There should be consequences for businesses that export jobs overseas

Great Debates
21

BTW, to the anti-outsourcing crowd:

Please answer this simple hypothetical (devised by John Mace, I think, in another thread)

A company decides to automate a part of a production process and lays off 500 jobs. Would you want government to intervene? Please answer with a clear Yes or No along with an explanation.

This hypothetical works very well. It doesn’t matter why a bunch of people are getting laid off. If a company decides to lay off in order to lower costs, increase profit etc, it will. The benefits will probably be passed to the American consumer. In the worst case, this company’s growth will benefit American shareholders, investors, and may even create more jobs within the company itself! The rhetoric about foreigners stealing jobs is a smokescreen. The real issue is that a bunch of people lose jobs. And, in both cases, the company and the US economy benefits.

22

Isn’t the real problem the lack of free movement of labour?

It strikes me that globalisation allowing the free movement of traded goods and capital is viewed as a “good” thing on this thread but movement of people to do the actual work (into first world countries) is not.

If I understand correctly willing and flexible labour movement in the US, to the West and now the South to chase States with growing economies is one of the reasons the US economy is generally higher growth the the EC - where movement within the EC is it really only a feature of the educated elite. It helps of course that you all generally speak the same language in the US.

If we allowed freer immigration, as was the case say up to WWI, would not that remove the pressures to “export job” abroad.

In other words is not US/EC job export a result of the actual protection of US/EC workers but restricting the supply of workers through tight immigration policy?

23

You armchair libertarians need to think a little bit harder before spouting these glib “It all comes out in the wash” assertions.

Comparative advantage is a good thing. IF indeed Americans are giving up mediocre jobs (ie, sending them to India) so that they can do better, more-value-added, and higher-paying jobs, then that’s good.

What’s not good is what is actually happening: the most highly value-added jobs (computer programming, etc.) are going overseas NOT because the people over there can do them better, and NOT because better jobs are already being made here, but simply because those Indians are willing to work without benefits that we have fought dearly to earn: decent holidays and workweeks, medical insurance, and just plain decent wages. It’s a big step backwards for labor considered on a global basis.

We need to raise the level of labor in India to our level, not reduce ours to theirs.

For the same reason, if manfacturers in China are able to undersell us because they treat their workers like trash and dump chemicals directly into rivers, then something’s wrong there too.

Libertarians always say, “Learn more skills, go for a niche,” blah-blah. But I never see any specifics. What niches should people go for these days? We already have a massively overeducated population that goes to college for 4 years just to earn minimum wage upon graduation. We already have hypercompetition for low-paying jobs.

I’m just curious how you envision things are going to work out OK. I don’t see it happening.

And yes, I’m a socialist.

24

Actually, those highly value-added jobs being outsourced are not going to Indians willing to work without the benefits you mention. These people are very highly paid in comparison to the majority of the Indian workforce. More often than not, these people have excellent working conditions of the kind that most in the developed world would envy.

I’m trying to drag up a cite for this: I read a newspaper report on the 1st of January, talking about how good the Indian economy is doing - the report notes that in the past 7 years, 100 million Indians have moved from the middle class category to the upper middle class category (as defined by the goverment)…

Even if this is an exaggerated figure, the fact is that the level you speak about is indeed rising - even five years ago, I couldn’t have dreamt about buying a car before I was 32 - now I’m planning on buying one when I’m 28. And I don’t even work in one of those businesses that depend on outsourcing.

25

Maybe they should “downsize” some of those upper-management jobs and send them overseas, too.

26

gouda: Actually, those highly value-added jobs being outsourced are not going to Indians willing to work without the benefits you mention. These people are very highly paid in comparison to the majority of the Indian workforce. More often than not, these people have excellent working conditions of the kind that most in the developed world would envy.

Didja find that cite? I’m living here in India now, and I know several Indians who are working in outsourced jobs (or training people doing outsourced jobs at call centers, etc.). Indeed, they’re “very highly paid in comparison to the majority of the Indian workforce”, but I certainly wouldn’t describe their salaries or working conditions as enviable to Americans or Europeans doing comparable jobs. Maybe there are some highly skilled software engineers in Bangalore and Chennai who are still leading the life of a '90s Silicon Valley dot-com mogul, but I think that these people are not very representative of the average Indian outsource-employee.

