How exactly does outsourcing make us stronger?

[Voyager]

@xtisme

Well, I’d have to ask for a cite that the current administration doesn’t agree with improving education…at least any less than any other administration. They certainly pour a lot of money into programs like “no child left behind” and eRate as far as I can see.

Well, they certainly say they are for education - but even pinko states like Utah are rebelling against unfunded mandates in No Child Left Behind. The tax cuts also rippled through to the states, making school funding in the states, where it belongs, more difficult. (Not that a lot of states have anything to be proud of about this.)

I’ve been programming since long before it was popular. I certainly agree with you that lots of people were working in IT who were clueless. This was less a problem in engineering though, since sophmores don’t know enough to even fake it. Engineers are being hurt also, which makes me feel that the unemployed are not just the idiots (not to mention I know several unemployed engineers who are well know industry leaders.)

The collapse of a lot of companies, the ones without a real business plan, was healthy. Alas a lot of support companies went down to. The problem is that the jobs from the rebound aren’t here anymore. An executive of a CAD company, quoted in Electronic Business, said that all their growth is going to be offshore. It is nice that they are not shrinking, but they aren’t picking up the slack.

You said something very important about core businesses. A lot of the decline in manufacturing was when companies decided that the Contract Manufacturers like Solectron could do it more efficiently than they could. It was not just cost, but the decision that a companies competitive advantage was in design (like Sun) or the channel, like Dell. A lot of offshoring is happening because it is a fad - that the Indian engineeri works for 20% of the salary of the American one does not mean you save 80%. I think some companies are giving away their core competencies, and they are going to regret it.

[msmith537]

@Dog80

I believe outsourcing is very damaging for an economy.
The problem as I see it, is that money leaves from US to India, but no money comes back from India to US.

Except that isn’t the case. Yes money does leave the US in the form of wages. Money also enters the US in the form of foreign capital investments and revenue from US products sold overseas in other countries.
As for my own annecdotal experience, there are jobs, but it take a LOT of work to find them. If you are only browsing Monster or the newspaper or are saying things like “I sent out FIVE resumes and got zero responses”, you will not find a job.

[Philster]

From reading this thread at least one or two posters are actually protecting their former employer’s identity? SCREW THAT.

Tata, the humungous Indian compnay that owns darn near everything, is providing offshoring services for two of the three national credit reporting agencies (Intelenet is the subsidiary). The third national credit bureau is offshoring in Jamaica.

From my first hand experience, I’d be hard pressed to demonstrate that quality isn’t suffering.

[Voyager]

@TWOTfan

JShore and FearItself – I was just responding to Voyager’s unsubstantiated dig at the Bush Administration.

But it’s getting us off subject – no amount of education is going to help the situation. What good is educating for jobs that don’t exist – that are being filled by educated workers abroad who will work for far lower wages?

How odd that my kids, one of whom is in high school and the other in college, never got any PCness in school - and I live in California. Affected by lack of money, yes, but never by PCness.

But we agree on the root cause. The knee jerk reaction is education. Take a look at the
article on offshoring in Electronic Business, a magazine targeted to executives. The argument that offshoring is required because of a lack of trained engineers in the US is hard to swallow given our current unemployment rate.

By the way, this is very different from importing engineers. I’m sure that there were some in some places who worked for low wages, but I’ve hired some, and the wage rates were exactly the same. H1B engineers pay taxes, bought products, and formed new businesses that created new jobs. It’s a very different situation.

[jshore]

@pervert

You keep saying things like this, but I see little evidence that anyone is advocating a repeal of any of the government controls on markets. What you are really asking for is more government control of markets. Not some control, or reasoned control, but more. If as you say, you do not know exactly what the government should do, I do not understand how you can maintain this position.

Well, you are clearly completely unfamiliar with Chapter 11 of NAFTA then if you think that these free trade deals aren’t reducing government controls. In fact, you have companies suing the government over their environmental regulations, claiming that these regulations amount to unfair restriction of trade. I’m not sure what the current status is of the Canadian company that is suing California in regards to the gasoline additive (MTBE?).

You also have the case where Presidents like Bush are pursuing “free trade” by which they essentially mean trade deals written for (perhaps by?) multinationals and characterizing anyone who objects to this as “opposing globalization” (which is then characterized as being just silly since globalization is inevitable and not something one can oppose). This basically prevents any reasonable public discussion of the details of these trade deals and policies. I.e., it prevents a shift of the debate from “Should there be globalization?” (duh!!!) to “How should globalization be managed so that it truly benefits everyone?”

