Outsourcing As A Source Of U.S. Jobs

An anonymous reader writes "The Economic Times, India's leading financial newspaper, reports that Diana Farrell, Director, McKinsey Global Institute during her speech at Nasscom 2004 said that Bureau of Labour Statistics is predicting a job gain of 22m in the US by 2010, against a job loss of 2m, due to offshoring. You can read the full article here."

Re:Really?

Isn't it better to have US businesses be the leades in the global economey or is it better to let foreign companies grow past us and eventually take over our companies?

Once it's a publicly traded company with subsidiaries and partnerships in multiple countries it doesn't really matter. The ships will be re-flagged, the profits will be transfer priced to tax havens, and the plants will be upgraded to wherever labour and environmental standards are the worst.

With agreements like the MAI, it doesn't really matter where the head office is. If the company's publicly traded, it'll be held by Institutional investors and round and round the profits go. The only ones that see the benefits are the executives.

Outsourcing = profits, profits = better bottom line, better bottom line = growth, growth = more jobs.

Here's where you're wrong. Profits do not lead to growth; Growth may be a strategy to increase profits. Growth (in business terms) may not lead to more jobs, or those jobs may be elsewhere.

The desire for more profits may lead to expansion, but only if that's what will result in higher profits. Take Porsche for example. Increasing their production capacity tenfold would likely lead to lower net profit, as it would erode their sticker price. Prestige is their buying motivation. Make Porsches commonplace and you lose the prestige.

In the forest industry, it was quite common in the 90's for a company to open one new higher capacity plant while closing an old plant. The old plant often employed more people (the new one was more mechanized). The company has grown, but less people are employed.

Similarly, An auto manufacturer may "grow", increasing it's production capacity by outsourcing parts that had been produced in-house to multiple offshore subsidiaries. By shifting it's ratios of parts supplied by each plant they can keep costs the lowest, while billing the highest in the countries with the lowest effective taxes (transfer pricing). Now the company has grown by increasing it's profits, but there are less jobs.

Offshoring depends on the market for your product not decreasing to increase profits. Unfortunately, if production is commonly offshored from the consuming market, incomes fall in the market, leading to less sales, which decreases profits.

(For those who've never taken an ethics course, this is called Kant's Categorical Imperative.)

More jobs and growing economy helps us all

This is only true is the growth is distributed evenly. Logic does not bear your assertion out.

A "growing economy", in business terms simply means that larger amounts of money are being transferred. If I were to sell you a rock for a promissory note for 200 trillion dollars, then buy the rock back for the promissory note, we would have increased the GDP by 400 trillion dollars, which is about 4000%. But who did this benefit? Only me, as I'd now have an asset with a book value of 200 trillion dollars (liquidating this asset is annother matter).

Much of what goes on in the economy (and one of the areas of largest growth) is companies acquiring eachother and merging. Often this is done by a stock swap. If two large companies swap stock at market value, the book value of the transaction adds to the GDP, and it appears that the economy has grown. Rarely are jobs created by stock swaps. The merged company may decide to grow, but often the reason to merge is something that precludes growth.

Re:Sauces, use thereof

"The US" is not benefiting from cheap labor - the benefits a corporation gains from outsourcing is passed mainly to the executives of the corporation through non-salary compesentation (options, bonuses, etc.), and to a lesser extent to the shareholders of said corporations.

The public is benefiting in the short term from the continually lowering retail price of consumer goods manufactured primarily in China.

The long term result is simple - good bye middle class. The growth in the service sector is primarily servicing said middle class, so the service sector dies with the middle class.

As much as I love capitalism, we are seeing its worst side now - as corporations realize they can behave with no morals (as modern society has decided there is no such thing, all is relative), there is no reason to create jobs, take care of employees, etc. There is nothing of concern other than the next quarter stock valuation...

To make it even worse, the modern system doesn't allow executives to benefit significantly from their stock shares until they SELL them (dividends are still overly taxed), so there is no real reason to think about the long term survival of the corporation either...

Add currency trading velocity issues and foreign holding policies for US treasury bonds, and the western economy is getting scary - inertia only lasts so long...

Re:Sauces, use thereof

so there is no real reason to think about the long term survival of the corporation either...

Quite so.

I've often thought the capital gains tax rate should be very high initially and very low in the long term. Something drastic like exp(-time/5 years), for example.

The main objective being to motivate shareholders and executives to think of the company's long term best interest and not just jack up earnings by cutting maintenance, R&D, selling the family jewels, etc.

One worrying development is just how much [nytimes.com] executives are motivated to sacrifice a company's long term health in order to meet earnings estimates put out by the Wall Street analysts.

If there were a similar way to make politicians or the public fiscally-minded, too, it would be nice. Something along the lines of "your share of this year's federal deficit is going onto your VISA card on April 15" would help shape things up in a hurry.

Your choice: pay more taxes, spend less, or lock yourself into an onerous debt. Most politicians are only too happy to give people less taxes, more spending and retire before the debt comes due.

Re:Sauces, use thereof

We only benefit from the cheap labor if we are a stockholder. If we are a working for a living wage we end up losing. Why dont you consider more than a stock index when you think about an economy? Why dont you think beyond basic economics class and think about what is really important to our a country; the citizens not the corporations are what we should be supporting.

Re:Sauces, use thereof

Food, clothing, and appliances are a small part of poor and middle class people's expenses, and outsourcing and mechanization is primarily reducing the cost of these goods.

The biggest expenses tend to be housing, medical, and auto. For the heavily in debt, you can add in credit cards. Housing and medical are skyrocketing while auto is rising more modestly. Funny enough, to take advantage of low prices in large stores like Walmart, you need a motorcar, which will, in all likelyhood, cost you more than all of your spending at said stores.

If you really want to help the working class, break up the pharmaceutical and medical cartels and push for subdividing our oversized houses and building affordable housing to get rents and property prices under control. Reducing auto expenses would require a massive overhaul of our cities and infrastructure, but the benefits would be massive.

Walmart could push the cost of food, clothing, and appliances to $0 and in several years rising health, housing, and auto costs will eat that all up.

Re:Sauces, use thereof

More to the point... American dollars go to India, and there are only two things that can happen:

1. They spend the money on American goods

2. They just keep the money

Case 1 is a wash, and Case 2 (which never happens), would be wonderful... we could just keep printing dollar bills and never have to work. Unfortunately, when we import goods or services, the other countries want something in return.

America is prosperous largely because it's a huge free-trade zone. Imagine if people in Massachusetts complained about imports of cars from Michigan, and passed a law that said you had to buy a car made in Massachusetts, so that jobs wouldn't be lost to low-cost labor in Michigan. Or suppose Massachusetts insisted that Michigan adopt all of Massachusetts' labor laws. Would the people in Michigan want that? Would the people in Massachusetts want to drive cars designed in Brockton?

Or another example... suppose a state complained about all the computers "imported" from California or Texas, and insisted that any computers in be made and designed in the home state. Who would be hurt by that? People who can't afford expensive computers, that's who. It doesn't happen, nobody even suggests it, because it's freaking brain-dead stupid.

Some states make certain products, other states make others. Free trade among states reduces income inequality among states, and allows us to be peaceful neighbors.

