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Yet Another Thread on Outsourcing...

I recently stumbled upon this ( ) article on Foreign Affairs magazine that tries to see offshore outsourcing under a new angle: the one that says that we're wrong.

And I agree with it.

Many people claim that outsourcing is stealing jobs when the percentage of jobs disappearing to outsourcing is very small. And to make things worse, the employment numbers have been compared to ones from the year 2000, where employment was exceptionally and artificially high.

Maybe outsourcing isn't the boogie man we all thought it was. And this article sure made me anxious for the benefits of outsourcing: wait until the Indian and Chinese economies start to deliver and begin to buy things from us. The chinese economy has already been responsible for the uplift of the japanese economy. I don't want to know what happens when they get into full gear.

Wednesday, March 24, 2004

Some (random and biased) excerpts with my comments in []. There's likely more than a bit of spinning in the article.

"The Gartner research firm has estimated that by the end of this year, 1 out of every 10 it jobs will be outsourced overseas. [10%, so far, is still a large number of relatively high-paying jobs.]"

"Such jobs include everything from retail and restaurants to marketing and personal care -- services that have to be produced and consumed locally, so outsourcing them overseas is not an option. [That is, much lower paying jobs.]"

"Annually, outsourcing would affect less than .2 percent of employed Americans. [But that .2 percent are high-paying jobs.]"

"Although 70,000 computer programmers lost their jobs between 1999 and 2003, more than 115,000 computer software engineers found higher-paying jobs during that same period. [How many of the 115,000 higher-paying jobs are new positions?]"

"Thanks to outsourcing, U.S. firms save money and become more profitable, benefitting shareholders and increasing returns on investment. [This is the essential reason behind the off-shoring. While many people are share-holders, the most weathly will be the ones that benefit most. One could argue that favoring shareholders over employees is not good.]"

It really is very hard to figure out what the impact of the off-shoring will be.  It's still misleading to hide the impact within the vast ocean of all jobs. Few "champions" of off-shoring mention that the off-shoring affects "in shore" jobs by suppressing the "in shore" salaries.

Wednesday, March 24, 2004

Off-shoring is bad for one reason. It does not increase trade.  Historically, when jobs were lost, they were replaced with higher paying jobs.  That is not happening today. Instead $60k jobs are replaced with $20k jobs in the US as that IT manager becomes a Walmart manager. Worse, they no longer appear as unemployed so they even make unemployment look better than reality.

Next we had a group of short term proponents who believe that if we just establish a free trade agreement, other countries will see the value and join.  Instead, what is happening is jobs go to countries that neither believe in free trade, nor allow foreign competition. 

Free-trade works great as a concept, if it is fair trade.  Today, a foreign company cannot displace a single worker in India.  If you wish to invest in India, they would love to have your money, but they do not want nor allow you to come in to display workers, even if you could do so for less cost.

So we have taught them well, how to milk the system.  Now it is time for us to protect our own.  If you are not a true free-trade country (like India), then we tariff your goods and services to 90% of the value in the host country.  As you open your markets the numbers get better and better.  In six months they would either be bankrupt or agreeable to the terms.  But, it take more spine than I have seen from business in a long, long time.  Doing the right thing for the right reason, while showing long term vision.

Trade Balance -
Department of Labor - 

Wednesday, March 24, 2004

The reason the American trade balance is so much in deificit is that Americans like spendiing money they don't have.

None of you would dream of living in India on an Indain salary so what's the point of beefing about possible restrictions on work visas.

Stephen Jones
Wednesday, March 24, 2004

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