Anyhoo, economic effects of outsourcing probably deserve their own thread. I think we can agree that its seen in a negative light by voters in any case. So as to the politics:
One thing I found interesting is how good Bush II was at avoiding this trap. Granted, its easier to avoid public anger at plutocrats when the economy is good, but despite the fact that he was from a very wealthy family, that his dad was the &*^&) President, and that his own life was pretty far from middle class (being a Harvard Cheerleader is probably the activity most far removed from that of driving a pick-up truck while drinking beer out of a can).
But he bought a ranch, slapped on a cowboy hat and managed to come across as a regular Joe. To the point where even his opponents made fun of him for being a “cowboy”. (I sort of wonder if the fact that, unlike Romney, he wasn’t particularly good at business actually helped him seem less like a Scrooge Mcduck clone)
Romney, on the other hand, sort of like Kerry before him, just seems like everyone’s image of what an entitled rich-guy would be like. In a time when we’re still recovering from the financial crisis, choosing a guy as the GOP nominee whose entire persona screams “millionaire”, whose personal finances are both sprawling and opaque and who made most of his money in complex business transactions that most people (including me) have trouble understanding seems suicidal.
Can you quote the part that supports that claim about “most Americans”?
Let’s clarify terms here-- most people use the terms outsourcing and offshoring interchangeably. Let’s restrict our discussion to offshoring, because that is what people usually mean when they use either of those terms.
Except that only a tine fraction of jobs are subject to offshoring. “Most Americans” have jobs that will not be offshored, and so have more of an interest, financially, in the cost of goods than in the effect of jobs being “sent overseas”.
ETA: I have no argument with you on the politics of this issue.
Funny how it’s only the manufacturing and technical jobs that get outsourced, never management or executives. I’d be a lot more inclined to believe that outsourcing is all about cold, hard facts if a company’s board of directors ever fired the executives and hired their replacements in Bangalore.
I think there is little doubt that Romney did purchase companies, shut them down and put thousands of employees there out of work. That is simply a fact, and calling it a “bullshit meme” won’t fly when there are thousands of pissed of former employees who lost their jobs due to Bain Capital.
As to the effectiveness of political campaigns based on this, compare and contrast these two hypothetical ads:
(Romney Spokesperson) Mitt Romney did great things with his leveraged buyouts of companies. These leveraged acquisitions of underperforming companies used a combination of syndicated loans and high-yield bonds. He used a tax shield of the acquisition debt, according to the Modigliani-Miller theorem of taxes, which of course increased the value of the firm.
The failed companies were often bought up in pieces by other partners and the resultant net increase in jobs was accomplished through a combination of increased efficiencies and consolidation of resources. Yay Romney!
(Obama Spokesperson) This is Bob. (Show sad old man in run-down house) Bob used to work for Consolidated Plastics. A good American company. That is, until Mitt Romney and Bain Capital bought it. Then they sold the valuable parts of the company to whoever would pay top dollar. Then they closed the plant. Now Bob and all his neigbors are is out of a job. The local cafe and hardware store have closed. His children did not have Christmas that year. Bob lost his health insurance - then his wife got cancer and died because he could not afford the treatments that would have cured her. Do you want this man (show Romney in business meeting) running YOUR country?
What would be the point of hiring someone whose main job it was to do work it that mostly has to be done in the US if that person couldn’t, well, work in the US? It’s not at all unusual for a company to hire local executives to run their offshore facilities. It happens all the time in the high tech business.
Nope. I should’ve been more clear, the article just addresses average wages for low-income jobs. But my point is that its not necessarily true that something is necessarily good for the average American worker, even if I accept that something is good for the US economy as a whole, in the sense of increasing GDP.
I was discussing “outsourcing” in the sense of a company contracting a job out to another company (usually another domestic company). I think that’s the usual use of the word, with “offshoring” meaning specifically outsourcing to a foreign company. Otherwise there doesn’t seem to be much point in having the word “offshoring” and we’re left without a good word to mean “contracting a job formally done in house to another company”.
Well, see above. I wasn’t discussing offshoring. I don’t think the two are really interchangeable. Outsourcing is advantageous to business owners because it allows them to break implicit agreements, while offshoring allows them to actually seek out a population that will accept a lower wage.
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I think there is little doubt that Romney did purchase companies, shut them down and put thousands of employees there out of work. That is simply a fact, and calling it a “bullshit meme” won’t fly when there are thousands of pissed of former employees who lost their jobs due to Bain Capital.