Re:Sauces, use thereof

If people in Massachusetts were trying to maintain their standard of living, and Michigan were a country where major killers were things like starvation and dysentary, I would see no problem with banning car imports from Detroit. All of this outsourcing is serving to do one thing; balance the economies of the U.S. and India/China. They gain, and we lose.

Re:Sauces, use thereof

I believe preserving this country's standing as a dominant world power is morality enough...certainly equal to the morality of putting a hard-working American out on the street after 30 years of labor for a company. If it were only a question of morality, we would be dividing up our cumulative wealth and spreading it equally about the earth; but the reality is that is we MUST not do that, lest we be equally divided in national strength.

Re:Sauces, use thereof

Wealth, on a national level, is determined not by what you have, but what you can produce.

We could redistribute every penny of current American wealth equally around the globe, and within a short period of time, the same order would redevlop, the same nations would be prosperous and the same nations would be poor. The Soviet Union had an incredible stash of natural resources, and a very educated and capable population, but they were piss-poor because they insisted on taking five dollars' worth of materials and labor and using them to produce two-dollar shoes.

Re:Sauces, use thereof

Well we can produce less as we ship it all overseas. I have been in the manufacturing industry in the past, and one of the larger problems is becoming finding tool and die makers. After all, it's nice to internet this and program that, but somebody has to make the die that stamps the case out for your computer. In the 80's, apprenticeship programs were eliminated left and right, as we would theoratically never need such "old style" skills anymore. Things were shipped overseas and the entire skill pool in this country evaporated. I can see the same thing happening across the board. Just extract this situation to its logical conclusion; every job here is outsourced to India/China/etc. What is left in the US?

Re:Unfortunately, there is another way

I should have noted earlier that I also agree that it's hogwash to suggest that trade creates jobs. It does, however, lead to lower-cost goods, which benefits the lowest earners.

Unfortunately, the person who lost his $20K job knows he lost his job, and the 2 million people who subsequently saved a dime on their shower flip-flops don't even notice the savings individually. But when we tried protectionisom with autos in the 70's, the point was made much more clearly. At the time, import quoatas meant that it cost $4K to buy a $3K Toyota. The alternative was to buy a $3500 Chevy, which at the time were a pieces of shit. And average-income folks got pissed. Yeah, workers were happy in Detroit. But only in Detroit.

Re:Sauces, use thereof

If all this is true, how come Indians aren't eager to outsource all the jobs back to the US?

Because it doesn't save money to do that. Salaries are much higher in the US which is why US companies are outsourcing in the first place.

Clear and compelling logic

This is true. By sending out jobs overseas, we actually gain jobs. We are giving jobs away to ourselves!!! By the same token, When we give breaks to large corporations and rich people, it is the average people who benefit!

Also, by killing people in Iraq, we are actually improving their lives.

Re:Sauces, use thereof

Yes, I believe that sauces will be involved in these 22m new jobs, mainly ketchup and mustard.

The market for techies as cheap burger flippers cannot be underestimated, as we have the skills to operate the tills that seem to so confuse your average McDonald's worker.

Some more statistics on the subject

US unemployment right now is 5.6% [itfacts.biz], the lowest it had been in 2 years.

Silicon Valley will ad 17,000 jobs this year [itfacts.biz] and 33,000 next year.

Re:Some more statistics on the subject

Unemployment statistics are trash. They don't include recent college grads or those who have been unemployed for a prolonged period of time because no one bothers to register unless they are eligable for unemployment benefits. After a while people are no longer eligable and so they stop registering as unemployed, the statistics assume they are employed which isn't necessarily the case.

Re:Some more statistics on the subject

and they dont count underemployment. I know alot of engineers who are flipping burgers and selling stereos burdened by student loans (which survive bankrupcy!).

Central planning falacy. All "jobs" not equal.

and they dont count underemployment. I know alot of engineers who are flipping burgers and selling stereos burdened by student loans (which survive bankrupcy!).

Bingo!

The central planners talk of "jobs" as if they were all equal.

Even assuming the numbers claimed by the Bureau of Labor Statistics' talking head are true, what good does it do to replace one lost 6-figure engineering position with eleven minimum-wage, no health plan, burger-flipper slots?

Especially if, say, eight of them will be filled by illegal immigrants, two by engin-school grads who never got to engineer, and the eleventh by a former member of the (NON-minimum-wage, WITH health plan) burger-flipper's union, leaving the engineer still unemployed?

Now multiply by two million.

Great for the ruling class. Hell for the workers.

Re:Central planning falacy. All "jobs" not equal.

Well said. I would like to add, that the boom made a lot of people *think* they could do technical jobs when in fact they were underqualified.

In my last job, (yes, I found a better paying job in this down economy) I interviewed countless wannabe techies trying to find someone to do rather simple stuff. Most people who came through the door were underqualified and wanted too much money.

Re:Central planning falacy. All "jobs" not equal.

Many people work their entire lives in their profession and never earn more than $45k/year.

Uh, buddy? That's a problem. How can anyone expect to pay off education debt, raise a family, and retire comfortably without burdening an already-crippled social security infrastructure if we begin to accept the notion that a $45k salary after 35 years of service is "normal?"

I'm not saying they should be making 6-figures either, but I am saying that in our culture, it is impossible for a family to live comfortably on $45k/year perpetually, while trying to put 2.5 kids through college and save for retirement. It can't be done.

Now, if both parents want to work and bring in that kind of money, well then it becomes possible, but if both parents are working, who's raising the kids? A stranger. And THAT, my friends, is a huge part of what's wrong with society today. THAT is why your kids won't listen to your or respect you.

But I'm getting off-topic.

Re:Some more statistics on the subject

And still more :

• In the last three months, more than 40 percent of the unemployed have been out of work more than 15 weeks. That's the worst number since 1983.
• According to the monthly payroll survey for January, jobs rose by 112,000. Before you start cheering, that doesn't actually keep up with population growth.
• Since the recovery officially began in November 2001, employment has actually fallen by half a percent, while the working-age population has increased about 2.4 percent.

All of these facts (with more available) come from Paul Krugman's editorial [nytimes.com] in the NYT today. His column should be required reading for anybody who wants to talk about the economy.

Gosh, it's on a website, it must be true

Silicon Valley will ad 17,000 jobs this year and 33,000 next year.

"Make it so" by putting it on a website.

Hey, maybe we should announce some other things on websites for a better tomorrow:
* The US Unemployment rate will be under 1% by 2006
* The US budget deficit will be 0 in 2005
* Martians will teach us how to harness zero point energy thus ending all reliance on foreign oil by 2010
* Nobody will die of malnutrition next year!
* All techies will get dates for Valentines day!

Well look at that

An Indian journal reporting that Indian outsourcing is good!

Re:Well look at that

McKinsey Global Institute is a US company.

McKinsey & Company is a global company with offices in Delhi and Mumbai just as in NYC

Re:Well look at that

An Indian journal reporting that Indian outsourcing is good!

The thing that winds me up about India is that it is quite two faced (as a country I mean, this isn't a criticism of any individual Indians). On the one hand, it's happy to take Western high-tech jobs. But on the other hand, it's always after aid and handouts from Western taxpayers. The way I see it, it can be a poor country that gets state aid, or it can be a wealthy country that competes with us, but it can't be both.

