likely to raise.
  41. The healthcare debate is over.

    Oh contraire – the health care debate, like the global warming debate, and many others, is just beginning. These things have now been acknowledged as a problem by the market, by liberals, by progressives, and by radicals – i.e. everyone except the very small segments that had short-term benefits from postponing solutions to these problems. But now the real games can begin – what will be the ideology and institutional makeup of the health care program? What will be it’s overall aim (universal coverage or rationalization of heatlh care financing). Will it disconnect health care from employment or not (which would be a significant advance for labor right and which emplyoers would go along with as well)?

    Similarly, do you get a global warming initiative that focuses on energy independence but continues to pump out noxious gases (hold the comentary about my writing people – your clever joke is hereby anticipated) and promote food crises, or does it focus on mass transportation, moving away from tyhe car, stronger urban planning practices (see jane jacobs), and reducing consumption above all, with a fair sense of internationalism to boot. And of course there are many other options.

    All of these problems – which have both pro-market and pro-people and everywhere in between and outside solutions will now be the subject of a REAL debate – if we want one.