Outsourcing: A Bane Or A Boom?

Take an AT&T calling card and dial customer service. There’s a 95 percent chance that your call will be answered by someone sitting 10,000 miles away, in a plush call center in Gurgaon, India.

Your iconic Levi’s jeans are still branded, but they’re no longer “Made in U.S.A.” The company closed down its last two sewing plants in San Antonio, Texas, earlier, his year.

A USA Today article, dated March 24, 2004, reported that giant carmaker General Motors would be expanding its business operations in Canada and India.

Welcome to the brave new world of “business process outsourcing.” More and more American companies are transferring their core business operations to low-wage countries that are rich in human capital and where labor is cheap.

With the presidential election just around the corner, job creation has become a hot-button electoral issue with most voters. About 2.3 million jobs were lost over the past three years. More than 3.3 million are expected to leave the country by 2015.

South Dakota is no exception. In the past three years, 5,200 manufacturing jobs have disappeared from the state.

For most, this spells bad news. For the most part, it is. But not all of it is bad.

While there’s a job flight in the low-skilled tech sector, some new, high-skilled tech jobs are still being created at the same time. Fueled by a sense of growing insecurity, the average American worker is blaming countries like India and China for his or her unemployment woes.

A paper released in the last week of March 2004 by the American Electronics Association, the nation’s largest high-tech trade organization, allays some of those fears.

U.S. jobs are indeed fleeing to nations where the workforce is willing to do more for less. But that’s not the all-important reason why folks back home are losing their jobs.

The current job-loss phenomenon is the cumulative result of a host of factors of which outsourcing is the least important. Of all the jobs that dried up since 2001, less than 10 percent of them went to India.

Data released by the Bureau of Labor Statistics for the first quarter of 2004 indicated that the percentage of jobs lost due to offshore outsourcing-related mass layoffs was a mere 1.9 percent of the total jobs lost through mass layoffs.

Thanks to the heavy investment in technology, there’s been a sharp increase in productivity. Fewer workers are able to handle a greater quantum of workload, produce better results, in a shorter time span. Thus, hiring rates dropped.

Also, during 2001 and 2003, the global economy slowed down, bringing in its wake a decreased demand for U.S. goods and services.

American high-tech exports to the world plummeted from $223 billion in 2000 to $166 billion in 2002. As if that wasn’t bad enough, the domestic economy slipped into a funk.

In an increasingly globalized world, where economics—not politics—calls the shots, outsourcing has become the leading-edge corporate strategy.

For those bearing the brunt of unemployment, it is, no doubt, a bitter pill to swallow. But the pain incurred is only short-term; the gains, long-term.

In the long-run, American firms stand to save more money. Shifting some corporate functions to countries like India can help save up to 80 percent in wages and operating costs. Prices will tumble and the average American consumer will be required to pay less.

Perhaps, we should all take a cue from Federal Reserve chairman Alan Greenspan, who, in a 2004 speech at Omaha, Nebraska, said, “Protectionism will do little to create jobs and if foreigners retaliate, we’ll surely lose jobs. We need to discover the means to enhance the skills of our workforce and to further open markets here and abroad.”

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s