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America's middle class is in trouble. Here's what that fact means for the world's largest economy — and the rest of planet earth.
 

One way India won't steal your job

India's manufacturing sector continues to lag, as exports plunge 15 percent

If you're not a regular reader of the international business pages, you might occasionally wonder why nothing you own says "Made in India."  

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India: Outsourcing goes rural, with a few hiccups

Half of new engineers hail from small towns and villages and are reluctant to move to the city, says study.
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Indian employees of the Quark call center work during their night shift, late 09 May 2005 in Mohali, in India's northern state of Punjab. (STR/AFP/Getty Images)

India's business process and IT services outsourcing companies are beginning to look to small towns and villages for their next wave of expansion, according to a new report from the Wall Street Journal.

It's a move that won't likely have a dramatic effect on the American middle class--as these are the types of jobs that were already lost long ago, or that most American job seekers lack the IT skills to do. But it could have a tremendous impact here, the WSJ suggests.

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Want to dominate the call service game? It's all in the accent.

Americanization gives Filipino call center agents the edge
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Filipino call center agents attend to U.S. clients at a call center in Quezon City outside the capital, Manila. (ROMEO GACAD/AFP/Getty Images)

When Americans' modems crap out, or their credit cards go missing, their calls to customer service hotlines are increasingly being answered by Filipinos in lieu of Indians.

India's dominance is the call center industry is entrenched in U.S. pop culture. Miscommunication between midwestern callers and heavily accented Indians feigning names like "Greg" or "Susan" is a go-to joke for hack stand-up comics and even the subject of a romantic comedy.

But guess what? As of last year, there are now more call center agents in the Philippines than India. According to the New York Times and other outlets, Philippine centers employ roughly 400,000 agents, which tops India's figure by 350,000. 

The Filipino edge is owed, in part, to their Americanized accents.

Like India, which was once ruled by England, the Philippines was also colonized by an English-speaking nation: the United States. Today, the Philippines is far and away Asia's most Americanized nation. Filipino pop culture embraces hip-hop, fast food and Hollywood and, even in the poorest quarters, it's easy to find families with siblings or cousins residing in the states.

In the Philippines, call centers handling calls from the U.S. can easily recruit college-educated Filipinos who speak English like Americans. Check out this CNN video, filmed inside a Manila center, and try to tell me these guys don't sound native.

That doesn't mean Indian outsourcing is waning on the whole. Far from it: my colleague Jason Overdorf in New Delhi explains how India is moving on to more sophisticated, tech-savvy forms of outsourcing. 

But when it comes to helping your cranky uncle reset his ATM PIN number, the Philippines is better stocked with men and women whose accents sound familiar. He might even think he's speaking to someone in California.

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Who belongs to the Chinese middle class?

Meet these new members of the not-quite-poor, not-quite-rich in the Middle Kingdom.
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Commuters travel in the subway of Shenzhen. (Philippe Lopez/AFP/Getty Images)

HONG KONG — Over the last decade, as America’s middle class has been squeezed and shrunk, millions of Chinese have risen from poverty, creating a new — if still hazily emerging — middle class in the Middle Kingdom. They are beneficiaries of the trends that have gutted America's economy. Now, much of the world’s hope for future growth rests on the development of them as consumers.

So who are these new members of the not-quite-poor, not-quite-rich? In some ways, they resemble their American counterparts, but the differences are notable. Below, a brief sketch of this all-important group. 

Size and Income

Average incomes in China are still a fraction of what they are in the US, so anyone making from $6,000 to $15,000 a year is generally considered to be in the middle. In China, that amounts to 350 million households — a figure that continues to surge. Since 2000, the amount of disposable income available to urban households has more than quadrupled. 

Professions

Think city-dwelling lawyers, teachers, doctors, entrepreneurs, real-estate managers and salesmen. In her book, "The Chinese Dream," Helen H. Wang defines this group as “urban professionals and entrepreneurs from all walks of life, who have college degrees.” Besides income, one Chinese scholar argues that to truly belong to the middle class, Chinese people must be managers, business owners or technians.

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The true cost of “Made in the USA” Levi’s? $178

Is the “ultimate icon of American culture” still affordable?
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A worker sits on a pile of jeans in a garment factory in Guangzhou, China. (China Photos/Getty Images)

BANGKOK, Thailand — Want a “Made in the USA” tag stitched inside your iconic Levi’s 501 jeans?

Your patriotism will cost you.

In the outsourcing era, all Levi’s jeans are stitched outside America with one exception: a single line of jeans produced at a factory called “White Oak” in Greensboro, NC. The mill is staffed by old hands who’ve narrowly survived the American garment manufacturing industry’s collapse. 

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India: What is outsourcing?

Those guys named Raj represent an ever smaller portion of the jobs going to India.
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An Indian man walks past old computer screens outside a shop in New Delhi's largest computer market at Nehru Place. (Manpreet Romana/AFP/Getty Images)

NEW DELHI, India — Here's a news flash for you: The outsourcing business isn't at all what you think it is.

Based on its image in popular culture, you'd think “business process outsourcing” was limited to handling phone calls for technical support and dunning people with outstanding credit card payments.

