Outsourcing As A Source Of U.S. Jobs

An anonymous reader writes "The Economic Times, India's leading financial newspaper, reports that Diana Farrell, Director, McKinsey Global Institute during her speech at Nasscom 2004 said that Bureau of Labour Statistics is predicting a job gain of 22m in the US by 2010, against a job loss of 2m, due to offshoring. You can read the full article here."

Comments

Sauces, use thereof

[A nonymous Coward]

What's sauce for the goose is sauce for the gander. If all this is true, how come Indians aren't eager to outsource all the jobs back to the US? Hard to believe they are so altruistic.

Re:Sauces, use thereof

[Smokin Goat McGruff]

Free trade benefits both parties. You wouldn't buy anything if you didn't think the benefit didn't outweigh the cost. The manufacturer benefits because they got your money, you benefit because you got a product you like.

It's the same thing here. The US benefits from cheap labor, and India benefits by providing it. You learn this stuff on the first day of any economics 101 class.

Re:Sauces, use thereof

[kbonin]

"The US" is not benefiting from cheap labor - the benefits a corporation gains from outsourcing is passed mainly to the executives of the corporation through non-salary compesentation (options, bonuses, etc.), and to a lesser extent to the shareholders of said corporations.

The public is benefiting in the short term from the continually lowering retail price of consumer goods manufactured primarily in China.

The long term result is simple - good bye middle class. The growth in the service sector is primarily servicing said middle class, so the service sector dies with the middle class.

As much as I love capitalism, we are seeing its worst side now - as corporations realize they can behave with no morals (as modern society has decided there is no such thing, all is relative), there is no reason to create jobs, take care of employees, etc. There is nothing of concern other than the next quarter stock valuation...

To make it even worse, the modern system doesn't allow executives to benefit significantly from their stock shares until they SELL them (dividends are still overly taxed), so there is no real reason to think about the long term survival of the corporation either...

Add currency trading velocity issues and foreign holding policies for US treasury bonds, and the western economy is getting scary - inertia only lasts so long...

Re:Sauces, use thereof

[rsidd]

If all this is true, how come Indians aren't eager to outsource all the jobs back to the US?

Because it doesn't save money to do that. Salaries are much higher in the US which is why US companies are outsourcing in the first place.

Re:Sauces, use thereof

[myom]

- Companies save money by outsourcing, allowing expenditure in more critical areas. Fewer jobs in the short run, more jobs and stable companies in the long run. - Spreading $ to "less developed" countries narrows the gap between countries with little money (a theoretical construction) but huge resources and low wages and countries with lots of money but few resources and high wages. In the long run or very long run this leads to a more stable world economy. Large parts of many countries budget defecits are because other countries can't afford to pay for exensive products. Basically money != work/resources, and the development of other countries rectifies this.

Re:Sauces, use thereof

[packeteer]

We only benefit from the cheap labor if we are a stockholder. If we are a working for a living wage we end up losing. Why dont you consider more than a stock index when you think about an economy? Why dont you think beyond basic economics class and think about what is really important to our a country; the citizens not the corporations are what we should be supporting.

Re:Sauces, use thereof

[Yartrebo]

Food, clothing, and appliances are a small part of poor and middle class people's expenses, and outsourcing and mechanization is primarily reducing the cost of these goods.

The biggest expenses tend to be housing, medical, and auto. For the heavily in debt, you can add in credit cards. Housing and medical are skyrocketing while auto is rising more modestly. Funny enough, to take advantage of low prices in large stores like Walmart, you need a motorcar, which will, in all likelyhood, cost you more than all of your spending at said stores.

If you really want to help the working class, break up the pharmaceutical and medical cartels and push for subdividing our oversized houses and building affordable housing to get rents and property prices under control. Reducing auto expenses would require a massive overhaul of our cities and infrastructure, but the benefits would be massive.

Walmart could push the cost of food, clothing, and appliances to $0 and in several years rising health, housing, and auto costs will eat that all up.

Re:Sauces, use thereof

[ZoneGray]

More to the point... American dollars go to India, and there are only two things that can happen:

1. They spend the money on American goods

2. They just keep the money

Case 1 is a wash, and Case 2 (which never happens), would be wonderful... we could just keep printing dollar bills and never have to work. Unfortunately, when we import goods or services, the other countries want something in return.

