“When it comes to
outsourcing, don’t listen to the politicians, listen to the laws of economics.”
From 2002 to 2007, the outsourcing of U.S. jobs to overseas
facilities was a mainstream discussion in the United States. The housing crisis, financial panic, and
subsequent recession have taken the focus away from outsourcing over the past
couple of years. Despite this, I believe
that continued disappointment in the jobs market (coupled with unemployment
benefits issues) will bring outsourcing back to the front lines. With that, we will get all the economic
fallacies and fantasies surrounding outsourcing as well. Therefore, it’s time to set the record straight
about outsourcing.
THE LIBERAL VIEW OF OUTSOURCING
The liberal view of outsourcing is that it is a zero sum
game. For every job created by a
multi-national company in India or China, one is taken away in the United
States. The other side of the liberal
coin on outsourcing is that for every job lost in the U.S., at least one job is
moved to China or India. We hear this in
union talk and on a variety of different television campaigns.
Another propaganda tool used by the left is one of
exploitation. They equate the wages paid
to these overseas workers to the equivalent in the United States. You will hear things like “workers are being
paid less than half of what the minimum wage in the United States.” This theory assumes that every economic
factor in the U.S. is the same as an overseas country.
THE REALITY OF OUTSOURCING
From the American consumer’s point of view, outsourcing
allows for products to be produced at cheaper prices, therefore, consumers get
more for less when buying products made overseas. If the government were to step in and reduce
the amount of imports under the guise of “protectionism,” consumer prices will
rise. Consumers facing higher prices
will consume less. In the current
economic environment, protectionism would hurt the economy. For more information on this, study any
tariffs the U.S. has passed in the last 100 years.
From the overseas worker point of view, outsourcing
represents an opportunity to build wealth and join the middle class. Let’s take China for example. As seen in this
article, China’s middle class (or wealthier) population has gone from less
than 1% in 1985 to a projection of over 76% by 2015. Ask the middle class worker in China if they
consider what is happening as “exploitation.”
THERE ARE PROBLEMS WITH OUTSOURCING
There are drawbacks to outsourcing. The first is that it takes six to seven
outsourced employees to meet the productivity and efficiency of one U.S.
worker. Some of this is due to
technological differences, however the differences in education and training
also plays a role. In some disciplines,
it is actually more expensive to outsource the work than to keep it within the
country.
The other issue is the cultural differences. Employees in other countries have different
views of what a management structure is and in many cases, how the organization
functions on a basic level (considering regulations, intellectual property
rights, etc as well). These differences
can create “snafus” in the communications between the different country
locations.
Overall, when examining outsourcing, understand that there
are costs and benefits to this economic practice. Don’t listen to the politicians, listen to
the laws of economics!