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I’ve seen no such evidence, to be honest. You don’t have to provide it either, since it’s not really the main thrust of this thread. If folks want to believe that Mitt actually is all those things (i.e. ‘Outsourcer/Offshorer and Corporate Raider’), well, to me that simply shows how effective this meme is.
Who says the president and CEO have to work in the U.S.? Hire all the executives in some place overseas. They can meet among themselves just as they do now. You’d save a fortune in salaries and probably facilities costs, as well. You’re right about needing someone local, so we’ll have a couple mid-level managers at the call center in Omaha. But every position above that gets outsourced to India.
To add to John Mace’s point, manufacturing and technical jobs get offshored because those are the capabilities that exist off-shore. Executive capabilities exist, but in competitors. And those competitors would have all the advantages of the cheap labour markets and friendlier regulation if the manufacturing and tech jobs didn’t get off-shored. As XT also notes, the manufacturing and tech jobs would disappear anyway, but if you insisted on making American firms unable to outsource, you’d lose the executive jobs and the shareholder wealth as well.
Fine, hire those guys away from their current jobs to come work for you. U.S. companies poach executives from one another all the time. You could offer an Indian CEO enough to jump ship and probably still save a fortune compared to what you’re paying your American CEO.
When you have your own company, be sure to do that. You’ll ‘save a fortune’, and thus will obviously be able to cut the competition and steal their market share. And certainly no one else has thought of that. All CEOs are the same, in the end, and an Indian CEO would naturally know how to run an American company in America just as well as anyone else.
Better yet, you could just make a robot CEO, and then it could work around the clock for basically the power needed to run it!!
The question isn’t whether or not outsourcing/offshoring eliminates certain jobs-- of course it does. The question is whether a policy preventing outsourcing/offshoring would preserve more jobs than it would destroy. If US companies don’t manufacture in countries with low labor costs, then other countries will be more than happy to step in to do so, and export their cheaper goods to the US. What do we don then? Slap tariffs on those goods, so that the cost of living is even higher? And then what happens to all those high priced goods made in the gold ol’ US of A. Americans might be forced to buy them, since laws make it less attractive to buy imports, but no one else in the world is hampered by that problem.
You can’t eliminate the effects of outsourcing without imposing tariffs on other countries, and we all know how well that works (or we should know). The question isn’t whether or not we are going to have a global economy. The question is whether we are going to participate in it or not.
Why not? Toyota seems to be able to build small cars in the U.S. at a profit. Can General Motors say the same?
And couldn’t you say the same thing about lots of other jobs, too? Who knows better how to talk to an American customer, and to solve a technical problem or resolve a customer service issue over the phone? And yet, the call centers go overseas anyway.
Amid all the debates about offshoring, does it help or hurt the economy, and in what ways, no one seems to question which jobs get offshored. It just seems to be an article of faith that executives and managers are special and irreplaceable, and manufacturing and technical workers can be farmed out to wherever it’s cheapest. And who has convinced us all that this is true? The executives and managers.
That’s right, keep talking about the logic involved, and convince everyone that shutting down manufacturing is a good thing and preserves jobs. That will go over really well with the voting public. Especially when Obama’s team is showing the 56 year old guy who lost his job and his hope along with it.
Romney’s one hope in this election was to use the relatively high unemployment to his advantage. It’s HIS team that should be playing to emotions, and showing sad, pathetic unemployed people in his ads. They can’t do that though, because of Romney’s association with a company that bought out other companies and eliminated positions.
You can’t beat emotions with logic. This is especially true if your candidate is already perceived as a cold, unemotional fish who cannot connect with the common person.
This, in my view, is one of the bigger weaknesses of democratic systems. Reality runs by logic. Governments run by emotions. Whole different discussion though. And, keeping in mind this is a US election thread, I’ll bow out.
Ah yes, the “competitiveness” argument. Companies need lower labor costs to remain competitive; even if the overseas work is only, say, half the quality of American work, the net savings in labor cost can make outsourcing a good business decision, one that increases a company’s competitiveness in a globalized hyper-marketplace.
Except there’s a major flaw in that argument: Why don’t we see a similar drive toward efficiency at the higher end of the pay scale? The ratio of CEO-to-American worker pay was 42:1 in 1980 vs. 343:1 in 2010, increasing to 380:1 in 2012. CEO pay increased nearly 23 percent in 2010 and another 14% in 2011 among the S&P 500 index companies. The 2011 increase is especially puzzling, since the S&P remained net unchanged for the year.