America is prosperous largely because it's a huge free-trade zone. Imagine if people in Massachusetts complained about imports of cars from Michigan, and passed a law that said you had to buy a car made in Massachusetts, so that jobs wouldn't be lost to low-cost labor in Michigan. Or suppose Massachusetts insisted that Michigan adopt all of Massachusetts' labor laws. Would the people in Michigan want that? Would the people in Massachusetts want to drive cars designed in Brockton?

Or another example... suppose a state complained about all the computers "imported" from California or Texas, and insisted that any computers in be made and designed in the home state. Who would be hurt by that? People who can't afford expensive computers, that's who. It doesn't happen, nobody even suggests it, because it's freaking brain-dead stupid.

Some states make certain products, other states make others. Free trade among states reduces income inequality among states, and allows us to be peaceful neighbors.

Re:Sauces, use thereof

[BJZQ8]

If people in Massachusetts were trying to maintain their standard of living, and Michigan were a country where major killers were things like starvation and dysentary, I would see no problem with banning car imports from Detroit. All of this outsourcing is serving to do one thing; balance the economies of the U.S. and India/China. They gain, and we lose.

Re:Sauces, use thereof

[ZoneGray]

Wealth, on a national level, is determined not by what you have, but what you can produce.

We could redistribute every penny of current American wealth equally around the globe, and within a short period of time, the same order would redevlop, the same nations would be prosperous and the same nations would be poor. The Soviet Union had an incredible stash of natural resources, and a very educated and capable population, but they were piss-poor because they insisted on taking five dollars' worth of materials and labor and using them to produce two-dollar shoes.

Re:Sauces, use thereof

[4of12]

so there is no real reason to think about the long term survival of the corporation either...

Quite so.

I've often thought the capital gains tax rate should be very high initially and very low in the long term. Something drastic like exp(-time/5 years), for example.

The main objective being to motivate shareholders and executives to think of the company's long term best interest and not just jack up earnings by cutting maintenance, R&D, selling the family jewels, etc.

One worrying development is just how much executives are motivated to sacrifice a company's long term health in order to meet earnings estimates put out by the Wall Street analysts.

If there were a similar way to make politicians or the public fiscally-minded, too, it would be nice. Something along the lines of "your share of this year's federal deficit is going onto your VISA card on April 15" would help shape things up in a hurry.

Your choice: pay more taxes, spend less, or lock yourself into an onerous debt. Most politicians are only too happy to give people less taxes, more spending and retire before the debt comes due.

Re:Sauces, use thereof

[SirChive]

"Free trade benefits both parties."

This is a common and widely-believed simplification.

There are many "sides" to Global "Free Trade". Multinational Corporations and their stockholders benefit the most. Politicians, lawyers and bankers tend to benefit as the Corporations spread money around to grease the wheels of trade. People who are already wealthy benefit from the cheap prices.

But the American Middle Class most certainly does not benefit in the long run. Remember that thirty years ago a person could get a job in a factory or a machine shop and buy a house and a car and raise a family on his earnings. Not everybody wants to or is able to be a businessman or a "knowledge" worker.

But this is ending. America is on the path to becoming a two class society: the business class who are becoming very wealthy and the service class who just barely scrape out a minimal existence.

Re:Sauces, use thereof

[elbarrio]

The argument you've made basically boils down to "we've seen this before and it didn't hurt us". However, your assumption that we have seen this before does not seem accurate. In the past we've seen exportation of unskilled labor, mostly factory jobs. The argument at the time was that we will retrain and become more skilled and a higher quality workforce than other nations, which will in turn raise our standard of living. However, now we're seeing job loss in white collar educated positions. How can you tell someone who has a PhD already that they need to retrain? that they're not educated enough? As such, it's hard to say this is not the beginning of a long downward spiral, where the money at the top of the paradigm begins to shift to other nations over the long run. You may make the case this is good for world stability as a whole, but I'm not so sure it's good for citizens of the U.S..

Re:Sauces, use thereof

[SirChive]

"Take an economics class. So we loose a few US jobs. US companies are making those jobs, which means US companies will be reaping the profits"

Oh man, you are so completely off track it boggles the mind. You have swallowed the propaganda hook, line and sinker. This is the Big Lie that Corporations and Politicians use to get the laws passed that they want.