No, but it is class warfare to consider every piece of property and every effort to create wealth as up for grabs in some “they need it more than you” riot. To look at the tax cuts and notice that most of the money returned went to rich people is fine. To then claim that this is unfair, because tax cuts should benifit poor people regardless of whether they paid taxes or not is class warfare.

I think this is kind of disingenius on your part. I have discussed before how the tax cuts are reducing the total federal tax burden (and the total overall tax burden) of the wealthy by a larger percentage than they are reducing the overall tax burden of the poor. The only way you can calculate that taxes are being reduced by a larger percentage on the poor than on the rich is if you decide to restrict your attention to the federal income tax only, i.e., the most progressive tax.

What is truly class warfare is to cut the tax burden of the wealthy by a larger percentage than the tax burden of the poor at a time when the wealthy have seen nearly all of the benefits from the economic growth in the last 20-odd years while the poor have treaded water or even lost ground and the folks at the median has only seen a very modest benefit!!

This is ok too, as long as it is also recognized that increased wealth allows for the resources to deal with some of these problems.

Well, it is great to recognize that increased wealth gives us resources to solve problems. But, if we don’t actually use these resources to solve the problems then I don’t really see it as being all that wonderful.

[I’m always fascinated about how when one starts talking about the costs of something like Kyoto, the conservatives (after using the most inflated costs estimates they can find) suddenly discover how that money could be used for all these wonderful things like feeding all of the world’s hungry…as if the current problem is that we don’t have the resources to do this rather than a problem of how the resources are allocated.]

Well, this is rhetoric and little more. There certainly are smart people who have though hard about these problems. They are not all liberal, however. And they are not all outside this administration.

Well, if you could point me to intelligent people in this Administration who are actually acknowledging these issues and seriously discussing how to deal with them, I’d be most obliged.

[jshore]

@litost

Exactly how? What have they not done? Admit that off-shoring is bad when they believe otherwise. Someone from his cabinet says that off-shoring is good for the economy and the whole media is up in arms.

To be honest, I think that this “off-shoring” comment by the Administration is about the least bad thing that this Administration has done. It has been jumped on because it reflects the Administrations cavalier attitude toward those who are being adversely affected by trade policies. But, the real issues in my mind are those that I have outlined in my previous post.

[jshore]

@jshore

Well, you are clearly completely unfamiliar with Chapter 11 of NAFTA then if you think that these free trade deals aren’t reducing government controls.

See here or here.

[Voyager]

[QUOTE=KidCharlemagne]

Outsourcing computer chip manufacturing saves Intel about 50% in labor costs, 30% of which gets translated to the consumer. Of course X thousand Americans lose potential jobs to Asia. But what about the effect of a 30% savings in computer chip prices for ALL consumers? How many more people can now afford computers who wouldn’t have been able to previously? How does this expand the market for online retailers and how in turn does that expand the market for web page developers and e-commerce solution businesses? How does this effect the number of people working for publishers of “How to Program in HTML” books? Where were all these jobs before the computer revolution? They didn’t exist. The beneficial effects of cheaper products are pervasive and cascading.
/QUOTE]

This is an interesting example. Computer chip manufacturing is not done in one place. First there is the fab, where the wafer is done. Chips that pass an initial test get diced and packaged, this is often done in a different location. Finally, the packaged parts are tested and burned in, which is done in yet another location. Wafer fab is a core competency for many companies. Package and test are not. Offshoring these tasks is nothing new - packaging for AT&T was done in Thailand over a decade ago. However, the contribution of labor costs to wafer fab is miniscule. The cost is almost all in capital equipment, and thus depreciation. The profit is in yield. If your yield goes down even 1% due to hiring low cost labor, you’ve blown it. So, most wafer fabs are still in high cost countries. (Not necessarily the US - Taiwan, which is not cheap, has a lot.) When I was at Intel there were no off-shore fabs. They might have opened one in Penang, where there was a test factory, but I doubt this was done for cost reasons. So labor is a neglible part of chip cost. That is why the price drops so quickly - when yield goes up, costs go down.

There are reasons to offshore other then cost. Lots of countries beside the US are protectionist. At one point you could not sell telephone switches into Asia unless you had local manufacturing. This can be a problem, such as when some countries demanded locally made ICs despite the fact that the infrastructure to build them there was not available.

