This months issue of Wired magazine (Wired April 2005, page 040) ran an article that stated that ‘US companies actually import nearly $20 billion more in jobs than they export’. According to wired this put the US well ahead of any other nation in the industrialized world (well, any nation they listed anyway except perhaps the UK). Here was the breakdown (again, according to wired):
United Kingdom Outsourcing: $19.7 billion
Insourcing: $41.2 Billion
China Outsourcing: $8.0 billion
Insourcing: $10.4 billion
Oh, and the USA:
USA Outsourcing: $ 43.5 billion
Insourcing: $61.4 billion
Here is some of what the article said (sorry, I don’t have access to an electronic version):
Also according to Wired by 2012 over 80 percent of US workers will hold jobs in the service industry. And the number of service jobs in the US will grow at least 20% by 2012.
So, for debate:
How accurate is this picture? It was pretty startling for me to see how large our own insource/outsource ratio is…and how much the US is geared into exporting/importing service oriented jobs. The volume is what was the most eye opening…especially compared to nations like China. The volume and ratio in the UK was nearly as startling in fact.
If its accurate does this put to rest some of the hysteria over the US exporting service oriented jobs? Has the myth been busted…or not? If not, why not?
Do those who think the US shouldn’t outsource still feel the same way in light of the fact that the US is running nearly 20 billion dollars in the black for the value of jobs leaving the US vs entering the US on the service side? If so, why?
Since it looks like the majority of US workers will be working in the service industry, this trend seems very good for US workers. Is there a down side to this?
How about all those countries running in the red…many of them in Europe. What does this mean for them?
Feel free to debate any other aspects dealing with outsourcing in the US or world wide.
As an aside, why does the UK have such a high ration? Its actually higher than the US, though the volume on both ends isn’t as large.
I’m being called away to watch a movie on TV, but off the top of my head, looking at the list, you’ll notice that countries that run a manipulated currency policy - and in this category I’d place all of the Eurozone countries, Japan, and China - are in sum running a large deficit. Individually, only China is running any kind of surplus at all.
The contrast between the UK, which still runs an independent monetary policy, and runs it based strictly on its domestic needs, and the Eurozone is particularly stark. Says a lot, to me.
The April issue’s not up on the site yet, but here’s what came to my mind:
The money a company makes from insourcing may be good for the economy, but doesn’t help people who have lost their jobs to outsourcing.
The US numbers may also simply be due to expertise in areas that other countries just don’t have access to. This may or may not change as other nations gain a knowledge base to perform these functions themselves and then find it unnecessary to outsource to the US.
I thought of this too. However, again according to Wired, what the numbers represent is ‘value of jobs leaving’ a nation and ‘value of jobs entering’ a nation. They give no sources for how they calculate this, nor cites for where they are getting their data…but they aren’t simply talking about money here but jobs.
True…but then, the US could theoretically advance also…so that NEW expertise is in demand to the world for us to sell. It seems to be a sliding window to my mind anyway…as service become more common place the US outsources those and moves on to others.
As a tech that gets constant reminders that the tech centers in India are getting better, quality surveys are regularly posted showing that the quality is at last getting as good as the American ones, the message that the American corporation is telling us grunts is simple: learn to leave with less or you are history.
But enough of useless personal situations, In reality even I would accept the position of the pro-outsourcing crowd if the deal to the ones that lose their jobs would not be so raw: little or no money for health care when you lose jour job, little or no money to re-train for the new jobs being made. It is also not funny that big corporations have access to communication channels to get in contact with overseas markets while the small companies or individuals wanting to do their own business with those markets have little or no access to those channels. So no, outsourcing is not bad, it is what the corporations and government do not do to help the workers to face the uncertainty, unfairness and inequality of the future job market.
Well, that’s really the problem. How can we know if the numbers are accurateif we don’t know how they got them? For instance, the value of the jobs being outsourced could be based on the salary of the country where the jobs are now, so if they are paying an Indian tech guy half as much as an American that could skew the numbers.
Until we know what they mean by “value of jobs entering” a nation, we don’t really know much.
Is a “job” a permanent employee at a US company?
