Cheap labour at the end of a phone line

Why is the Third World doing the West's office work? By Paul Gosling

While Tory Euro-sceptics worry about the effect of the Continent on the British economy, the European Commission and trade unions are beginning to worry about changes at a more global level. From today, for example, Swissair's ticket accounting, computer entry queries and discount scheme will be carried out by 370 staff in one office - in Bombay.

The same centre is also doing the ticketing for an associated company, Austrian Airlines,. and the intention is to move more tasks there from Swissair's head office in Zurich. Behind the geographical shift is some hard-edged accounting: operations transferred to the office since it opened in January 1993 have achieved 50 per cent savings.

Similarly, Lufthansa and British Airways have transferred some of their data processing to areas with lower wage costs. BA has had a small unit in New Delhi since 1990 to decipher inaccurate computer entries from its 20 computer reservation systems worldwide and spot errors in booking codes. The company says this operation was established to overcome recruitment problems in the UK.

Concerned at the loss of jobs within the European Union from this process - called "teletrade" - the EC's employment and transport directorates have commissioned a study on the social impact of the evolution of the aviation industry, including the trend towards what is termed "delocalisation".

The study has been prompted, in particular, by the French government's concern at the loss of jobs to non-EU nationals. While France is also worried by the use of Romanians as cabin crew by EU airlines, the main concern is the growing trend by First World airlines to use Third World countries for electronic data processing.

A number of big airlines have established Third World divisions to operate their administration in moves that seem certain to be copied not only by other airlines, but also in other industries that rely heavily on data processing. Trade unions contend that some large corporations are using Third World teleworkers, particularly in India, because of the much lower rates of pay.

American Airlines has much of its data processing undertaken by an associate company, Data Management Services, which has personnel in Barbados and the Dominican Republic. DMS employs 1,600 staff across the two units, is the largest employer in Barbados, and processes claim forms for several US insurers.

"Ticket bookings will stay in the country of the passenger," predicts Stuart Howard, secretary of the civil aviation section of the International Transport Workers' Federation. "Other functions can be located anywhere. It is the kind of thing that other industries, such as garments and the auto industry, have been doing for some time, using electronic communications to enable them to relocate functions."

Earlier this year Horace Mitchell, a management consultant, told a conference organised by the Labour Telematics Centre that teletrading will grow significantly. Mr Mitchell argued that many large corporations would cut their staffing further, using the international labour market and part-time workers to create a more flexible workforce. He added that this would not always take jobs away from the EU, pointing out that American Express had moved some processing to Brighton from the European mainland.

Bill Walsh, a national officer for the Manufacturing, Science and Finance union, also believes that some parts of the EU could gain jobs. "I know of a US insurance company that set up a branch in a remote part of County Kerry [in the Irish Republic], to be staffed by a highly educated, young, local population at much less cost than in Chicago or elsewhere in the US. But there is clearly a risk when employers in the UK see the opportunity for work to be done in the Third World for a fraction of the price in the UK."

Peter Skyte, an MSF regional officer, adds: "It isn't just the big companies. A doctor's practice in Washington sends its dictation to India for typing and gets it back in seven minutes by satellite. You can see the scope for more of that type of thing."

Examples of teletrade have so far mostly involved data processing, where comparatively low-paid work can be sent abroad to even lower-paid workers. It is predicted, though, that the greatest growth will be in occupations that attract higher salaries, such as accountancy and computer programming, where much greater cost savings can be achieved. Indeed, a recent large contract for programming awarded by the Royal Bank of Scotland was won by Tatar, an India-based company.

Unions are aware that teletrading is likely to lose their members jobs and undermine their own role, but they can do little to protect staff. In April the Transport and General Workers' Union signed an agreement with the Teamsters in the US and the Canadian Auto Workers. This said that each will refuse to accept any work transferred by Air Canada from one country covered by the agreement to another. But any transfer is more likely to be to India than within the developed world.

The unions accept that resistance achieves little. "Technology has a habit of rolling over people who get in its way," says the TGWU's transport officer, Matthew Campbell. "It is not a matter of principle, it is about dealing with reality." Instead, their approach is to encourage employers to make productivity gains while keeping activities in their existing localities.

Bill Walsh of the MSF says: "Employers can miss out on the opportunity to get work done more flexibly in the UK because of their determination to stick to existing patterns of work. I am a teleworker and I am struck by the lack of progress towards teleworking, principally because of the resistance of managers who don't seem to think they can get work done unless people are locked into the clerical factory. I can see that getting people to traipse into the office in the Third World, replicating the existing system, could be very attractive to them."