In reality, these are primarily Global Multinational corporations that benefit. And they are not passing on the wealth by hiring vast numbers of new managers. In fact these big companies are finding that they need fewer and fewer managers. When was the last time you saw a headline like "Big Company Hires 10,000 New American White-Collar Workers"?

When a factory moves to China it doesn't just create jobs for assembly line workers. It also creates jobs for supervisors and managers and maintenance workers and so forth. And once all the actual production has been shipped overseas there's no real reason to keep the services and support staff here either. Hence the accounting and programming jobs are starting to go.

We are witnessing the complete hollowing out of the American Economy.

Re:Sauces, use thereof

[4of12]

Oh sure, W spends $500B and it goes on my credit card (at 10%, no less) - that's fair! If I'm going to pay for the deficit, then I get a veto too.

Transposition error.

You don't get a veto, you get a vote.

Re:Sauces, use thereof

[BJZQ8]

I am talking about tool and die makers, not just machinists...T&D's are the elite of the elite machinists, highly skilled and specialized. The elimination of apprenticeship programs and the exporting of jobs has led to their virtual elimination in this country, and now many companies are hurting for it (Caterpillar Tractor Company for one of them)...but they are much happier sending the jobs elsewhere. That's fine and dandy. I say because of that, we are a weaker country, becoming more dependent on others in the world. We have exported our prosperity, you might say. As this progresses, we will soon be nothing but an administrative shell of a country. We cannot sustain a great nation on politics alone.

Well look at that

[Sarojin]

An Indian journal reporting that Indian outsourcing is good!

Re:Well look at that

[Anonymous Coward]

Just because you do not agree with someone does not make that person a troll. Complaining about the moderation is kind of pointless anyway, though, this being slashdot and all.

Re:Well look at that

[BobPaul]

McKinsey Global Institute is a US company. They're the ones who did the research.

Ask Alan Greenspan, ask the Adam Smith, ask John Forbes Nash, Jr, ask the Italian Merchantilasts who failed misserably (along with all the rest of the Merchantilasts).

Tarrifs bad, Free Trade Good.

It's good when your customers have money. That's how we sell them things. India is soon to be the largest country in the world. We damn well better give them jobs so that they can buy the products that we manufacture and develope. That gives money back to America and allows for more jobs on the home front.

Wealth hording doesn't work.

Re:Well look at that

[sql*kitten]

An Indian journal reporting that Indian outsourcing is good!

The thing that winds me up about India is that it is quite two faced (as a country I mean, this isn't a criticism of any individual Indians). On the one hand, it's happy to take Western high-tech jobs. But on the other hand, it's always after aid and handouts from Western taxpayers. The way I see it, it can be a poor country that gets state aid, or it can be a wealthy country that competes with us, but it can't be both.

India needs to be told once and for all by Western governments, right, you are a high tech country now, you are taking jobs from our taxpayers which proves it, we'll spend our state aid budgets on real poor countries from now on. 'Cos once India needs to start paying for its own vaccination programmes and reading classes, suddenly it'll have to start taxing its own people to pay for it, and the artificial advantage in price will disappear. Then we'll see how well India competes on a level playing field.

Re:Well look at that

[Knuckles]

McKinsey Global Institute is a US company.

McKinsey & Company is a global company with offices in Delhi and Mumbai just as in NYC

$22 million in jobs

[Transient0]

or in dividends to stock holders.

The argument that India will need to import American goods for the growing tech sector and that this will result in even more jobs seems a little specious.

Is the global economy being turned on it's ear? Will the U.S. now be making cheap consumables to send to the IP producing countries in Asia? And why would India not simply start manufacturing the products it needs itself?

Re:$22 million in jobs

[smallpaul]

$22 million in jobs or in dividends to stock holders.

Do you think that shareholders stick their money in socks when they get it? I don't. I either invest it again (which creates jobs) or I spend it (ditto).

The argument that India will need to import American goods for the growing tech sector and that this will result in even more jobs seems a little specious.

Why? There are things we make that they do not and vice versa?

Is the global economy being turned on it's ear? Will the U.S. now be making cheap consumables to send to the IP producing countries in Asia?

Manufacturing does not imply "cheap consumables." You can also make high end sewing machines. Robotics. Advanced materials.

And why would India not simply start manufacturing the products it needs itself?