Is a “job” a temporary employee at a US company?
Is a “job” a fictitious economic calculation along the lines of:
Economic transaction X of value Y is a service, not a good and therefore Y contributes to the total “value of jobs” regardless of whether any US people are employed as a result of the transaction
I suspect it is something closer to the third definition, in which case a lot of information could be missing from the statistic.
Consider this situation:
Foreign companies purchase technical support contracts from a large US technology company. The US company employs some local management but the bulk of the service personnel are outsourced in other countries.
The US company makes a profit and the inbound dollars exceed the outbound dollars, but there are not many US jobs as a result.
One problem with raw numbers is that they fail to indicate trends that could be beneficial or harmful in the future. If we lose all the call centers while gaining a lot of legal work, it may not harm us much, at all. On the other hand, if we continue to lose manufacturing, we could put the country at risk if the world changed and we required more home-grown manufacturing for purposes of security.
I really do not know which way we are really heading, but I tend to distrust the “big picture” when it is so big that no details are visible.
I would also like to see how they gather their numbers consider the following example:
A company employing 100 people in country A at an average salary of $200,000 runs a factory in country B employing 1,000 people at an average salary of $20,000. Did the company in country A export the 1,000 jobs? Were the 100 jobs imported by country A from country B? Or is it a wash?
That’s what most people assume will happen. However, once the infrastructure of country X creating goods for the US market is in place and they reach the limit of what they can earn by manufacturing, where will they turn to earn more money?
Innovation.
The assumption that I find in these arguments is that Chinese/Indians/Eastern Europeans are stupid and unable to do anything more than read a script. I find that many of the articles mention the high education of the Indian call center workers.
The *WSJ * has recently been running articles on Chinese MBA students coming to study in the US. While the domestic markets in these countries are growing, they will be working and emulating the US market. Once the market in those countries reaches a certain level, I imagine that the companies will turn inward and to compete with the “US-innovated” products will create their own.
If the manufacturing costs are the same (the product is likely already created in that country or a country that’s “cheap”), then the only thing to cut are the “intellectual” costs - management, R&D, etc.
I would imagine that if a Chinese factory works for X% less than a US worker, a Chinese engineer would likely work less expensively than an US engineer.
So, the US gives away ($43.5 B) 2/3 the number of jobs that we keep ($61.4 B)? That doesn’t sound so optimistic.
All the nations on your list outsourced $219.1 B, and they insourced $245.4 B. That’s quite a few billions unaccounted for.
The US trade deficit does not align with Wired’s “value of jobs” in-out figures; it is hugely in the other direction. I believe Wired is leaving out something.
The figures are expressed in dollars rather than jobs. So, when a US textile job paying $10 an hour goes to China, where it pays $10 a day, you can see that dollars are not a good way to express insource vs. outsource job flow.
Insourcing and outsourcing over time? There is a surplus now, but how long will it last?
Average salary in the service sector? If job growth there is keeping up with population, but salary and benefits are dropping by some large amount, it is worth getting worried, yes?
Yes, it shows it as an upward trend. In 1980, according to the article, the US was nearly even in its balance. Since then outsourcing has followed a fairly steady progression…while insourcing has followed a much steeper progression upward. In addition, they show the balance…and that is also shown to be rising. Of course, they don’t give a cite for where they get these figures, or how they are calculated, so as others have already pointed out its difficult to judge. I suppose I was hoping someone else more versed in the details of this subject than I would wander into the thread with some additional cites. As that hasn’t happened though I doubt we will go anywhere with this thread.
Its not that kind of article…its talking about straight insourcing vs outsourcing. If you feel you have a cite showing that the average salary/benefits for people working in the service sector is ‘dropping by some large amount’, feel free to post it and then we can worry. Afaik no such radical drop is happening save for the blip after the tech bubble busted…and that has been recovering.
Probably to a new proven market, whatever that may turn out to be.
