May 18, 2004 4:00 AM PDT
Perspective: The jobless recovery and offshore outsourcing
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That companies are offshoring work at a growing rate is certainly true. That offshore outsourcing, which began decades ago in manufacturing, is now expanding to include some of the most highly skilled jobs we have is also true. And that these jobs are gone and will never come back may be true, too.
However, that the causes are misguidedness, short-sightedness or even evil business leaders is not true. And that the solution is to stop the practice is even less true.
We are certainly in a period in which America's trust in its business leaders is at a real low.
The simple truth is that offshoring is not the result of a few Benedict Arnolds.
Yes, offshoring does involve taking advantage of "cheap foreign labor." But let's be fair. Americans love cheap. Wal-Mart Stores, the largest U.S. company, is famous for its low prices. Customers love Wal-Mart. That Wal-Mart is, all on its own, one of China's top trading partners doesn't slow down the American appetite for what the mega-retailer does or how it does it. Does this make Wal-Mart bad? Of course not. In fact, Wal-Mart just topped Fortune's list of America's most-admired companies.
As consumers, we demand the lowest possible price and the highest possible quality. If an American company can't deliver it--sorry; we'll buy from whoever can, American or not.
The simple truth is that offshoring is not the result of a few Benedict Arnolds. It's a result of the relentless pressure on businesses to take advantage of every opportunity available to them to reduce costs, increase quality and add to profits.
Stopping offshoring--or imposing a moratorium, as some have suggested--would simply put U.S. companies at the mercy of their foreign competitors. Does that mean that every company that is offshoring is considering all of its options and making a fully informed decision? Of course not.
| There is a train coming down the tracks. If we don't work together to fully understand the changes heading our way, we will all be equally flattened when it hits. |
There are real issues that we need to better understand quickly--very critical ones, such as the protection of intellectual property and private data. And top companies are working very hard to do just that. But again, let's be fair. Intellectual property gets stolen in the United States. And identity theft didn't begin with offshoring. Sadly, it's yet another American innovation.
What to do
So what should we do? Simply tell people to hang on, that macroeconomics will eventually come around to save them? I'd instead suggest a more aggressive, two-pronged effort.
• First, we need to open a dialogue across business, government, labor, and academia to better understand where outsourcing, offshoring and the global economy are taking us. There is a train coming down the tracks. But we seem to be arguing over who's going to stand where on the track. It won't matter. If we don't work together to fully understand the changes heading our way, we will all be equally flattened when it hits.
• Second, we need to begin to develop a blueprint for a response to these changes that builds on the best of America: investing in our people; investing in research and development; spurring our entrepreneurial energies. We don't need government regulations to protect us. But we do need to seize the moment in a uniquely American style.
What might that be? We should embrace offshoring where it makes sense, but we should also reinvest some of those savings right here. Let's put money back into retraining and job placement services.
Let's find ways to encourage entrepreneurs to launch new call centers in places like North Dakota and the Bronx to compete head-to-head with those in India, the Philippines and other countries. Let's find ways to help some of our people reapply their talents in fields like education and health care. Let's redouble our investments in research and development in areas like nanotechnology and biogenetics--fields that offer the United States the opportunity to dominate tomorrow's great industries.
Biography
Michael F. Corbett is CEO of Michael F. Corbett & Associates. He has testified as an expert on outsourcing for the White House's Office of Management and Budget.
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All this retraining is for the lower paying service sector jobs. These jobs don't come close to replacing the 25-30 dollar an hour jobs being outsourced.
Oursourcing is not caused by evil-minded CEO's. Think again. CEO compensation in 2003 was up over 43% compared to their 2002 compensation. The additional compensation came solely on the backs of outsourced American workers who were fired.
Given real issues:
1. American workers are the main body that are supplying money to the government by paying what is called "income tax".
Question: what will happen with all this source of money if Americans lose their jobs?
How the government will "patch" this hole?
2. Social Security fund is maintained by American workers paying in.
What will happen with this fund when there will be less and less payment into it due to American workers losing their jobs?
My personal thought:
Companies offshoring jobs whould pick up these tabs by paying taxes and fees usually an American employee would do it.
For each foreign employee the companies would have to pay what each American employee would usually contribute while holding a job.
This way American workers who were laid off could benefit of a temporary jobless income and retirees continue have their retirement income and medical benefits as if nothing has ever happened.
Ben Adams
I would guess that it would be a "career limiting
move" for a business consultant to harshly
criticize offshore outsourcing. After all, their
customers are actively moving high paying jobs
to locations were the salary cost is a fraction
of that in the US. The last thing that these
corporate executives want to hear is that they
are traitors to the country that gave them so
many advantages. So we see a stream of
consultant and other people with a financial
interest in outsourcing telling us that
oursourcing is either good in the long term
or, if it is not, that it can't be avoided so
don't fight it.
Among the gross distortions in this editorial
was the characterization of Wal-Mart as one
of the most admired corporations in the
US. Amired by who? By their employees who
are paid at best subsistence wages? By the
employees who have been injured on the job
at night and can't leave locked store
for fear of being fired? Or how about those
Wal-Mart employees who have had their time
cards altered by their managers so that they
are not paid overtime? Are these the people
who admire Wal-Mart?
Let us contrast Wal-Mart and their pay and
employment policies with those of CostCo or
retailers like Trader Joes. These are stores
that offer excellent products, low prices and
great employee benifits. These are the
companies I admire. Not the US's version of the
third world sweat shop.
There is a very simple question that lies at the
heart of offshoring: when well paying
manufacturing jobs, engineering jobs, accounting
jobs and so on are moved offshore, who will
have the income to buy all that low priced
merchandise? Income for many people in the
United States is either declining or stagnant.
While offshore outsourcing is good for the
profit of multi-national corporations there is
no reason other than blind faith that it is
good for anyone else.
Americans will be forced to compete with 2.5 billion other people in China and India for resources, what'll you think gas will cost then? I shudder to think.
These countries don't care about the US, except for our money. Further they won't trade fairly, because there's no money in. I can't immigrate to India, and if I sell my software there the pirates will just smile.
Further they like having their money be permanently devalued, and that will continue until the U.S. currency is worthless to those who provide the inputs to capitalism.
Only good news is that the multi-trillion dollar deficit might not be worth a loaf of bread in 10 years (I'm exaggerating but I think you get the picture).
Keep devaluating the dollar that's the future, Greenspan knows, soon you'll know it too.
About Michael F. Corbett & Associates, Ltd.
Michael F. Corbett & Associates, Ltd., Outsourcing?s Global ResourceŽ, is a research and training firm dedicated to advancing outsourcing as a powerful management discipline. The company produces the field?s premier conference, The Outsourcing World Summit, and provides leading-edge insights and information on outsourcing through its Website www.firmbuilder.com.
Routinely sought as a lecturer and speaker on outsourcing and related topics, in 1996, Mr. Corbett was an expert witness on outsourcing at hearings called by President Bill Clinton and, in 2002, was invited to testify before the Office of Management and Budget?s Commercial Activities Panel tasked with redefining the Federal government?s outsourcing policies and practices.
Mr. Corbett has worked with organizations as diverse as Bell Canada, Delta Airlines, GlaxoSmithKline, Hallmark, EDS, Xerox, Trammell Crow Company, the Department of the Navy, India?s NASSCOM, and the People?s Republic of China.
Regarding training. In what? What industry can I be trained in that cannot be done cheaper internationally? Whatever the next big thing is, which nobody knows what that might be.