[fishead788]

The only people other than the millionaire corporate execs and the slimball politicians who are in favor of outsourcing are those who have secure jobs.
Plain and simple.
I once thought it didn’t apply to me. I made close to 6 figures in the computer field.
I used to see the stories about the steel workers getting let go, and thought, “Wow that sucks, glad it’s not me!” Now they are sending IT jobs to India in droves where they work for peanuts.
Alan Greenspan says, “Outsourcing is good”. “We need to educate America”
What an asshole!
I’m pushing 50 years old! What are you going to teach me to do to make a comparable salary? And even if you did teach me something else, what makes anybody think that Raja over there isn’t willing to do that too for pennys on the dollar?
To add insult to insult, he wants to cut Social Security.
I voted for George Bush last time and I’m sorry I did! I didn’t see any of that big tax brake. Did you?
Next time you want to say that outsourcing or H-1Bs are a good thing, just think how you would feel if it was your job.

[TWOTfan]

fishead, this is an issue that cuts across party lines.

In particular the Dems are split. Liberals, always feeling sorry for the underdog, will tend to see American workers as priviledged and have more compassion for workers in other countries. Dems who have a Union background will disagree with that. On the Republican side there are conflicts between the Country Club Republicans and the America First’ers.

[Voyager]

@jshore

To be honest, I think that this “off-shoring” comment by the Administration is about the least bad thing that this Administration has done. It has been jumped on because it reflects the Administrations cavalier attitude toward those who are being adversely affected by trade policies. But, the real issues in my mind are those that I have outlined in my previous post.

I agree with you, but it is going to be ironic that the one place where they are making an economically sound argument is where they are going to get their butt handed to them. I can just see the Kerry ad with Powell saying that Bush is not going to do anything to stop jobs going to India. It is a great “Bush to workers: Drop Dead” soundbite.

(sorry for the bad coding on my last post. Aargh.)

[Evil_Captor]

@TWOTfan

fishead, this is an issue that cuts across party lines.

In particular the Dems are split. Liberals, always feeling sorry for the underdog, will tend to see American workers as priviledged and have more compassion for workers in other countries. Dems who have a Union background will disagree with that. On the Republican side there are conflicts between the Country Club Republicans and the America First’ers.

Ain’t no split on the Dem side. Liberals may feel sorry for workers in other countries, but they don’t feel so sorry for them that they are willing to give them Americans’ jobs – that’s a Republican thang. Some few Dems may oppose curtailing outsourcing on the grounds that it’s a bad method of protecting American workers, but they’re ALL for protecting American workers’ jobs.

Would really like a cite as to where you see this Dem split.

The Repubs do have a split, but the America Firsters don’t have anything like the clout of their opponents – at present.

[dal_timgar]

Who is us? The battle line is rich vs non-rich. National boundaries are irrelevant. Outsourceing makes people desperate in this country driving down wages.

We all should know accounting and have been concentrating on NET WORTH for the last 50 years. Our economics experts don’t suggest that.

Dal Timgar

@Spectre of Pithecanthropus

Outsourcing’s cheerleaders like to tell us that by making American businesses more competitive, it will strengthen the economy and actually create jobs here. My simple question is, jobs for whom? What kind of jobs? Cheap imports flood our ports and lead to many jobs for the truck drivers who haul them from the docks up to your local WalMart, and many low wage jobs in that WalMart selling those goods. But how can any well paying jobs come out of this scenario? What will an “ultra-outsourced” economy look like? Will nobody have any disposable income except for a few entrepreneurs, their lawyers, and a few others, perhaps doctors…in short anybody whose work cannot be moved? How will such pressing techological crises, such as the need for desalination and alternative energy be solved when an engineering major offers no better hope of future employment than not attending college at all?

[TWOTfan]

Evil Captor – take the Kyoto Accord as an example. The environmentalists (mostly Dems) are willing to see American workers put out of work at the expense of foreign workers in countries that are not as well off.

[TWOTfan]

And here’s a cite. A site where Dems and Leftists seem to be discussing this split:

http://www.matthewyglesias.com/archives/002178.html

[jshore]

TWOTfan: It is a rather dubious claim that Kyoto would lead to significantly more outsourcing of jobs. It is even more dubious that the bill that Congress actually considered, the McCain-Lieberman Climate Stewardship Act, which is way weaker than Kyoto, would lead to any outsourcing of jobs whatsoever. It may well lead to job-creation if the U.S. really commits to getting in the ball-game in regards to energy efficient technologies rather than, e.g., letting Toyota and Honda kick our butts in the rapidly-growing (albeit still small) hybrid vehicles market. [News Flash: Ford will buy its hybrid technology from Toyota, using engines manufactured by Toshiba. Read all about it here and here!]