Who said anything about them being stupid?? The reality though is that they all gear their manufacturing or even services to PROVEN US markets, so they aren’t exactly on the cutting edge for innovation. That said, as their economies improve to a certain point, I have no doubt they WILL be innovating wholly new products and services. Again, its not a matter of how smart they are or aren’t, its how they have oriented their industries and services in the past. Japan is a good model for how this works IMO. In the past Japan made only products for proven markets in the US. However, with the influx of capital it allowed them to expand and innovate manufacturing to the point where THEY were on the cutting edge of various industries. The same COULD happen in Japan, India or with the Eastern Europeans…time will tell.
Granted. It was supposed to be a teaser to spark debate (and really, to fight my own ignorance…I’m no expert on this subject), not an authoritative source in itself (it IS Wired magazine after all…not the best sources for this particular subject). I was hoping to interest folks enough who really know this subject to bring in cites on both sides. Obviously that hasn’t happened. I’m still hopeful.
The reason I asked was to put into context the OP’s question about whether this was worth worrying about. Since it is getting worse, it might be. If the outsourcing rate were stable, it seems it would be silly to worry about. If it is getting worse, it might be, regardless of the benefits or problems with it.
Well, you said that it was good that jobs were moving into service. I’ll look for some numbers, but I seem to remember seeing that service jobs in general pay less than manufacturing jobs. I’ll see of “knowledge worker” jobs are considered service or not. But if average service wages are on the low end, then an increasing number of service jobs is not a good thing for the economy and workers.
That was my first thought to. If a hundred Indians getting a dollar a day are hired by an American firm and one ad guy in the US is hired for a 100$ a day by an Indian firm, will Wired’s method calculate that our outsourcing/insourcing ratio is equal to one.
I think we need something that gives the actual number of jobs involved, not a $ figure. I’m googling now, but so far no luck (insourcing seems to have a couple deffinitions, so its hard to search for).
Er…you lost me. What do you mean by ‘getting worse’?? I would say that a trend showing a steadily upward movement in insourcing is a GOOD thing…not getting worse. Perhaps I wasn’t clear. According to Wired (for whatever thats worth) the trend since the 80’s has been a steady upward rising of insourcing vs outsourcing…i.e. the US has more insourcing coming in than we have outsourcing going out. It was nearly even in the 80’s (i.e. we had as much going out as coming in), but has improved substantially since then.
Well, no, I didn’t say ‘good jobs’…I said that (again, according to Wired) by 2012 80% of US jobs (good or bad) will be in the service sector. According to them (again, FWIW) the trend of insourcing into the US will also continue to rise steadily (no idea what they base that on except its been the trend since the 80’s). I would like to see some figures that the average service workers wages are low…lower than any other sector. I have serious doubts this is so, as most professionals fall into the service sector (lawyers, doctors, engineers, etc). I think people are getting stuck on service=fry cook at Wendy’s which isn’t exactly the reality…we aren’t going to be insourcing fry cooking from other countries…nor outsourcing it either.
In the era of the Internet, I’d like to think we are over the reflexive belief that because something is put in print in a “real” magazine, the information must have credibility.
A lot of the info out there is no better than what someone calculates on the back of an envelope and sticks in his/her blog.
The figures have no credibility whatsoever. Even the best economic figures must be taken with a pinch of salt, but these have no references or explanation attached to them. Garbage.
Let me expain this…again. The article I mentioned was intended to spark debate, not to be authoritative. Even if the figures are accurate (we don’t KNOW if they are credible or not…no one has put forth squat for cites countering them in this thread. Including you btw), they are minimal…it was a one page blurb in a tech magazine for gods sake. I wouldn’t consider that authoritative reguardless. I had HOPED that someone on this board who has some expertese in this area would wander in and provide some harder facts and cites. This hasn’t happened unfortunately, and I’ve been unable to make heads or tails out of what my own limited research has dug up…not being anything close to an expert on this subject.
“Sourcing” is the word used by the purchasing side. I source materials and labor (i.e., look for a source for them) at home or abroad. If I “outsource” labor, I am per the definition of and use of that word looking for a labor source outside my own country.
Contrariwise, if I am supplying laboring, I am not sourcing it. If am supplying labor to another country, I am not “insourcing” labor. In fact, if anything, I am “outsupplying” it.