Sure, it’s not quite as easy to outsource an executive as it is to outsource an assembly line worker, but it’s not that much tougher. If competition is really that tight, then CEOs and other executives should also feel the pinch in the hyper-competitive global environment that’s driving these decisions to outsource. And yet they don’t.
The truth is, globalization is not requiring companies to outsource, it’s allowing them to outsource. Outsourcing is a choice, plain and simple; we can argue about whether it’s a good or bad choice, but IMO companies don’t get to hide behind the “competitiveness” excuse given these obscene increases in executive pay.
Give it time. It’s still ‘early’ in the offshoring trend.
The company I work for is hugely into outsourcing. I’ve been here over 10 years now and have seen outsourcing begin at this company and grow over time. It is definitely ‘creeping up’.
For example, I have written here on SD before about a manager that used to work here. The company was trying to get managers to outsource to India and encouraging people to do so. One manager (Deb) managed an area of about 15 people.
She decided to try outsourcing. Worked like a dog and managed to get it set up. She did well and in just a few months had her entire team in India. She then laid off all 15 U.S. workers and basked in Executive compliments.
We went out for a drink after work shortly after she did this and she was flying high. I then asked her when she was moving to India.
What? Why would I move to India?
Well…your whole team is there…I just thought.
No, I am not moving to India.
You are going to manage your team from half way around the world? Does that make sense?
Sure, why not? No matter, I’m sure I will be promoted shortly.
{the above is paraphrasing…I was much more diplomatic }
Well, she was not promoted…and 2 years later she was laid off. Her replacement was in…you guessed it…India. I still work with her replacement near every week.
A good example of Karma biting someone in the ass.
Anyway…
The moral of the story here is that outsourcing will just creep up and creep up and creep up the chain. There is recent talk in my company of putting Research Managers in India and this is a good paying position and the stepping stone to REAL good paying positions.
You are right, executives and managers will not outsource themselves but executives will outsource the managers. What will then happen is that when the company is pretty much exclusively outsourced then the executives will not be needed and the company will just jettison the executives (with their governments protection) and replace it with their own. Executives won’t be able to do anything as the company is essentially overseas now.
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This is my main fear with outsourcing. At my company, the first jobs to be outsourced were the really unlikable/dreary monotonous ones. After that came the low level positions. All of our Assistant xxxxx positions are now in India. The problem with this is these positions were the ones Americans cut their teeth on. I started out as an assistant xxxxxx and that is where I learned my job. I was good at it and got promoted.
What are the young people supposed to do to learn these jobs today? All my Assistant xxxxxx that I manage are in India (not my choice). This was the position I started in! All the people I manage in the U.S. are starting, like me, to get a bit long in the tooth. I am SURE my company plans on just having my entire area in India by the time I retire and, since they have all the young people in those assistant xxxxx positions they will get promoted up. After this is complete, do you think these jobs will EVER come back to the U.S.?
These are GOOD jobs! We hire people out of college for $50K. You can get $90K within a few years so long as you are reasonably good. I like to joke that I am at the highest paid position that someone can actually produce something at this company These are mathematical/research jobs that are not going to be ‘going away’ and I just don’t see how it is good for the U.S. for India to be doing them.
This is the danger I think. What makes a country great? If you start messing around with the youth and eliminating these good starter jobs and have them done by youth of another country will we stay great? Once that chain/spirit of inertia is broken and the youth are demoralized for a generation or two will we stay great? I don’t know…but I think we are playing with fire.
You may as well say it’s one of the bigger weaknesses of human beings. Emotions overrule logic in almost all circumstances. We can’t help it, so we may as well learn to live with it.
I know I said I’d bow out of this thread, but this one I think I can address. CEO pay may be 380:1, but that means if you took out the CEO, you could, at most, compensate for 380 workers. Actually, an outsourced CEO would still make a fair bit more than the average worker, so the savings would be much less. And senior executive pay falls off very quickly even one or two steps down from the CEO. By contrast, the median number of employees in the S&P 500 in 1998 (only cite I could find.pdf.) was 18874. The scope for savings is simply far greater further down the pyramid. IBM, which does a lot of outsourced work for American companies, has more than 200,000 employees in India. Indian IT companies easily have upwards of 2000 people working per large client. And most clients hire more than one company to do their work.
The numbers, competencies required, competencies available in offshore locations all are in favour of lower level jobs being outsourced.
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