However, it does interest me that pro-business (as opposed to America-firster) Republicans only seem to worry about jobs going overseas when the subject of enacting environmental or labor protections here in the U.S. comes up. In other words, they are not really worried about any “race toward the bottom” phenomenon involving labor and environmental standards except when they can use it as a boogyman to undermine such standards here at home.

Sorry, but I am not going to take that bait!

[ashtayk]

Haven’t seen any of my ilk yet participating in this discussion so here goes. I am an Indian in the US helping an American company outsource work to India.

I tend to view the outsourcing issue as an inevitable. Anecdotal examples of a personal nature always cloud discussions like this, but this not to say that their problems are not worth addressing.

Companies who are engaged in outsourcing are admitting to doing so because they are caught in this warp of hyper competitiveness. If they don’t do it, their competition will, then lower costs and drive them out of business. I can assure you that this is cyclical and even as I write the dollar is weakening steadily and sooner or later outsourcing to India will not merely be a matter of cost.

Most of the companies who outsource now could potentially have been run out of business and jobs that have been lost today would have gone anyway. Witness large tech companies like Lucent and Cisco, whose layoffs some months ago was prompted more by business conditions than by outsourcing.

The problem as I see it, is that money leaves from US to India, but no money comes back from India to US. Suppose the US based company X is outsourcing to India. What happens if Indians (for various reasons) do not buy X's products? 

Well, all I can say is that Indians drink Pepsi and Coke, work on HP computers, bank with Citibank, wear Levis and Nike, drive Fords (admittedly not as muhc as Hyundais), eat KFC and Macs, flaunt Ray Bans, Smoke benson and Hedges…and most of these are market leaders, completely swamping local brands when they came in. The largest consumer goods companies are P&G and LeversThere was the usual talk about how this invasion is eroding the entrepreneurship of India’s business commmunities. And to add insult to injury, when they first set up they all had expatriate managers. this was in the late eighties when the market in India was opened up. Barring one or two, none of them are listed in India… so guess where the profit goes. But I guess this is a force of economics.

So, what happened? Prices came down, quality went up, charming localizations went out, local businesses folded up or sold out etc etc.

My heart goes out to the people who lose jobs in this situation. I do not have an answer to that. But if it makes you feel any better, earlier, in India people who managed to get jobs usually stuck to it for the rest of their lives. Now with all the business we do with companies in the West, hire and fire is the order of the day.

[TWOTfan]

jshore – I didn’t mention Kyoto in reference to offshoring but rather to illustrate that there IS a certain type of Dem (who I refer to as Liberal) who is okay with destroying U.S. jobs.

I consider myself a “Populist” and I think the non-Liberal Dems could also be described by that term. I agree that many Republicans are quite willing to see offshoring taken to its logical conclusion – that is, until they begin to see THERE jobs in danger. That is a good while away for the CEOs, etc. That doesn’t mean there aren’t Republican Populists.

[Evil_Captor]

@TWOTfan

I consider myself a “Populist” and I think the non-Liberal Dems could also be described by that term. I agree that many Republicans are quite willing to see offshoring taken to its logical conclusion – that is, until they begin to see THERE jobs in danger. That is a good while away for the CEOs, etc. That doesn’t mean there aren’t Republican Populists.

C’mon, you find one fringe blog where a liberal favors offshoring – doesn’t exactly constitute a movement with the Dem party. Shall we see what kind of madness we can find among Pubbie fringe blogs? Nah, let’s not go there.

[Johnny_L.A]

@Philster

From reading this thread at least one or two posters are actually protecting their former employer’s identity? SCREW THAT.

Tata, the humungous Indian compnay that owns darn near everything, is providing offshoring services for two of the three national credit reporting agencies (Intelenet is the subsidiary).

Okay. I worked for the Business Credit division of Experian.

We spent a lot of time, in addition to our regular duties, helping to develop and document the parameters for the “new DP system”. We spent many, many hours testing the new processes. Then Tata came in and took it over. Ta-ta to half of the department (so far)!