India needs to be told once and for all by Western governments, right, you are a high tech country now, you are taking jobs from our taxpayers which proves it, we'll spend our state aid budgets on real poor countries from now on. 'Cos once India needs to start paying for its own vaccination programmes and reading classes, suddenly it'll have to start taxing its own people to pay for it, and the artificial advantage in price will disappear. Then we'll see how well India competes on a level playing field.

India recently pre-paid its debts

to Canada.

http://www.siliconindia.com/shownewsdata.asp?new sn o=22785

The amount was 13.5 billion dollars.

US used to grant an aid of $25 million to India annually. That too was stopped when Congress got worked up over some issue. But India is now attracting investment, not aid. See the various projects underway here:
http://www.bharat-rakshak.com/ubb/ultimateb b.php?u bb=forum;f=2

$22 million in jobs

or in dividends to stock holders.

The argument that India will need to import American goods for the growing tech sector and that this will result in even more jobs seems a little specious.

Is the global economy being turned on it's ear? Will the U.S. now be making cheap consumables to send to the IP producing countries in Asia? And why would India not simply start manufacturing the products it needs itself?

Re:$22 million in jobs

$22 million in jobs or in dividends to stock holders.

Do you think that shareholders stick their money in socks when they get it? I don't. I either invest it again (which creates jobs) or I spend it (ditto).

The argument that India will need to import American goods for the growing tech sector and that this will result in even more jobs seems a little specious.

Why? There are things we make that they do not and vice versa?

Is the global economy being turned on it's ear? Will the U.S. now be making cheap consumables to send to the IP producing countries in Asia?

Manufacturing does not imply "cheap consumables." You can also make high end sewing machines. Robotics. Advanced materials.

And why would India not simply start manufacturing the products it needs itself?

Sigh. Have you never heard of comparative advantage [systemics.com]? The total output of the Indian economy is limited by all sorts of infrastructural issues which make it impossible for them to manufacture everything themselves cheaply.

Re:$22 million in jobs

The wealthy need not spend their money in ways that create jobs. They can buy land - which drives up the price of land for the ones who don't have it yet - they can buy goods from overseas and luxury goods - the production of which doesn't create very many jobs.

A flatter distribution of income creates more jobs producing things that benefit more people: the more important a part of the market the lower to middle class is, the more productive power goes to address their needs.

Re:$22 million in jobs

If they buy land, then they buy it from somebody. The person that has sold the land now has the money in his (or her) pocket.

If they spend their money overseas, then it creates jobs in Italy or Taiwan, and the money is spent on video games made by Nintendo or Electronic Arts.

Which means these companies make a profit, which is good because otherwise your 401K would be empty and you wouldn't be able to afford to retire.

Re:The rich, backwards

Yeah, that unfair income distibution in Venezuela really makes their economy soar. What you're saying makes no sense--who the fuck is going to buy an American luxury car? If you're poor, you buy from China, if you're rich, you buy from Japan and Germany. Even if it did make sense, the reason we need there to be more jobs is to make the world a better place for the poor and middle class--if you're suggesting we restructure our economy so that the vast majority of people are working to make products for the rich, which appears to be Bush's plan, you and your sick plutocrat plans can go fuck yourselves.

And then you have the nerve to repeat this supply-side bullshit--look how much the stock market soared when Clinton raised taxes on capital gains! The taxes on capital gains have to be incredibly huge before they start to matter--people will invest if an investment makes money, they won't invest if it doesn't make money--taxes on the profit made will have little effect on this.

On the other hand, taxes on labor have a very direct and simple effect on jobs. Corporations have to pay more wage taxes for every additional employee they hire IF they choose to hire that worker in the United States. Wage taxes and the lack of a nationalized health care systems (an exponentially increasing cost our employers are also expected to pay for, unless workers do without) are incentives for factories to move to either completely undervalued countries (India) or more progressive countries like Canada, which currently has a fantastically booming economy.

Bottom line: there has been no economy in the history of the world that has been able to withstand long-term trade deficits. It's great to save money on Indian labor, but unless we can find something else for American workers to do, unless we can find something else to export, then it doesn't do either the world or America any long term good. If you save 58 cents by outsourcing to India, hey, great, that's 58 cents more for the American economy. If you just spend the whole dollar on American labor, that's a whole dollar spent in the American economy.

surplus value

The US product is about $10.5T:year, with about 100M workers earning about $40K:year. The $4T income are less than 40% of the revenue, with the other 60% representing corporate profit and taxes. Since corporations pay so little proportionately in taxes, and capital gains less still, the extra value is taken in corporate profits funneled to the very rich. Some estimates indicate that 15K US households (probably about 75K people, or .001%) own 5% of the Earth's property. The lack of job growth in the US, despite the looting of the Treasury for subsidies to these rich people, once again destroys the argument of "supply side" economics. After the debacle of Reagan's supply side, the last time these unemployment numbers were close to this high (excepting Bush Sr's next-closest nadir), you'd think this nonsense would be rejected. But I guess greed blinds even the survival instinct, when so much loot is flying through the air, without any merit to where it lands.

Re:surplus value

Some estimates indicate that 15K US households (probably about 75K people, or .001%) own 5% of the Earth's property.

There will always be rich people, my friend. It's a fundemental feature of human social structure. Someone has to decide what times the train run (Rich People) and someone has to run them (Poor People).

500 years ago, there were maybe a couple dozen people who owned a good 80% of the earth's property...they're called Monarchs. The real difference between then and now is not that the rich people have slightly less, it's that we've invented a whole new class of people: The Middle Class.

And the middle class is hurt the most by high income taxes (at any level). I don't know if you've noticed it or not, but rich people already have money. More accurately, they already have assets (stock, real estate, bonds, annunities, etc...). People who think that high income taxes put the tax burden on the rich are fooling themselves. If you really wanted to put the tax burden on the rich, you'd have a wealth tax, but putting the tax burden on the rich isn't what the income tax is all about.

The purpose of a progressive income tax is to prevent the middle class from becoming rich. Since middle class people are almost entirely dependent on thier income, taxing it ensures that they will never have enough disposable cash to start a business, invest in a new private business, or do anything else that might lead to financial independence. This is why a progressive income tax is a key plank in the communist manifesto. [nationmakers.com] It's designed to crush the ability of the middle class to raise enough capital to become financially independent.

Re:surplus value

The lack of job growth in the US, despite the looting of the Treasury for subsidies to these rich people, once again destroys the argument of "supply side" economics. After the debacle of Reagan's supply side, the last time these unemployment numbers were close to this high (excepting Bush Sr's next-closest nadir), you'd think this nonsense would be rejected

If you examine the Reagan Economic Record [cato.org] you'll see that Supply Side economics worked very well. During the Reagan years, real family incomes [cato.org] increased for all income quantiles, proving that a rising tide indeed does lift all boats.

Re:22 million jobs

not $22 million in jobs.