I agree with the free-traders that the burdens of protectionism in the long run outweigh its benefits, and that knee-jerk hostility to outsourcing is not the answer. But I also agree with Aeschines that the free-traders often overlook or understate the genuine disadvantages of trade liberalization as we now practice it, particularly in the short term.

The fact is that the past couple decades of liberalization have not been a big success story for the average American worker. The median wage level didn’t even rise above its 1979 level until 1998, and household debt and hours worked have both increased for the average family over the last decade. So has student loan debt and the percentage of Americans without health insurance. This has happened even as a growing percentage of the workforce has earned college degrees and productivity has steadily risen. Despite huge income and wealth gains at the top of the socioeconomic scale, as well as productivity increases and other boons to GDP, the average worker has been continually having to run harder and faster just to stay in place, or at best move a little ahead. Source: Economic Policy Institute report “The State of Working America 2002/2003”.

litost: *If a company decides to lay off in order to lower costs, increase profit etc, it will. The benefits will probably be passed to the American consumer. In the worst case, this company’s growth will benefit American shareholders, investors, and may even create more jobs within the company itself! *

But the net result, since shareholders, investors, and other beneficiaries of increased profits from layoffs are generally concentrated at the top of the income/wealth ladder, is to further concentrate in a small group the benefits that were formerly spread more widely in the form of wages. Don’t be Pollyannaish about this, folks. If those newly unemployed ex-workers can’t find comparable new jobs to replace their vanished income, they ain’t gonna console themselves with the reflection that now they will probably be able to get cheaper DVD players, or that their 401k’s will probably earn a little more money, or that their ex-boss will be able to afford another new Mercedes. They are going to be mad as hell, and they will take out their resentment on trade liberalization in general, and on those who support it.

If we don’t deal with these problems at the level of social infrastructure for workers (domestic job creation, living wages, social safety nets, retraining and education, strong labor law enforcement, labor representation on corporate boards, etc.), you can bet your libertarian ass that the angry protectionists will end up dealing with them, at the level of “consequences”.

27

Hey Gouda,

Good for you. I don’t think Americans deserve more just because we’re US citizens; I think people all over the world deserve a good standard of living.

If you are getting all the benefits that Americans have (not that our benefits are anything compared to those of Europeans), then that’s good. However, if other people in your country don’t get those benefits, and if that’s what keeps the cost of employing people in India down, then we’re back to square one.

For the past few years the outsourcing of jobs to India and elsewhere has been painful because people who have been doing good work for decent money have suddenly been reduced to poverty in a country where it looks like they’ll never make the same amount of money. Yes, and keep in mind that these were the people who went the extra mile back in college to learn a skill that the marketplace would reward.

So the talk about learning new skills and niching onself is only so much guff. I have an MBA degree and have been totally unable to find a decent job in the US since 2000. I do have a special skill–complete fluency in Japanese, PLUS I got an MBA from a top-25 school. Still not good enough.

I applied for a job whose salary I didn’t know at first. It turns out a 50-year-old with tons of experience got it. The pay was 34k. MBAs have been taking jobs that pay in the 30s and 40s according to recruiters I talked to. It is nuclear winter out there for the tech and managerial classes. And I don’t see it get much better anytime soon.

28

Kimstu,

Very eloqunt. Free-traders often leave out the cost of people getting pissed off and going for protectionism or just plain rioting, since people “aren’t supposed to do that.”

But libertarian principles do give us a Utopia as time n goes to infinity. [Snicker]

29

Libertarianism is not a Utopian mindset like socialism.

It’s simply the concept that no one has the right to tell you how to live your life as long as you aren’t hurting others. If I want to move my factory to Bangladesh, I can darn well move it there and there’s not a thing you can do about it unless you resort to keeping me here at gunpoint.

Libertarians believe that is morally reprehensible.

Libertarians have no illusions that the society that would result from their ideas being fully put into practice would create some kind of utopia. We aren’t socialists. We aren’t delusional. We just believe that individual rights outweigh collective desires.