Sigh. Have you never heard of comparative advantage? The total output of the Indian economy is limited by all sorts of infrastructural issues which make it impossible for them to manufacture everything themselves cheaply.

Re:$22 million in jobs

[Lemmy Caution]

The wealthy need not spend their money in ways that create jobs. They can buy land - which drives up the price of land for the ones who don't have it yet - they can buy goods from overseas and luxury goods - the production of which doesn't create very many jobs.

A flatter distribution of income creates more jobs producing things that benefit more people: the more important a part of the market the lower to middle class is, the more productive power goes to address their needs.

Re:$22 million in jobs

[Rotten168]

There are certian situations where trade is indeed a zero-sum game or at least close to it. You're right that it's not a perfect zero-sum game. Economists, however, know that regions can decline in standard of living because of normal economic forces. To assume that countries cannot decline is naive.

Sa...

[cgranade]

I wonder how politicized this report is. Here we are, Bush is taking heat on the same thing that doomed his daddy: the economy. Not to mention that we're neck deep in the election cycle.

Right...

[Einer2]

"People don't understand what a great opportunity offshoring is for US companies. Apart from huge savings, it allows US companies to concentrate on their core competencies and the people (in the US) can move on to higher paying, more creative, more value generating jobs."

...

You see, that doesn't quite work when it's the high-paying jobs going overseas. The only jobs that can't are those that require physical presence, and I can only see so many ways to creatively remove a clog from a toilet.

Re:Right...

[Frymaster]

it allows US companies to concentrate on their core competencies

ack! if i have to hear that "core competencies" argument one more time i will scream... louder.

it's basically just a rehash of david ricardo's "comparative advantage" argument. it goes like this: there is a surgeon and a typist. the surgeon types 60 wpm, the typist only 40. however, despite the fact that the surgeon is faster on the keyboard, it is better overall for the typist to do the typing and leave the surgeon to surgery.

that analogy, of course, makes good sense.... but when you start expanding it to global economics it becomes shakey. we in north america have been fancying ourselves the surgeons for a long time and been foisting the "typing" work (like making sweatshop running shoes) onto the "third world".

the breakdown is this: comparative advantage theory leads to a narrowing of the economic base. if your country doesn't have the infrastructure and labour force to create an auto industry the theory is you shouldn't try. just stick to labour-intensive, capital-light industries like agriculture or textiles. this has proven to be bad news for the developing nations of the world because it a) ties the entire economy to a few industries b) offers little room for development. an economic ghettoization if you will.

and now india is foisting this argument back on the united states.

the fact of the matter is this: every economy needs diversity. there need to be un and low-skilled jobs and there need to be highly-skilled jobs. there need to be labour and capital intensive industries.

if the united states focuses exclusively on "more creative, more value generating jobs" then a dot-com burst (or the equivalent) can do greater damage to the economy as a whole... in the same way that a bad coffee harvest can tank a small latin american country.

Re:Right...

[skifreak87]

Well for one thing, I personally do not consider tech support/call centers as high paying jobs. Just because a job requires education, does not make it necessarily high-paying. It does not make economic sense (in terms of the global economy) to pay U.S. workers more than Indian workers for the same production - whether or not outsourced work is just as productive is a different argument. It only makes the U.S. companies less competitive.

The problem, as I see it, is that too many people are relying on their technology education as a guarantee that they will have a job. At my university, all engineering graduates are required to have a basic competency in programming. My Optimization course teaches utilizes AMPL (A mathematical Programming Language) for many of the problems we have to solve, and my linear algebra course used matlab for several problems. Basically what this means is that Computer Programming/scripting is becomming required knowledge in many other fields, reducing the need for someone who is simply a computer programmer.

While this obviously does not cover the entire technology sector, my point is, there are many "IT" skills that are now being learned by people in other industries. Yes we still need System Administrators, security consultants, etc. but there is no reason to have tech support people living in the United States, nor is there the same need (read: demand) for people whose main skill is programming. Yes there is still a demand, but it's lessened. This is a fact of life. There is no reason to hamper U.S. companies by requiring them to buy expensive labor if the same labor is available more cheaply. It simply makes the companies less competitive, in the long-run hurting our countries economy.

My analogy, which I mentioned before. Suppose OpenOffice and Microsoft Office are of the same quality. The argument that U.S. companies should not be allowed to outsource because it takes jobs away from "deserving" Americans, is the same as saying using OpenOffice is wrong because the money you save would otherwise have gone to Microsoft. Same "argument" SCO used when attacking the GPL and claiming that Open Source software was a detriment to the economy.

