The average starting pay for an electrical engineering graduate from Carnegie Mellon University is $56,000. On the other side of the globe, the starting pay for a graduate with the same degree from the Indian Institute of Technology is $10,000.

Gautam Singh, Associated Press

The excitement was evident last year at this conference to introduce 27,000 schoolchildren in Bangalore to surfing the Internet -- the technology that has made it possible for young Indians to compete directly with Americans for jobs. Click photo for larger image. Today's Installment Wage insurance: a way to ease outsourcing angst? About the author The Series DAY ONE: Where did jobs go? Look in Bangalore DAY TWO: It hurts if it's your job going abroad DAY THREE: All day, all night, the phone calls come in

A decade ago, those two highly educated young people would rarely have competed for the same job. Today, the Internet and cheap telecommunications costs have changed all that.

The yawning salary gap between Pittsburgh and Bangalore is a stark example of the challenges facing American workers as the economy moves into a new phase of globalization -- the way in which white-collar services can be performed virtually anywhere.

The trend is in its early stages, but it's already raising questions for policy leaders about how to make U.S. knowledge and service workers more competitive, and how to help those who lose their jobs make the transition to new careers.

The challenge is clouded with uncertainty.

While the first jobs that went to India and other low-cost nations were mostly routine work, such as software maintenance and call centers, no one is sure how many higher-skilled technology jobs will follow.

Bangalore's leafy green terrain already is dotted with office buildings where engineers do top-shelf intellectual work for U.S.-based companies such as Cisco Systems, General Electric, HP, Intel, Motorola and Texas Instruments.

On the other hand, it's unclear just how many American jobs have actually been lost because of outsourcing.

Many politicians have been quick to blame outsourcing for the jobless economic recovery the U.S. is experiencing. But the fact is, the unending corporate drive for productivity improvements inside America -- using technology and domestic contracting to get more output from each worker -- may be an even bigger culprit.

And a recent U.S. Commerce Department report noted that in 2003, other nations outsourced far more white-collar work to the U.S. than the U.S. did to other nations. U.S. exports of legal work, computer programming, telecommunications, banking, engineering, management consulting and other private services jumped to $131 billion in 2003, compared with $77 billion in such services that the U.S. imported from other countries.

Many free-trade advocates say that American workers eventually will benefit from the "next big thing" to come along in technological innovation, just as they did when personal computers and the Internet arrived on the scene.

But it isn't evident yet what that next big thing will be, let alone whether it will be developed in America.

In the face of all this ambiguity, then, here are some of the main issues that the United States will need to deal with over the next five to 10 years:

Help for displaced workers
Even those who disagree over whether globalization is a benefit or a threat to the American economy agree that people are being displaced by offshore outsourcing of white-collar work, just as manufacturing workers were before them.

One problem workers in America face in trying to adapt to the global economy is that they are rooted in specific households and communities, said John Ralston Saul, a Canadian author who wrote an essay on the negative effects of globalization in the March issue of Harper's magazine.

"You can't expect two parents who live in a town with kids in the public schools to suddenly buy a plane ticket and move to India to become more efficient," he said in an interview.

It isn't just people in the West who understand this problem.

Professor Sowmyanarayanan Sadagopan, founding director of the Indian Institute of Information Technology in Bangalore, was a graduate student at Purdue University in the 1970s. On return visits, he has seen the negative effects of international competition on the once-thriving steel town of Gary, Ind.

"If I were a [resident] of Gary, I would curse," Sadagopan said.

As an educator and consultant to some of the largest corporations in India, Sadagopan is a proponent of free trade. It will benefit his students and the companies he advises.

Yet he speaks with sensitivity about its impact in the United States,

"Unfortunately, life is not economics. Life is much larger. We are dealing with affectionate, loving human beings. So, we possibly have to take care of the transition."

Several proposals are now circulating for how to ease the dislocation caused by outsourcing.

One is wage insurance, a government-funded program that would pay a worker a share of the difference between an old job and a new one if the new job's wages are lower. Another idea is subsidizing health insurance to ease the burden during unemployment.

Brandeis University Professor Robert Reich, former secretary of labor in the Clinton Administration, supports both wage insurance and portable health care benefits. He also says that job training needs to be easily accessible and the government needs to provide tax cuts to middle-class people rather than the wealthy. Middle-class families are the ones whose extra spending would best stimulate the economy, he says.

