|Written by Philip Lautman|
|Thursday, October 21, 2010 07:21 PM|
This summer I had the rare opportunity to take an internship abroad. For two months I lived and worked in the Philippines, a country in which the elite are almost identical to American elites, and a vast amount of the provincial poor live without plumbing or electricity. I worked for a major corporation with a capitalization of approximately 25% of the country’s stock market in a finance division whose sole purpose was to build and develop outsourcing companies.
Since 2004, outsourcing has moved to the forefront of American political debate. The benefit strategic outsourcing provides to American companies is consistently weighed against the “they took our jobs” counterargument. It is true that general manufacturing and various levels of unskilled and skilled labor have all but disappeared from our shores and traveled to “somewhere over there.” The difficulty in this debate is separating the emotional and rational elements of the issue. Emotionally, we all know of someone who was laid off as a result of their job being outsourced to a domestic specialist or overseas. It hurts to imagine the difficulty Americans face in being unable to support their children, pay their mortgage, or, in extreme cases, pay for food. But no American company would choose to fire its employees if there wasn’t a significant upside. That upside is usually decreased costs or a strategic move that will allow a company to focus on its core competencies.
When people think of “cutting costs” they imagine a group of people in suits sitting in a well-lit room with a chart indicating success. What they don’t realize most of the time is that the same people in suits were looking at downward pointing arrows for the past two years. Firing some employees allows for the retention of hundreds more and the continuation of the company. In short, outsourcing allows companies to survive in the current hostile market. While this is probably the most common rational argument in favor or outsourcing, I would like to illuminate some lesser known factsThe United States benefits immensely from foreign outsourcing efforts. As the intellectual and service leader of the world, the United States receives work from companies all over the world because we can do “it” better, faster, or cheaper. In fact, the amount of foreign investment in the United States right now is approximately $2.397
trillion as of December 2009. European and Asian firms consistently outsource to the United States, which provides thousands of jobs at home. Revenue from the free marketplace across borders pours billions annually into American coffers. Software outsourcing to the USA is a large industry as well. Since 2008, odesk.com, a leading talent marketplace for IT services, has seen a near 500% increase in the number of assignments overseas companies outsourced to the United States (see figure 1, courtesy of oDesk.com).
The increased price of oil has also increased the cost of outsourcing to the point where domestic companies are increasingly turning to “nearsourcing” or “homesourcing” where they accept work from geographically nearer companies or companies at home. The American effort to reduce or regulate the outsourcing industry has generally been one-sided. In other words, legislation is designed to keep American jobs here. But what happens if regulation or increased tariffs interfere with the outsourcing that brings jobs into the United States? Having worked at a company that actively promoted the export of jobs like accounting, medical billing, and the well-known customer care call centers, I can say that I have seen where those jobs go and the benefits we promise and deliver to American companies to ensure their long-term health and competitiveness. What happens to companies that are currently reliant on outsourcing for survival viability? Can we really say that the jobs “we bring home” through regulation will result in higher employment since it will definitely cause some existing companies to fail?
In short, we are made to feel like America is being hurt by outsourcing. In the 2004 presidential election, Senator John Kerry criticized American businesses that hide profits and taxes through international business. While this does hurt America greatly, these practices have nothing to do with outsourcing. The misinterpretation of his comments launched an unwarranted national outsourcing paranoia, which has skewed the facts and allowed passion to override reason. But outsourcing is good for America and allows many companies to retain employees they would otherwise have to fire.