Jobs are relative

[Neppy]

22 million more jobs, but how much will the population increase by then? this reduces the increase in employment, so the number 22 million looks a lot more impressive than it actually is.

so..

[Anonymous Coward]

we lose 2 million engineering jobs, and gain 22 million pizza delivery jobs. Sounds like a great trade-off to me!

Seriously, we can't sacrifice professional jobs for low-level service jobs, even if there are more of them. If we do that, we'll have a rich and poor caste system. Wait a minute...

Poor wording

[smallpaul]

Even though I am a fan of free trade and offshoring, I found this economist's choice of words disturbing: "People in the US are looking at it as a job issue. They are not economists and therefore, they don't necessarily see the whole picture." Funny, I thought that every human being (even economists) had only a part of the picture. People working in the dismal science should be more humble about what they know versus what they think they know.

New Jobs added WHERE?

[Elpacoloco]

I see no examples of these new jobs that they keep talking about. Just about corporations saving money.

Corporations saving money is no guarentee of employment at all -- they could just increase their dividends to attract more investment. They could just increase their CEO's salary.

Even if they do make new jobs, there's no distingishing between wage-slaving jobs against salaried professionals.

New jobs added WHERE, wise guy. :P

Just one catch..

[eclectro]

From the article;

She pointed out that the Bureau of Labour Statistics was predicting a job gain of 22m in the US by '10, against a job loss of 2m due to offshoring.

All of these jobs are going to be in the "service sector". It does not say what the quality of those jobs are. Also, even "service sector" type jobs are being exported to india now (programming, call centers).

My prediction - in 2010 we will all be selling hamburgers to each other.

"Would you like to supersize that for just $.39
more??"

Re:Just one catch..

[gtshafted]

Just for the record, the department of labor was predicting a job gain of 17 million for 2003. In reality there was a loss of tens of thousands of jobs. The 22 million prediction sounds like re-election propaganda...

One more stat

[missing000]

A net loss of 2.2 million jobs in less than 4 years.

Glad to know things are good.

In 6 more years?

[Malk-a-mite]

"She pointed out that the Bureau of Labour Statistics was predicting a job gain of 22m in the US by '10, against a job loss of 2m due to offshoring."

When have 5+ year estimates ever been accurate in economic matters?

Secondly -
Tomorrow's Jobs (from bls.gov)
http://www.bls.gov/oco/oco2003.htm
"Services. This is the largest and fastest growing major industry group and is expected to add 13.7 million new jobs by 2010, accounting for 3 out of every 5 new jobs created in the U.S. economy. Over two-thirds of this projected job growth is concentrated in three sectors of services industries-business, health, and social services."

Social services? Wheeee.... big money here I come..... :-/

Can't Outsource me

[king-manic]

There have always beens some jobs that cannot be outsourced. Even if a telecoms help desk is all foreign they can't outsource service crew off shore. It make sense that with a slow recovery of the US economy (no thanks to bush) that there will be more jobs.

Jobs like DB admin need to be close to the DB and to where the info is coming from to properly administer it. System Analysts and Network analysts must be on site to do their job. Service technicians can't do it from over seas. Web developers can be outsorced but it's almost artistic and cutural gulfs make workign with foreign firms difficult. (Our Firm tried, the indian firm kept trying to use Lime green in their color schemes, no matter hwo often we told them we don't like lime green that).

The outsourcing only spells the end to abundant positions as low level code monkeys. We'll just have to move on and try to adapt like workers did durign the 80's when many manufacturign firms went over seas. There are still a large amount of blue colalr workers despite this, and We'll still have jobs even though an indian firm might be competign with us.

PS: I don't like bush but I'm not a democrat, in fact I'm Canadian. We have more than a vested interest in your prosperity, because it spills oevr here. It does seem liek he's responsible for you current economic slump, by spending so much on defence and offering Tax cuts that the budget won't support. Think more debt. Real soon.

Re:Can't Outsource me

[Grei]

I hate to be a naysayer, but DB Admin work (or even DB maintenance work) does not require that much in the way of an onsite person. I've been doing remote DB work for 7 years, most of it international...only once have I ever been on a customer's site and that only to do a tape backup that hadn't been done in over 3 years.