Just to stay even with the number of new workers entering the workforce, the US needs to add 300,000 jobs per month. Multiply 300,000 by 12 months by 6 years (the difference between now and 2010) and you get 21.6 million, a number suspiciously close to the 22 million cited in the article. I'm guessing that the job creation number is based on horseshit.

in the long term

in the long term, a foreign country succeeding will make the entire world better...
of course in the long term, we'll all be dead.

Re:in the long term

The phenomenally poor in India are seeing a big jump in their standard of living, while the fat American is simply seeing a slow down in their accumulation of wealth.

It is not the phenominally poor in India who are benefitting from the export of high tech jobs it is India's upper and middle classes. India has a cast system and the people who are benefitting from this would rather drown than touch a rope that has previously been handled by one of Inda's phenominally poor low cast "Untouchables", unless of course the rope was ritually purified first.
It seems to me this has alot less to do with "fat Americans" and more to do with "short sighted greedy little American corporate executives" who are pissing away a highly trained workforce for short term gains and making a present of high technology to India which is only too happy to accept it since the technological exchange will eventually allow her to dispense with the Americans and compete with them.

Right...

"People don't understand what a great opportunity offshoring is for US companies. Apart from huge savings, it allows US companies to concentrate on their core competencies and the people (in the US) can move on to higher paying, more creative, more value generating jobs."

...

You see, that doesn't quite work when it's the high-paying jobs going overseas. The only jobs that can't are those that require physical presence, and I can only see so many ways to creatively remove a clog from a toilet.

Re:Right...

it allows US companies to concentrate on their core competencies

ack! if i have to hear that "core competencies" argument one more time i will scream... louder.

it's basically just a rehash of david ricardo's "comparative advantage" argument. it goes like this: there is a surgeon and a typist. the surgeon types 60 wpm, the typist only 40. however, despite the fact that the surgeon is faster on the keyboard, it is better overall for the typist to do the typing and leave the surgeon to surgery.

that analogy, of course, makes good sense.... but when you start expanding it to global economics it becomes shakey. we in north america have been fancying ourselves the surgeons for a long time and been foisting the "typing" work (like making sweatshop running shoes) onto the "third world".

the breakdown is this: comparative advantage theory leads to a narrowing of the economic base. if your country doesn't have the infrastructure and labour force to create an auto industry the theory is you shouldn't try. just stick to labour-intensive, capital-light industries like agriculture or textiles. this has proven to be bad news for the developing nations of the world because it a) ties the entire economy to a few industries b) offers little room for development. an economic ghettoization if you will.

and now india is foisting this argument back on the united states.

the fact of the matter is this: every economy needs diversity. there need to be un and low-skilled jobs and there need to be highly-skilled jobs. there need to be labour and capital intensive industries.

if the united states focuses exclusively on "more creative, more value generating jobs" then a dot-com burst (or the equivalent) can do greater damage to the economy as a whole... in the same way that a bad coffee harvest can tank a small latin american country.

Plumber = $$$

Hey, don't knock toilet unclogging. Plumbers make serious dollars.

Jobs are relative

22 million more jobs, but how much will the population increase by then? this reduces the increase in employment, so the number 22 million looks a lot more impressive than it actually is.

so..

we lose 2 million engineering jobs, and gain 22 million pizza delivery jobs. Sounds like a great trade-off to me!

Seriously, we can't sacrifice professional jobs for low-level service jobs, even if there are more of them. If we do that, we'll have a rich and poor caste system. Wait a minute...

Re:so..

we lose 2 million engineering jobs, and gain 22 million pizza delivery jobs. Sounds like a great trade-off to me!

When all the tech jobs finally dry up and the only thing the US does better than the rest of the world is high-speed pizza delivery, I'll be first in line to work for Uncle Enzo. Being the Deliverator is actually sort of a long-standing ambition of mine...

The Deliverator used to make software. Still does, sometimes. But if life were a mellow elementary school run by well-meaning education PhD's, the Deliverator's report card would say: "Skyshadow is so bright and creative but needs to work harder on his cooperation skills...

The Deliverator is a Type A driver with rabies. He is zeroing in on his home base, CosaNostra Pizza #3569, cranking up the left lane of CSV-5 at a hundred and twenty kilometers. His car is a black lozenge, just a dark place that reflects the tunnel of franchise signs -- the loglo. A row of orange lights burbles and churns across the front, where the grille would be if this were an air-breathing car. The orange light looks like a gasoline fire. It comes in people's rear windows, bounces off their rearview mirrors, projects a fiery mask across their eyes, reaches into their subconcious, and unearths fears of being pinned, fully conscious, under a detonating gas tank, makes them want to pull over and let the Deliverator overtake them in his black chariot of pepperoni fire...

Poor wording

Even though I am a fan of free trade and offshoring, I found this economist's choice of words disturbing: "People in the US are looking at it as a job issue. They are not economists and therefore, they don't necessarily see the whole picture." Funny, I thought that every human being (even economists) had only a part of the picture. People working in the dismal science should be more humble about what they know versus what they think they know.

New Jobs added WHERE?

I see no examples of these new jobs that they keep talking about. Just about corporations saving money.

Corporations saving money is no guarentee of employment at all -- they could just increase their dividends to attract more investment. They could just increase their CEO's salary.

Even if they do make new jobs, there's no distingishing between wage-slaving jobs against salaried professionals.

New jobs added WHERE, wise guy. :P

Just one catch..

From the article;

She pointed out that the Bureau of Labour Statistics was predicting a job gain of 22m in the US by '10, against a job loss of 2m due to offshoring.

All of these jobs are going to be in the "service sector". It does not say what the quality of those jobs are. Also, even "service sector" type jobs are being exported to india now (programming, call centers).

My prediction - in 2010 we will all be selling hamburgers to each other.

"Would you like to supersize that for just $.39
more??"

Re:Just one catch..

Just for the record, the department of labor was predicting a job gain of 17 million for 2003. In reality there was a loss of tens of thousands of jobs. The 22 million prediction sounds like re-election propaganda...

In 6 more years?

"She pointed out that the Bureau of Labour Statistics was predicting a job gain of 22m in the US by '10, against a job loss of 2m due to offshoring."

When have 5+ year estimates ever been accurate in economic matters?

Secondly -
Tomorrow's Jobs (from bls.gov)
http://www.bls.gov/oco/oco2003.htm [bls.gov]
"Services. This is the largest and fastest growing major industry group and is expected to add 13.7 million new jobs by 2010, accounting for 3 out of every 5 new jobs created in the U.S. economy. Over two-thirds of this projected job growth is concentrated in three sectors of services industries-business, health, and social services."

Social services? Wheeee.... big money here I come..... :-/

Can't Outsource me

There have always beens some jobs that cannot be outsourced. Even if a telecoms help desk is all foreign they can't outsource service crew off shore. It make sense that with a slow recovery of the US economy (no thanks to bush) that there will be more jobs.

Jobs like DB admin need to be close to the DB and to where the info is coming from to properly administer it. System Analysts and Network analysts must be on site to do their job. Service technicians can't do it from over seas. Web developers can be outsorced but it's almost artistic and cutural gulfs make workign with foreign firms difficult. (Our Firm tried, the indian firm kept trying to use Lime green in their color schemes, no matter hwo often we told them we don't like lime green that).