Another idea getting attention from both the Democratic and Republican parties in this election year is expanding the existing Trade Adjustment Assistance Act to cover software and service workers.

The trade adjustment law provides unemployment benefits and tuition aid for manufacturing workers who can prove their jobs were lost because of foreign competition.

The program, expanded slightly at the insistence of Democratic representatives in 2002, has been touted by President Bush in recent speeches, and U.S. Trade Representative Robert Zoellick has hinted the administration might back a bill to expand its benefits to engineers, architects and call center workers.

Not all bad
While outsourcing can be devastating to many families, it can also have broad benefits for American society as a whole, its advocates say.

	Graphic: The so-called 'gold collar' jobs will prove harder to export overseas. Click graphic for larger image.

In the 1990s, high-tech companies moved the production of computers, memory chips and telecommunications equipment to Asia, lowering their cost. Many American businesses responded by investing heavily in productivity-enhancing computer technology, which helped to usher in faster income growth, lower inflation and new employment.

Economist Catherine L. Mann, of the non-profit Institute for International Economics, thinks America may be poised to reap a similar technology benefit as software development moves to Bangalore and other lower-cost locales.

By driving down overall prices of software and service packages, Mann argues, information technology will become more affordable and accessible to small and medium size businesses that have yet to fully computerize.

And that, Mann argues, could create jobs for people here to make those software packages work -- data entry workers, database administrators, computer software engineers.

Another substantial benefit of outsourcing, others say, could be greater peace and stability in the world.

India, a democracy with a fast-developing free market, has taken to heart the American lesson that education, competition and hard work can bring prosperity. Its young technology workers admire American culture and values.

Advocates of outsourcing say that is far preferable to what is happening in neighboring Pakistan, or and in Saudi Arabia and Afghanistan, where al-Qaida has flourished not by engaging young people in commerce, but by immersing them in a culture of violence and hatred toward America.

"In many ways we represent what is good about globalization," said Nandan Nilekani, CEO of Infosys Technologies, the Indian software giant. "If we can get more and more people to become part of the global middle class, then we are all interdependent. That's great from a security point of view. It's a good force for change."

Whole-life education
As millions of young people in India, China and other nations begin to enter the modern economic world, the biggest burden in America may fall on those charged with educating the workers of the future.

At Carnegie Mellon University, engineering school Dean John Anderson has gathered business executives together to discuss outsourcing and help the school come up with new programs that will address the challenges of globalization by figuring out how to differentiate American graduates from their counterparts around the world.

"Our goal is to prepare students to be leaders and have productive careers with engineering backgrounds, and that means being competitive not just in the U.S., but overseas," Anderson said.

He understands as well as anyone how daunting the task will be.

Anderson noticed last year that manufacturers were siting more factories overseas and moving the attendant engineering functions along with them. Research and development is gravitating there as well.

One prominent example is General Electric Corp.'s new John F. Welch Technology Center in Bangalore, where more than 1,700 researchers, scientists and engineers are working on such high-end projects as making jet engines quieter, turbines more efficient and plastics more resilient. Employees there have applied for scores of U.S. patents since the center opened four years ago.

Researchers for HP in Bangalore are working on computer speech recognition and other ways of making computer technology easier to use. At Motorola, Indian engineers are writing software for new phones. At Intel, they are designing a new chip for desktop computers and pushing to improve wireless broadband technology.

While lower salaries encouraged U.S. companies to move research operations there, that was only one part of the equation. The deep pool of talent was another.

The United States graduates about 70,000 engineers a year, some of whom will leave the field for other work. India produces about 200,000 engineering graduates or diploma holders a year. On top of that, other colleges in India graduate another 2.1 million students annually, many of whom gravitate to information technology and related fields.

"There are very good people in engineering in other countries. They are smart people, people to be reckoned with," Anderson said.

Despite all that, Anderson sees the competition as a positive challenge to schools like CMU. U.S. engineers lead the world in innovation and technology integration, he believes, and can continue to do so with the right preparation and ingenuity.

"I think this is an opportunity," he said.

Around-the-clock world
One suggestion Anderson heard from business executives here was to prepare students to work with engineers in other countries. With time zone differences, a company can have almost around-the-clock access to engineering talent, resulting in faster research and getting products to the marketplace more quickly.