But that stuff represents an ever smaller segment of the BPO business — which also includes high-growth areas like data mining. And BPO itself is only a small part of what's known as “outsourcing.”

According to India's National Association of Software and Services Companies (Nasscom), India's BPO segment is worth about $16 billion, and growing at 12 percent. But other types of work both accounts for more money and higher growth.

IT services – which includes not only application development and maintenance but also testing, infrastructure management and system integration, and all the other stuff you think of your in-house IT guy as doing – grew 19 percent this fiscal year to account for exports of $40 billion, according to Nasscom.

Engineering design and research and development — the stuff you think your in-house engineers are doing — grew 14 percent to generate export revenues of $10 billion, thanks to a decline in the number of people with the necessary skills in the US and Europe.

Outsourced Software Product Development (OSPD), already worth more than $1 billion a year, is expected to grow 17 percent this year.

And in more bad news for you IT guys, remote management of computer servers, networks and desktops, or “RIM,” more than doubled to reach $7 billion.

The upshot? Maybe you should start working on understanding that Indian accent, instead of mocking it. The next Raj you talk to might be your boss.

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America the Gutted: Golfing Motor City (VIDEO)

Tired of Industrial Ruin Porn featuring the gutted city of Detroit? Try crossing it with a golf club.

NEW YORK — The Motor City has long been the poster child for America’s industrial decline.

But, aside from the porn-ish slide shows of industrial ruin posted regularly on news sites, it can be hard to get a grip on what the place actually feels like.

This summer, a knicker-wearing, golf club-toting TV reporter has managed to do what dozens of photo montages have not.

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America the Gutted: What Cleveland and Napa have in common

The loss of manufacturing jobs has left one-time industrial powerhouses on par with California wine country.
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Graphic. (Kyle Kim/GlobalPost)

NEW YORK — To wrap your mind around just how far America's once-great manufacturing cities have fallen, consider this:

The industrial-era stalwart of Cleveland, Ohio now has the same percentage of production workers in its labor force as Napa, California's wine mecca.

And in case you've never passed through Cleveland, the change hasn't come because Ohio suddenly spawned a sunny climate and wine industry.

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The return of “Made in Myanmar” to US closets

As sanctions lift, impoverished nation likely to resume stitching American brands.
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A factory worker in Myanmar carries shirts at the TNT garment factory in Yangon, Dec. 9, 2011. (Paula Bronstein/Getty Images)

BANGKOK, Thailand — If you’ve got a pair of tattered, grunge-era Levi’s, check the tag. If it reads “Made in Myanmar,” you’ve got a relic from a time when US apparel makers were still willing to do business in Myanmar (also called Burma) and risk condemnation for colluding with ruling despots.

A lot has changed since 1992, the year Levi Strauss closed Myanmar operations while announcing it wasn’t possible to do business there without “directly supporting the military government and its pervasive violations of human rights.”

Now, as a reform movement nudges Western sanctions towards the dustbin, Myanmar appears primed to compete with other Asian nations on the come-up (think Bangladesh and Vietnam) and start churning out American clothing brands en masse.

This is almost inevitable. Stitching clothes is highly repetitive, low-pay work that gravitates to poor countries. Myanmar, located between China and India, hits all the right strategic and economic notes. In fact, the country already has a sizable industry that was gutted in 2003, the year American trade embargoes criminalized shipping clothes to the US.

Myanmar is among the poorest nations in Asia. And when extremely poor countries attempt to pull themselves off the ground, they often have little else to offer but dirt-cheap wages and unskilled masses desperate for steady jobs. That’s why garment stitching is, in the words of Japanese researcher Toshihiro Kudo, the “first rung on the industrialization ladder.” 

Expectations are high, he writes, that garment stitching will become this ascendent nation’s “driving force” in the manufacturing sector.

So if you buy cheap threads from H&M, The Gap or any of the other brands that already source clothes from impoverished reaches of Southeast Asia, expect “Made in Myanmar” to reappear in your closet in the very near future.

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Why China’s middle class is nervous

Experts argue that the problems created by the last decade of growth in China may outweigh the achievements.
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Graphic. (Kyle Kim/GlobalPost)

HONG KONG — Almost as quickly as China’s burgeoning middle class has catapulted into existence, there have been fears that its days of heady growth could be ending.

With the economy slowing, and the manufacturing boom that propelled it looking shaky, many experts inside and outside the country argue that it will have to go through a period of painful rebalancing before middle-class growth can be resumed.

In a barnstorming editorial for Caijing magazine titled “The Ten Grave Problems,” Deng Yuwen argues that the problems created by the last decade of growth may outweigh its achievements. Among the problems he lists is the “failure to nurture and grow a middle class.”

He argues:

In the last decade, benefiting from the economic boom, the sheer number of middle-class people increased. However, the growth rate lags far behind general economic growth rates, as a result of the lack of any mechanism to nurture the middle class. As regards income distribution, reform has stagnated, resulting in an ever-increasing gap between rich and poor.

The road leading towards the middle class is becoming even bumpier for low-income households. High housing prices have eroded people’s spending power, putting middle-class living standards beyond their reach. Bearish stock markets have sucked in people’s savings yet denied them the chance of getting returns on investment. These are just some areas where the government should have done better.

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