30

Adaher,

Socialists aren’t delusional or utopia seekers, at least not the ones I know: the majority of people living in developed countries, whcih are, for all intents an purposes, socialist countries. It’s just a matter of degree.

The problem with your thinking is that you think it’s “your” factory to move to Bangladesh. What makes it yours?

Only the arbitrary legal and social structures of the country you happen to be living in. Heck, in France in 1788 it was “your” chateau and those were “your” peasants; and in Alabama in 1864, those were “your” slaves.

Private property is nothing more than a useful social ficition. It should exists only insofar as it’s moral and useful.

The cool thing about libertarianism, though, is that it’s a crank philosophy that will never again have any palpable effect on any major developed nation. So you can just lean back in that armchair and dream. Ah…

PS–By the way most libertarians talk, you’d think that society would be really great and nifty if only libertarianism “came true.” Hence the Utopia slam. I think it’s apt.

31

Congratulations, you’ve discovered the fundamental disagreement between libertarians and socialists. Libertarians believe that if you work to build something, this thing is yours alone. You own the fruits of your labor.

Don’t confuse the posts here saying how free trade is a benefit to society, as libertarianism. The libertarian view isn’t concerned with whether free trade works out in the end; we’re for it because freedom is the ultimate moral good.

Now really - this doesn’t hold water. Socialists are the ones building a utopia. Libertarians just want our freedom.

32

Kimstu:

I’m a little confused by your post. You seem to be saying that protectionism is bad for the economy, but we should go ahead and institute certain protectionist measures to appease the masses. I’ll grant that I’m probably grossly oversimplifying your stated position, but can you clearly outline the difference between good protectionism and bad protectionism?

What labor laws do we need that we don’t have, and how specifically do we improve the social safety net?

Aeschines:

Private Property is the sine qua non of capitalism. For you to argue that it’s an arbitrary construct is fine as long as you are arguing in favor of communism. Feel free to do so, but understand that private property is hardly a concept only embraced by wild-eyed libertarian purists.

33

So, you don’t support government intervention to stifle out-sourcing but you want to humanely address the issue of displaced jobs? Did I get that right?

If yes, it is easier said than done. How can we, as a society, grant everyone willing to work a job? Can such an utopia be achieved? Well, even being practical, how exactly do we create jobs domestically over and above what is being done? It sounds like artificial insemination to me. I do concur with the need for safety nets and much better labor representation on corporate boards. But, do you want the government to set these up through legislation?

On the issue of safety nets, what can you do when someone works hard for a living, gets laid off in his 50s, but sadly enough has put all his savings in one stock and thus loses his safety net when the stock crashes? What I am getting it is that unless the government takes a “We’re a Big Family” attitude, you will see people failing and falling.

And, re: Indian wages, many many Indian programmers earn a good living. $600 a month is peanuts here but in Indian currency it earns a good lifestyle. I would disagree that only some Silicon Valley type moguls are making good bucks. I don’t know exactly how much a call-center operator earns but from what I hear, it pays well. Middle-class lifestyle, I guess.

34

Well, I’ll just say this once since I’m sounding like a broken record on the subject, or an OTP, God help me.
The Asian nations, from Japan to India, have been practicing mercantilism. Japan and China have both experienced huge increases in their foreign reserves, and have been throwing monstrous sums of money at keeping their currencies fixed to the dollar in order to undercut both US and European companies.
Fix that problem and you fix most of this problem. Redirect the vast sums being spent by these idiotic governments on the black hole of currency intervention into doing something productive for their citizens, or even just make them not spend the damn money, while freeing the currency markets to do what they do best in the form of providing feedback to all of the economies of the world, not just the Western ones, and then sit back and watch what happens.
I’m not a libertarian by any stretch of the imagination. But the only answer to the woes of free trade is, more of it. Growth is the only answer to the problem, and removing the obstacles to growth is the path to that answer.
As to the lack of wage growth in the Western countries: this may be true, but the Chinese government, for instance, is planning for 220 million people to move from the countryside to the cities over the next decade. Like it or not, there is a vast, vast global surplus of labor. Like it or not, unless growth ramps up to absorb that surplus, wages aren’t going anywhere.
Remove the obstacles to growth.