Respironics, the Murrysville-based maker of respiratory equipment, employs engineers in Asia to work on product development along with local engineers. "When they go home, our people are coming to work," Respironics Vice Chairman James Liken told a CMU panel. "They can almost work on the same thing."

II-VI Inc., a maker of optical elements used in laser technology, manufactures optical material in Saxonburg but does cutting, grinding and polishing in China, Singapore and elsewhere in the United States. The challenge for the company's engineers is to make the product exactly the same no matter which factory does the processing.

"You'd be surprised how tough it is for engineers to work that out," II-VI CEO Carl J. Johnson said. "You need to create teams of engineers in different locations that work together on a problem."

He, too, sees that as a plus. "What a great thing to prepare our engineers for -- and it can be a lot of fun as well."

As a result of ideas like these, CMU has instituted a new minor for engineering students in international studies, and has offered an undergraduate course in business concepts. Engineering students also can participate in international collaborative design courses.

If there is any worry on the education front, some say, it is not over elite, innovative schools like Carnegie Mellon, but over the nation's basic school system.

Adam Lerrick, another CMU professor and an international business expert, said that when he looks at the future of the American workforce, "I'm not as concerned about the high tech workers as I am by the much larger group who have minimal skills."

That is the group that is truly vulnerable to global competition -- a phenomenon that can be seen already in Mexico, where factory workers with minimal education are losing their jobs to even less expensive employees in China.

Glenn Meakem, co-founder of the Internet-based supply chain company FreeMarkets Inc., is blunt about the lessons Americans need to learn from such stories: "Give kids a good education or they are screwed."

While Meakem thinks Pittsburgh is more economically diverse than it was in the 1980s, when the region was dependent on steel, he also believes that will put an even greater premium on a good education.

"Parents must understand that their kids are in the best, wealthiest country in the world with the most stable political system," but "no one will take care of them. They must do it themselves."

When the promise fails?
Paul Almeida, president of the AFL-CIO's department of professional employees, said that the problem with Meakem's message is that many people have responded to globalization by getting new high-tech skills, only to see their jobs disappear anyway.

"They're doing exactly what they were told to do by educational and governmental leaders: Go to college and get knowledge and you will be employable," Almeida said. "That's not going to be the future if this outsourcing continues."

Yet it's not just a matter of getting any training -- but of seeking the right kind no matter what age you are, says Anne McCafferty, director of the Human Capital Policy Initiative at the University of Pittsburgh's Institute of Politics.

"It's a lifelong proposition. There's no terminal point in skill-building or education these days," McCafferty said. "The days when you thought that just because you had your associate degree, or your engineering degree, that you never had to go back to school, are gone."

McCafferty's mission includes helping local schools and students better understand the changing economy. She encourages them to think of jobs in terms of which ones have the potential to move overseas and which ones are likely to stick in America.

She calls the ones with staying power "gold collar" jobs, a phrase borrowed from the title of a book, "The Gold Collar Worker," by CMU professor Robert E. Kelly.

McCafferty's gold-collar jobs are a mix of blue collar, managerial and service occupations. The underlying thread is that most of them involve human interaction that can't be sent over a wire.

Health care is one industry with a lot of such "high-touch" jobs that don't all require advanced degrees. McCafferty uses the example of dental technicians -- a job that's in demand and pays an average of about $40,000 a year, and which obviously requires close personal contact.

Gold-collar jobs are ones that "require analytical problem solving skills, creativity, innovation, and a lot of them are jobs that cannot be outsourced or offshored because they require face to face contact and interaction."

One man who tries to take a balanced view of the emerging picture is Krishna Pendyala, a native of India and an American citizen who deeply values the freedom offered by America, but is also promoting outsourcing as vice president of Pittsburgh's iGate Corp., a provider of information technology and business services in locations around the world.

On the plus side, Pendyala said, companies that outsource can reduce their costs, increase their profits, lower their prices to customers and give a boost to investors through higher stock prices and dividends.

The downside, he knows, are the human costs in lost jobs, increased workloads for those who remain with a company, decreased job loyalty and stress.

But for good or ill, there is no going back, he says.

"What has changed is the global league. The league [includes] the whole world. It's the mega-league and [Americans don't know] all of the teams. And to me, I think, that is what we need to wake up to."

In the end, Pendyala thinks the answer for the U.S. will rest in the traits Americans have always shown -- innovation, drive, entrepreneurship and leadership.

"I don't think we will ever run short of that," he said.