The outsourcing only spells the end to abundant positions as low level code monkeys. We'll just have to move on and try to adapt like workers did durign the 80's when many manufacturign firms went over seas. There are still a large amount of blue colalr workers despite this, and We'll still have jobs even though an indian firm might be competign with us.

PS: I don't like bush but I'm not a democrat, in fact I'm Canadian. We have more than a vested interest in your prosperity, because it spills oevr here. It does seem liek he's responsible for you current economic slump, by spending so much on defence and offering Tax cuts that the budget won't support. Think more debt. Real soon.

Re:Can't Outsource me

I hate to be a naysayer, but DB Admin work (or even DB maintenance work) does not require that much in the way of an onsite person. I've been doing remote DB work for 7 years, most of it international...only once have I ever been on a customer's site and that only to do a tape backup that hadn't been done in over 3 years.

With the right equipment on site, a person in their underwear and sitting in their home can do all of the necessary work. Believe me...I've been doing it for the last few years as part of the downsizing my company's going through (after all, why pay the extra money for an office after you've already cut all of the technical people's pay?).

Just my two cents.

Tired of this offshoring whine on /.

For one thing India is still at a trade deficit with US. For every job that indians get from US, there is are range of stuff US companies are dumping here and killing local business.

Opening the market works both ways. Deal with it.

Re:Tired of this offshoring whine on /.

Well I'm a software programmer in India working for a company that outsources. Most people working over here are pretty similar to you guys (which is the point that Wired was trying to make)...all college educated people happy to get a 'stable' job which pays really well and allows us all to be able to pay a decent rent and buy cars and stuff. We do feel awful about the fact that ppl in USA are going to lose jobs...but the fact is it's not our fault American companies are coming here to scout for work. We need jobs, and they are offering, so naturally we're gonna take them. And they are paying us MORE than what we would be making otherwise. It is cheaper than America, but HIGH and COMFORTABLE by Indian standards. That being said... most of the work we get here is "Grunt Work". I'm responsible for 'maintenance' i.e. fixing bugs between release 4.1 and 4.1.1. That kind of stuff. It's a rare day we get to sit down and design an operating system, say, or a piece of software which actually can do something worthwhile. Most of us here feel that those kinds of fun things are given to the Americans to do in America, and to only call us if things break(or if they get bored with their product)....Many of us actually want to go to America and live there...failing that, having America come to us was the next best option...and many people like these jobs because it gives them an opportunity to go aborad (necessary for technology transfer)...
That is the Software perspective... The call-centre perspective is totally different. Call-centre people have to work all kinds of awful hours (8 pm to 6am) they have no social life and all kinds of health problems. On top of that, they have to deal with unruly, irate customers, among other things. Not a SINGLE person working in a call-centre here loves his/her job. They are just doing it for the Money. To make ends meet. Most people working in call-centres are people with reasonable college degrees but no scope of getting employment elsewhere. Everyone who works in a call-centre knows s/he will quit in a year and do something else with their life - the churn rate is VERY HIGH. Anyway - THAT is the Indian Perspective and the ground reality. Guys there's nothing constructive we can say to you - We are truly sorry that your jobs are being taken, but we didn't do the stealing - your CEOs did. I've been fired, I know what that's like.
And the truth is, many of us feel it is a good thing because it is putting more money in our pockets, and giving us a better life...but unlike you guys, we have no social security benefits if we lose our jobs.. I don't expect any pleasant replies to this, just giving a point of view from the land of Kama Sutra, Cow-Worshippers, Towel Heads, Sand-Niggers, Curry Munchers....

But what *kind* of jobs?

My worry is that the economists say "Oh don't worry, we'll replace those jobs." But not with anything I've remotely studied to do. A job at my current level may not be available or even practical. Most places won't let you get a second bachelors degree. And somehow I don't think a university will accept me for a chemistry masters program when I have a degree in Computer Science. Sometimes I get the feeling that to these economists going from being a skilled worker to a Deliverator is acceptable as long as I'm employed.

I used to think the reality portrayed in Snow Crash was just current trends taken to some unreal extreme. Now as I watch the destruction of the middle class I'm not so sure.

Re:But what *kind* of jobs?

Actually you should have no problem getting in to a Chemistry Masters program. You will have a longer prereq phase to catch up to those with an undergrad background in it. E-mail or call an admissions advisor at a school you're interested in. Even if you can't jump right in to their Masters program, they'll tell you what you have to do. Worst case you would have to be a non-degree student and take the classes you need.

It is true that most places frown on two Bachelors degrees unless they're from different colleges, like one in CS and one in art or theater. Once you get your Bachelors, you can load up on as many Masters and PhDs as you have time for.

I'd like to believe, but

I just don't see this as a big motivator to the US economy. The 'savings' of outsourcing are mostly in the form of taxes not paid to the government (by the time the infrastructure - ie, Stateside project manager, Stateside liason, overseas liason, overseas management, and programmers, the actual salary savings is fairly small). Also, the profits of this reduced cost simply are not going to be realized in reduced cost of the product, but in terms of lining the pockets of the major stockholders (I hope I'm wrong, but history would suggest differently).

The largest percentage of the outsourced jobs are high-paying; perhaps we'll eliminate a single 80k job and replace it with 4 20k jobs? Or does somebody think that American business is going to hire local techies to architect products and the humble outsource labor forces will selflessly implement the design?

I have nothing against India or the programmers that are taking advantage of the avarice of American companies in order to better themselves. I would do the same thing in their shoes.

I do, however, blame an American business culture where todays stock prices have become more important than the ultimate survivability or long-term health of the company. After all, on a long enough timeline, everyone's surviveability is zero, eh?

It's the economy, stupid

Don't worry. Our wonder boy in the White House has it all under control.

Just lowered the taxes of the most filthy rich 5% of the population, got us a $500 billion deficit and compensated for that by dismantling the useless social programs for the poor and old.

Maybe the rich will use that tax-break to create more job and not simply line their own pockets. And maybe those poor slackers on welfare/medicare will die away and stop siphooning money from the well-off, respectable, white protestant heterosexual married people like the rest of us.

Faulty logic and misleading headline!

[Ms Farrell] pointed out that the Bureau of Labour Statistics was predicting a job gain of 22m in the US by '10, against a job loss of 2m due to offshoring.

According to the labor predictions [bls.gov] from the Bureau of Labor Statistics [bls.gov], the total growth of jobs between 2000 and 2010 is 22,160,000 jobs. Surely you can't account for all of this growth strictly based on one aspect of corporate behavior.

Also, to satisfy the cynic in me, remember that these are merely predictions, which are possibly skewed to make the current market look like it'll be stronger, which will in turn (hopefully) make investors and consumers more confident, (hopefully) making the economy stronger.

Lastly, could this also be like George Bush's predictions that there would be approx. 1.7 million new jobs last year, as opposed to the 53,000 jobs lost last year (as reported by CBS news tonight).

Only economists can see the 'Whole Picture'

Great quote from the article:
They are not economists and therefore, they don't necessarily see the whole picture.

Yes, economists have such a great track record when it comes to figuring out what's going to happen next, don't they?