35

Do the math. Trade barriers take perfectly good well-being and throw it away. If you don’t like the down-side of lower trade barriers, then you should be attacking the politics that prevent those hurt from being helped, not the measures that make us better off overall. Putting up a trade barrier wastes money (as a crude proxy). In other words, by taking away a barrier, there is enough of an increase in wealth to fully compensate those hurt and leave some money left over.

If you want to moderate the side effects of chemotherapy, you don’t do it by embracing the cancer.

You wouldn’t think so. But you are in essence telling us that Indians should not be allowed to get employment from American firms simply because they are Indians. Read this:

http://www.landsburg.com/about2.html

36

No, you’ve got it all wrong. libertarians are a bunch of ignorami who was raised as children by their parents with the aid of teachers and volunteers, often given scholarships and such to get them through school, then get jobs from their friends and relatives while living in their parents’ basements to keep costs down, who then declare that they are independent beings who owe nothing, not one thin dime, to society as a whole since they are totally responsible for who and what they are.

Socialists at least have SOME idea that people are born into and raised by societies of human beings.

37

There should be consequences for people who start threads and never return to them…

38

Is there a problem with requiring US companies that outsource jobs to other countries, in requiring the companies to provide similar levels of living quality to those employed in the other country as those employed in US would get. ie allow outsourcing if those who do the job receive full health coverage, reasonable (from US employees point of view) hours and vacation times, similar contracts to US employees. The only variable would be the payment rate, which would be negotiable but still subject to US minimum wage laws.
Tarifs could be used against companies that create goods in foreign countries using a workforce that is not given as high benifits as those discribed above.

39

Yes, it’s a protectionist measure and a tax on consumers. Since other developed countries don’t require this, it puts US companies at a competitive disadvantage. It also assumes that we in the US know what is best for workers in other countries. Things like vacation time are luxuries-- rich countries can afford more of them than poor countries. And I don’t know how you think that wages would still be a variable if you imposed US min wage laws on outsourced jobs. You seem to think that tarrifs are something paid for by companies-- they are taxes paid for by consumers.

40

Kimstu, this is the article I read, and here is the relevant part of the transcript of speech the article refers to.

And I was not just referring to the dot-com moguls (of which there are plenty - even the chauffeur of the chairman of Infosys is a Rupee multi-millionaire!). In those businesses dependent on outsourcing, even people low down in the hierarchy earn salaries which are higher than those in other businesses. A fresh graduate software engineer earns around 50% more than a fresh mechanical engineering graduate, in an equivalent company. I’m speaking from personal experience here.

And I never said their salaries were enviable from an American or European point of view. I was talking about the working conditions. Take the call center business (the bottom of the pile in outsourcing). I have plenty of friends working in a multitude of such companies. They get picked up from home in a company bus, so no need to use public transport. They get subsidised food in their canteens. They get the weekends off. Through their company, they get amazing deals on credit cards, mobile phone tarrifs, insurance, and memberships in a host of clubs/gyms… and more. Not enviable? I wasn’t getting half of this when I was working in Germany!

Aeschines, I sympathise with you. I too was in the same situation you’re in. Post-grad degree from one of the best auto engg. schools in Europe, fluent german, worked at Audi, good with CATIA v5 - the extension on my work permit was denied when unemployemt in Germany spiraled. I came back to India to job offers and salaries that were dismal (to be polite). So I switched careers. It wasn’t easy, but it was either do or get stuck in a rut. I’m fortunate in that I’m young, so the switch wasn’t as painful as it could have been.

I’m now working in a small company that makes residential buildings, in what is one of the fastest growing cities in Asia. A large chunk of this growth is due to outsourcing. Many of our buyers are the new affluent who can now afford to move into their own home. We, not connected in any way to outsourcing, are benefiting - so much so that we’re planning on hiring a new employee just to handle the marketing, because I can’t do that myself anymore. Benefiting also are the shopkeepers who’ve had to open new outlets to cater to these new communities. So are the various other services which cater to these new communities. And so on. There is a trickle down effect which permeates to the bottom of the social scale in India. What I mean to say is that it’s not just those people working in the outsourcing business who’re benefiting.