With the right equipment on site, a person in their underwear and sitting in their home can do all of the necessary work. Believe me...I've been doing it for the last few years as part of the downsizing my company's going through (after all, why pay the extra money for an office after you've already cut all of the technical people's pay?).

Just my two cents.

Re:Really?

[Anonymous Coward]

Of course realy.

We are exiting a global depression. The US has had a sustained growth rate of 6% for the past year.

We have a average 5.7% unemployement rate. Basicly that's as good as it gets. There are always a small percentage of people imbetween jobs, and bunissess start and others fail. Pluss there are some people who are fine with not having a job and won't get one until their unemployment benifits run out. This means that except for some notable exceptions in small areas, most everyone has a job that wants a job.

During the worst part of the "economic collaspe" as people like to over-dramatize it as, we still had a growth rate of 3-4%.

Our economy is strong enough that our growth rate, unemployment rates, and standard of living is better then most any other country out their.

For instance in Germany they would kill for the same economic indicators that here in the united states we considure "most horrible economy in the past 15 years".

I don't understand that when companies export jobs they are doing it to remain competative.

Isn't it better to have US businesses be the leades in the global economey or is it better to let foreign companies grow past us and eventually take over our companies?

Also don't forget that big corporations like IBM and HP have only the vast minority of possible jobs out there, even in IT. 75% of everybody is employed by small business. The vast majority of work that gets done is done by companies with less then a couple hundred people each. That's why the US economy is always so robust. For every big bad coporation that screws up or goes out of business or into and out of bankruptcy there are dozens of other driven people and companies willing to take their place.

Outsourcing = profits, profits = better bottom line, better bottom line = growth, growth = more jobs.

More jobs and growing economy helps us all, and that's why we need to remove obsticals to growth, while making sure that things don't get out of hand.

Otherwise would you want your company to be bought out by some Korean componate manufacturer, because they can compete better and produce quality things at a lower price?

Tired of this offshoring whine on /.

[Anonymous Coward]

For one thing India is still at a trade deficit with US. For every job that indians get from US, there is are range of stuff US companies are dumping here and killing local business.

Opening the market works both ways. Deal with it.

Re:Tired of this offshoring whine on /.

[Smokin Goat McGruff]

No doubt. For such a highly concentrated group of supposedly educated people, Slashdotters sure don't seem to know a thing about economics.

This will probably help the local economy here which relies on highly on office furniture manufacturing. All those Indian IT professionals have to sit on something.

Re:Tired of this offshoring whine on /.

[hymie3]

It isn't so much that Americans don't quite care for Indians working in America--it's that we're *outsourcing* our jobs that really irks us. At least when a programming job is given to an Indian H1-B instead of to an American, there is a theoretical competition for the job. And even if it is a non-American, some of that money does go back into our economy in the form of taxes and rent and buying stuff.

Outsourcing our jobs overseas doesn't really do anything for America. The top .0001% of the population who are the CEOs and company owners like it a lot, but what about the common working person?

My personal gripe is that our jobs are being outsourced overseas *and* we're giving financial aid to the countries who are getting our jobs. Shouldn't the financial aid be decreased?

It's the economy, stupid

[Anonymous Coward]

Don't worry. Our wonder boy in the White House has it all under control.

Just lowered the taxes of the most filthy rich 5% of the population, got us a $500 billion deficit and compensated for that by dismantling the useless social programs for the poor and old.

Maybe the rich will use that tax-break to create more job and not simply line their own pockets. And maybe those poor slackers on welfare/medicare will die away and stop siphooning money from the well-off, respectable, white protestant heterosexual married people like the rest of us.

Faulty logic and misleading headline!

[grape jelly]

[Ms Farrell] pointed out that the Bureau of Labour Statistics was predicting a job gain of 22m in the US by '10, against a job loss of 2m due to offshoring.

According to the labor predictions from the Bureau of Labor Statistics, the total growth of jobs between 2000 and 2010 is 22,160,000 jobs. Surely you can't account for all of this growth strictly based on one aspect of corporate behavior.

Also, to satisfy the cynic in me, remember that these are merely predictions, which are possibly skewed to make the current market look like it'll be stronger, which will in turn (hopefully) make investors and consumers more confident, (hopefully) making the economy stronger.