I smell bull

Diana Farrell, director, McKinsey Global Institute, said, "People in the US are looking at it as a job issue. They are not economists and therefore, they don't necessarily see the whole picture. What's going to happen is that offshoring is actually going to benefit US businesses even more than India." She said it was a profoundly new way of doing things and would change the structure of organisations. Offshore was about global wealth creation and integrating economies, she explained, adding that it would create more high-value jobs in the US than people could imagine today.

Based on the research that the McKinsey institute had carried out, Ms Farrell said conservatively, for every dollar invested in the offshore space, $0.58 was directly saved. This could be either redistributed to investors or customers. But she added that there were indirect benefits to the US, in terms of the import of US goods and services into India by Indian service providers, and so there was some transfer of profit back to the parent in the US. She pointed out that the Bureau of Labour Statistics was predicting a job gain of 22m in the US by '10, against a job loss of 2m due to offshoring.

I'd like to know what she's smoking. I see a lot of this as someone with a comfortable job spouting off:

1. Job loss in the last few years has continued unabated in the tech sector. By all reports, the new jobs created have been nontechnical, particularly in construction.
2. This doesn't account for the fact that many people have dropped out of the labor market altogether (going back to school, early retirement, panhandling).
3. Economists have a pathetic record for prediction. Right now we're in what's been termed a "jobless recovery." If that's a recovery (I remain unconvinced) then just where does Ms. Farrell see those 22 million jobs coming from in the next 6 years, and just when does she think they'll appear?
4. Additionally, Ms. Farrell claims that cost savings from shipping jobs overseas will be passed on to the consumer. Ignoring the tendency of corporations to pass cost savings on to executive compensation rather than to stockholders or even (gasp!) consumers, just how would consumer savings help the average unemployed Joe on the street get a new productive job?
5. On top of this, consider the setting for the comments. Ms. Farrell is telling a group of people in India not to feel bad about taking our jobs because eventually we'll turn out better than we started out. This is yet more bull in an article already reeking of manure. All it is designed to do is assuage someone's conscience.

It's one thing to say something substantive on the subject, but all that's been presented is trite expressions of hope that things will get better. I'm sure I'm not alone in hoping that they do get better, but until something meaningful is said, it's only so much bull.

Re:I smell bull

All of this antiglobalization and anti-free trade banter drives me up the wall. The trend of outsourcing and globalizing IT jobs is about the best possible example of free trade I have ever seen, because the jobs being exported actually do have labor standards and do dignify the population; and it is very good for America.

Take some hypothetical math here. Say there are 100,000 U.S. Programmers making about 80,000 dollars a year (with benefits and business side social security tax). That's

80,000 * 100,000 = 8,000,000,000 dollars a year.

Now imagine, aggregated, U.S companies via outsourcing eliminate those jobs (so-called creative destruction) and instead pay 100,000 indian folks an average of 20,000 a year.

100,000 * 20,000 = 2,000,000,000 dollars a year.

So, for 2 billion dollars Indian programmers are delivering the exact same amount of business value as the 8 billion dollar American programmers.

The end result? Well, at first, 100,000 less American jobs, and 6 billion more dollars for our "evil" corporate masters.

Yes some of that money will go to the clever executive who thought of the idea. Yes some of that money will go (gasp!) investors, who probably include many of the readers here.

And where will the rest of that money go?: to investment; to research; to newer jobs, etc. This is the inexorable march of progress here people. Can I predict what those new jobs will be? Of course not. Otherwise I would have already thought of it. But someone will drive innovation. This is all about a more effecient allocation of resources.

Undeniably, it sucks for those 100,000 programmers. There are a lot of hidden costs to creative destruction, soceital costs that do not show up in GDP numbers (family and emotional distress, for one). But those people, like lots of other people have, will have to reinvent themselves, to discover new talents, to retrain. In the end, it will be good for the country, and the world, as a whole. I mean, I'm sure it sucked for typewriter makers when computers gained popularity, or for horse farmers when the car was first mass produced, but for the whole soceity the creative destruction of those jobs was a good thing.

In any case, this is the best possible outcome from the development of a large educated populace in India. We are utilizing their resources, rather than competing against them. A worse scenario, from the American perspective, are the Indians out-innovating us and driving entire American businesses out of business in the global marketplace.

I am not sure I buy it, but I have

been thinking about this lately. (I am still employed, but my company is having a pretty rough time right now.)

We are going to see more jobs. If Bush gets his way, most of them are going to be in competition with 'undocumented' (Ahem..), I mean ILLEGAL workers. So, we all know those are not going to pay well. Lots of people are going to be devalued for sure.

Jobs that involve people skills are going to become more important. Somebody needs to manage the teams, make deals, and other things. I have been seeing another trend along these lines as well.

Working professionals are forming groups to cut overall costs. So far I see this happening with law, accounting, taxes and other similar traditional services, but maybe technically oriented groups have a chance doing this as well.

Having your own in-house technical people may be too expensive, but buying some quality time locally, sans language and distance issues might be worth a small price premium. Personally, I hope this is an area that Open Source can begin to play a little harder.

I can't help but wonder what effect the growing license fees companies, like Microsoft, ask each year have on the job market. There are a lot of dollars going to one place that used to go elsewhere.

With Open Source working as it should and some greater degree of acceptance, perhaps some of this money will be distributed more evenly. Companies could choose to keep minimal staff and pay high license fees for one size fits all software, or...

They can choose to employ some more staff and combine that with services from a number of competing firms to solve their problems. The greater number of potential solutions might yield competetive advantages as well depending on who is involved.

If this sort of thing begins to really happen, polishing up those people skills might be the way to go. Your technical background will be valuable for advising execs on critical decisions and evaluating potential partners.

I have been getting some experience doing this on the side for a little while now. Once the execs learn there is a cheaper way, they need people to facillitate getting it done for them. Being able to work hands on, in a pinch, helps as well. I sort of ended up doing this for a couple of people I met when I began networking a couple years ago. (fear drives a geek to do strange things, I know!)

Thinking along these lines seems better than a long job search in any case. So, here it is, for what it is worth.

Anyone doing anything similar? Have any luck? Suggestions? I just might need them soon!

This is basic economics people!

Jesus breakdancing Christ. If I see one more hand-waving post devoid of either fact or theory, I will scream.

Free-trade is a basic tool of a capitalist economy. It has a proven track-record of working (eg: France under Napoleon, the modern EU, the US of fucking A!). There are also lots of statistics that show that protectionist laws save a few jobs at the cost of much greater costs to the rest of the economy. A certain law that protects US textile workers saved 75,000 jobs at a cost of $15 billion a year. That $200,000 that each of those textile jobs is costing is being taken right out of *your* pocket. That's money you could have, but do not.

Free-trade is also the only thing that makes sense in a democracy. People have rights, and it takes a very strong argument to limit those rights. Strong moral arguments give us reason to limit the right of people to commit murder. Strong economic arguments give us reason to limit the right of companies to form cartels. There are no such arguments in favor of protectionism. Morality says that people should hire whom they damn-well please, and economics says that this freedom is best for the economy in the long run. The only arguments we get in favor of protectionism is crap about patriotism, and hand-waving about "the destruction of the US middle class." Two points: One, as a Virginian, I care about as much about a guy in Texas as I do about a guy in Afghanistan. Two, the middle class did just fine when farm work, which was a middle class job, disappeared. They did just fine when factory work, another middle class job, disappeared. They'll do just fine when the programming jobs disappear!

The predictions in this article are precisely those predicted by economic theory. A certain class of jobs will be destroyed, but many more jobs will be created. Such predictions have been borne out numerous times before (NAFTA really didn't cause all American jobs to be sucked to Mexico, did it???) and will be borne out again.

Of course, this is assuming you believe in capitalism. If you'd prefer the stability of a socialist system, then by all means, move to a communist country! I take particular pleasure in saying this --- as a liberal I rarely get the chance to call *other* people communists, but that doesn't change the fact that calls for protectionism are nothing less than attempt to subvert the capitalistic ideals of this country!

NAFTA tens years later

>NAFTA really didn't cause all American jobs to be sucked to Mexico, did it???

Why, yes it did.

Good piece here [citizen.org]

>If you'd prefer the stability of a socialist system, then by all means, move to a communist country!

Logical fallacy here. You are ignoring other solutions like better economic planning and fixing the problems our policies have done.

Good piece at the nation here: [thenation.com]

The business-backed politicians who pushed the agreement through the three legislatures promised that NAFTA would generate prosperity that would more than compensate "ordinary" people for its lack of social protections. Foreign investors would make Mexico an economic tiger, turning its poor workers into middle-class consumers who would then buy US and Canadian goods, creating more jobs in the high-wage countries.

But as soon as the ink was dry on NAFTA, US factories began to shift production to maquiladora factories along the border, where the Mexican government assures a docile labor force and virtually no environmental restrictions. The US trade surplus with Mexico quickly turned into a deficit, and since then at least a half-million jobs have been lost, many of them in small towns and rural areas where there are no job alternatives.

Meanwhile, Mexico's overall growth rate has been half of what it needs to be just to generate enough jobs for its growing labor force. The NAFTA-inspired strategy of export-led growth undermined Mexican industries that sold to the domestic market as well as the sixty-year-old social bargain in which workers and peasant farmers shared the benefits of growth in exchange for their support for a privileged oligarchy. NAFTA provided the oligarchs with new partners--the multinational corporations--allowing them to abandon their obligations to their fellow Mexicans. Average real wages in Mexican manufacturing are actually lower than they were ten years ago. Two and a half million farmers and their families have been driven out of their local markets and off their land by heavily subsidized US and Canadian agribusiness. For most Mexicans, half of whom live in poverty, basic food has gotten even more expensive: Today the Mexican minimum wage buys less than half the tortillas it bought in 1994. As a result, hundreds of thousands of Mexicans continue to risk their lives crossing the border to get low-wage jobs in the United States.

Lets not forget that free trade is largely an illusion when farmers keep getting subsidized and when social safety nets, wages, and the environment take a beating in the name of 'free trade.'

maybe I'm missing something

"Apart from huge savings, it allows US companies to concentrate on their core competencies and the people (in the US) can move on to higher paying, more creative, more value generating jobs."

What higher paying, more creative, more value generating jobs?

Re:Exportable Jobs (2nd try)

(My goddam browser fucked up, let's try again)

Manufacturing jobs (but we already knew that).

And now thanks to the Internet, intellectual jobs, which would include (but is certainly not limited to) programmers, tech support, accountants, scientific research, financial research, and eventually, executive positions within companies.

The only jobs that won't eventually export are those which require a physical presence, such as police, fire fighters, doctors, auto mechanics, retail sales clerks, burger flippers, etc. (But I'm sure we can import some people for those jobs, or replace them with robotic telepresence... eventually.)

Actually, the only job in this country which is guaranteed not to be outsourced, is President of the United States. But I hear the pay is lousy and the hours are long.

economics and history

The reality is that outsourcing is good for the economy over the long run - low paid, low skilled jobs are moved elsewhere, and the economy focuses on new jobs. We've all heard these arguments in terms of blue collar work ("car manufacturing, etc"), yet the demand for information technology workers filled the gap.

The same goes for what's happening now: in the long run it will be good. The danger is in the short run: sudden loss of jobs without the ability to restructure could be damaging.

Re:economics and history

low paid, low skilled jobs are moved elsewhere

We're not moving burger-flippers. We're moving upper middle class technical jobs. Good paying jobs that you need a degree for.

and the economy focuses on new jobs

What new jobs? Not one person has demonstrated what these new jobs will be. They make references to new, "knowledge" based jobs. What the hell are those? The only jobs we're creating are low level burger flipping jobs, that we will soon have to compete with Mexican immigrants for if Bush has his way.

Where's the beef?

Without even speaking to the fact that these numbers seem quite dubious, there is almost no logical analysis in this article. The author, has failed to logically connect outsourcing jobs offshore to creating jobs in America. She has failed to characterize the 22M new jobs as a real benefit to the American popluation. Forgive me, but this article seems to like kind of work that one might expect from a contractor who bids a project at 1/5th the price of his competitors. It's reminicent of, say, the work done by some foreign outsourced service companies. The article is bareboned, uninspired and almost totally without merit as news. Only the editors who published and linked to this story could feel more ashamed of it than it's author.

That would appear to be the good news. I think that the bad news is that outsourcing isn't going to last long as a real solution for cutting certian labor costs. Instead, companies are going to realize that it really is dangerous and conterproductive to export too much proprietary data and work to outside firms. Instead of purely outsourcing a job to India or elsewhere, companies are going to put more effort to set up real offices in those countries bringing the foreign workers in-house. It has been going on for a while, but recent progress in telecommunication has led companies to choose quick-and-dirty outsourcing to bridge cultural and political gaps and reap cost savings. As executives become more adept at dealing with the foreign cultures and labor marketplaces (esp. by acquiring foreign executives who understand the foreign places) they will be able to achieve both better cost savings and better overall security by untying their internal organization from traditional geographic divisions. Companies will further embrace doing whatever part of their business "needs" to be done in whatever part of the world they can do it cheapest. It's still globalization, but it's more pervasive than just redistributing production centers and opening new markets to sales. It's re-distributing the locus of control within each company.

Here's some predicitons: The biggest U.S. export for a while is going to be culture. Foreigners who want to work for U.S. globalized companies in their own countries are going to have to work in many ways within western cultural frameworks and they will bring that culture home to their families and neighbors. The U.S. dollar will continue a long, slow decline in (relative) value, as will the Euro, eventually. This is a natural result of the strengthening of competing currencies of the foreign nations which will be supplying the new, eager middle-class labor forces. As more countries follow India's example of embracing western culture and education, they will gain a share in the job market.

Hopefully, as western culture (particularly the English language and the values of capitalism) become more pervasive, people will also break down political barriers. It all does seem a long way off, but almost certainly the 100 years of the 21st century will witness more and faster changes in the human landscape of the world than the 20th, due to the interconnectedness of the world (think about, for instance, that probably for all of the next 100 years, people will be able to make a phone call or send email anywhere in the world instantly. In 1900 this was hardly even a dream.) and the continuously-increasing pace of technological advance. Probably third world nations will not disappear, but wealth and poverty are likely to be distributed more evenly (geographically, anyway) throughout the globe. That is, after all, what we're ultimately worried about in out own small way. We (all) want the opportunity to make ourselves useful and prosperous. It's just going to take some suffering and upheaval before things equalize. Buckle up.

HP's Outsourced Support Quality

A data point on the quality of outsourced tech support:

My neighbor's HP Pavilion kept putting a window on her screen last week, saying her Windows license had expired, and that she needed to enter her credit card number and expiration to validate her copy of Windows, but not to worry because her credit card would not be charged.

My neighbor is in her 80s, but her memory is good and she didn't remember anything about an expiration date for Windows. So she called HP support and got a man with an Indian accent. She told him the problem, and he asked, "How old is your computer?" She told him it was a couple years old, and he said, "If it's that old, Windows could be expired. Try entering the information as requested and see what happens."

Fortunately, my neighbor is much smarter than HP's outsourced call center, and didn't take their advice. She called me and we cleaned mimail.s [symantec.com] off her computer. She promises she won't buy from HP again.

So, where is all this outsourcing?

As a European independent consultant/developer contracting to a range of clients in the SME and similar sectors I've seen absolutly no impact from outsourcing over the past few years and I'm still scratching my head trying to figure how it could.

The problem is that for my clients the idea that they could develop any system specification sufficently precise to give to an outsourcing company is frankly ludicrous. For example I've been writing a medium sized clothing hire program for a client for the past 6 months. This sounds like an ideal 'specify and hand out to india' project, except that the client really didn't have much idea what they wanted when we started beyond 'we want a hire program', 'here's an old DOS based-system that does something like' and 'we have these bits of paper'. The amount of iteration, exploration, respecification and general systems analysis that has gone on from then is frightening, but hardly unusual. In the process I've crawled though virtually every aspect of the business and even sat in with them on visits to their suppliers, associates and clients. You can't do that from india.

Now, of course I've considered splitting the work by doing the systems analysis myself and subcontracting the rest to india. However because of the iterative nature of the process that's not really feasible, plus the relatively small size of the project would mean setting up overheads etc would negate the cost saving. Some might say that the development process shouldn't be iterative but I should insist on completing and signing off a full spec up front, but while that could be done it wouldn't lead to satisified clients, and my clients do have the wit to realize that.

The same goes for all my clients. I simply don't see how they could replace me by outsourcing to india because they simply don't have the analysis skills to do so. The only way I can see it happening is with a larger 'software' house who can scale by having multiple projects which they outsource for, but do the analysis work here. Trouble is it's difficult to see how the additional overheads of such a company could compete with my almost complete lack of them.

Now, having worked in big business IT a few years ago (financial & manufactoring sectors) I can see how outsourcing would work there because the analysts developed tight specs which were then handled by the programmers - obvious candidates for shipping offshore. Even their though I distinctly remember when I reached analyst (and even analyst/programmer) level that I spent large amounts of time walking around manufacturing plant and talking with people to understand jobs I was adding IT functionality too worked. In fact doing what I do now to some extent, but on an intra-company level.

So, I'm not disputing that development jobs can be outsourced, but surely because of the human interaction needed for much analysis and development work there is a natural limit as to how far it can go and result in satisfied clients. Also, because the use of IT increases all the time in breadth of penetration into the business environment I'd postulate that the general trend for work will be upwards - although there will be a natural impact while the pecentage of work that can be done by outsourcing reaches it's natural effective level, and this impact will be sever in some areas of developer employment but non-existent in others.

A Questioning Of CEO Logic

The people who control the US high tech companies are billionaires or at least millionaires several times over.

Its not about the cash for them anymore. Its about points, being the top player in the game for the thrill of it, and staying in the game.

Given that it is about staying in the game, outsourcing jobs to India is irrational because it will ultimately put them out of the

Indian tech workers are smart, politically aware, and socially aware.

They will not be content with the American business colonialism of outsourcing.

They will use outsourced American jobs to build up funds and to learn how to run tech companies( or given our greedy, short sighted, overpaid American CEOs.....how NOT to run a tech company)

Once they do, they will form their own Indian owned tech companies.

Unlike the American tech companies paying Indian wages and selling their products at American prices these early Indian owned tech firms will sell their products at Indian prices.

They will either drive American Tech companies out of business or their competition will severly limit their profits.

In short, American CEO jobs will be outsourced to India in the end. They will be out of the game

Steve

big hit to social security and medicare

The high end jobs pay about $11,000 a year in social security and medicare taxes (counting the employer half of the contribution). 3.3 million of these will off-source to locations where no tax is paid, just as the boomers are retiring.

Lies, Damn Lies, Statistics

... and Damn Statistics.

From the article: She pointed out that the Bureau of Labour Statistics was predicting a job gain of 22m in the US by '10, against a job loss of 2m due to offshoring.

And then there's this article [cnn.com], which points out that because of globalization, technology and stagnant prices, none of the old statistical models of employment work, and apparently no economist has come up with a new model, since their predictions over the past year have been completely wrong.

So I doubt I'd trust what any economist, or group of economists, or the BLS, has to say about future employment numbers.

--Rob

Am I reading this right?

Wait, let me get this straight.

First she says that companies save $.58 on the dollar in outsourcing - then states that this goes to the investors. How does that benefit workers?

Then she states that India consumes goods as a result of their increased wealth. Ok, so I lose my job as a developer but I can always go to work in a factory to produce goods that will be shipped to India for consumption?
Oh wait, that won't work because all of the factory jobs are now in Mexico.

Good thing that that investor has his extra pocket change. Maybe he'll drop it in my cup on the way by.

How Dilbertian

There's a Dilbert where the PHB outsources a bunch of jobs, then uses the freed-up people to take on an outsourced contract ... which turns out to be the same jobs he outsourced in the first place, through two intermediaries. Or, the old joke about the three arbitrageurs stranded on a desert island - when they were rescued, they were all immensely wealthy from trading coconuts with each other.

Global Capital vs. Global Labor

IAAE (I am an economist). See, the problem with free trade is that the people who tout it are really only talking about the free movement of capital. Free movement of labor does not really exist. If a U.S. company outsources your job to India, can you pick up and move to India to get it back? No. Foreign workers can come here (yes, it's a pain in the ass to get the visa, but it is done) and take jobs from Americans, and foreign workers can take jobs away from Americans through outsourcing. But can Americans go take away their jobs where they are? No.

So you get an imbalance in the global market. The Chicago School of Economics would say that given free movement of capital and labor that the market would seek a global equilibrium whereby the programmer in India would make the same wages as a programmer in America. But in reality there are significant barriers to entry, especially for the American worker trying to go elsewhere to take jobs away from the locals. So if you really are a free-trader, and not just an MBA trying to justify your ridiculously high bonus, then you'd push for the elimination of structural barriers to free labor flow. Then all kinds of neat things will happen like foreign MBAs coming to America to drive down the cost of executive pay, and you the American techie can go get yourself a good job in sunny Goa.

But somehow I don't think that the MBAs making these outsourcing decisions would like that kind of free trade.

Left out the usual

for every dollar invested in the offshore space, $0.58 was directly saved. This could be either redistributed to investors or customers.

Makes it sound like execs will forget their usual antics: taking ever-more-astronomically-high salaries.