Lastly, could this also be like George Bush's predictions that there would be approx. 1.7 million new jobs last year, as opposed to the 53,000 jobs lost last year (as reported by CBS news tonight).

surplus value

[Doc Ruby]

The US product is about $10.5T:year, with about 100M workers earning about $40K:year. The $4T income are less than 40% of the revenue, with the other 60% representing corporate profit and taxes. Since corporations pay so little proportionately in taxes, and capital gains less still, the extra value is taken in corporate profits funneled to the very rich. Some estimates indicate that 15K US households (probably about 75K people, or .001%) own 5% of the Earth's property. The lack of job growth in the US, despite the looting of the Treasury for subsidies to these rich people, once again destroys the argument of "supply side" economics. After the debacle of Reagan's supply side, the last time these unemployment numbers were close to this high (excepting Bush Sr's next-closest nadir), you'd think this nonsense would be rejected. But I guess greed blinds even the survival instinct, when so much loot is flying through the air, without any merit to where it lands.

Re:surplus value

[Dr. Bent]

Some estimates indicate that 15K US households (probably about 75K people, or .001%) own 5% of the Earth's property.

There will always be rich people, my friend. It's a fundemental feature of human social structure. Someone has to decide what times the train run (Rich People) and someone has to run them (Poor People).

500 years ago, there were maybe a couple dozen people who owned a good 80% of the earth's property...they're called Monarchs. The real difference between then and now is not that the rich people have slightly less, it's that we've invented a whole new class of people: The Middle Class.

And the middle class is hurt the most by high income taxes (at any level). I don't know if you've noticed it or not, but rich people already have money. More accurately, they already have assets (stock, real estate, bonds, annunities, etc...). People who think that high income taxes put the tax burden on the rich are fooling themselves. If you really wanted to put the tax burden on the rich, you'd have a wealth tax, but putting the tax burden on the rich isn't what the income tax is all about.

The purpose of a progressive income tax is to prevent the middle class from becoming rich. Since middle class people are almost entirely dependent on thier income, taxing it ensures that they will never have enough disposable cash to start a business, invest in a new private business, or do anything else that might lead to financial independence. This is why a progressive income tax is a key plank in the communist manifesto. It's designed to crush the ability of the middle class to raise enough capital to become financially independent.

Re:surplus value

[HiThere]

If you believe the Cato institute studies on Republican economics, then you should also believe MS studies on TCO.

I don't claim to know the truth here, but I do know that some people have close associations with some other people. These aren't disinterested parties doing the studies.

Plumber = $$$

[Atario]

Hey, don't knock toilet unclogging. Plumbers make serious dollars.

Central planning falacy. All "jobs" not equal.

[Ungrounded Lightning]

and they dont count underemployment. I know alot of engineers who are flipping burgers and selling stereos burdened by student loans (which survive bankrupcy!).

Bingo!

The central planners talk of "jobs" as if they were all equal.

Even assuming the numbers claimed by the Bureau of Labor Statistics' talking head are true, what good does it do to replace one lost 6-figure engineering position with eleven minimum-wage, no health plan, burger-flipper slots?

Especially if, say, eight of them will be filled by illegal immigrants, two by engin-school grads who never got to engineer, and the eleventh by a former member of the (NON-minimum-wage, WITH health plan) burger-flipper's union, leaving the engineer still unemployed?

Now multiply by two million.

Great for the ruling class. Hell for the workers.

Re:in the long term

[yintercept]

Such is capitalism. What goes up must come down.

Capitalism works by reinvesting what gets earned. So, it is the best system for keeping things up.

The biggest worry for the economy right now is that big companies, big government and big unions will use people's fear to inact anti-market legislation and muck up positive market developments.

Don't you think it is odd that people are calling the outsourcing of jobs to India a "free market failure." Out sourcing is widening the income gap world wide. It is narrowing the income gap. The phenomenally poor in India are seeing a big jump in their standard of living, while the fat American is simply seeing a slow down in their accumulation of wealth.

If you take the world view that includes both the US and India, you would see that the number of jobs world wide is increasing substantially faster because of outsourcing.

This is basic economics people!

[be-fan]

Jesus breakdancing Christ. If I see one more hand-waving post devoid of either fact or theory, I will scream.

Free-trade is a basic tool of a capitalist economy. It has a proven track-record of working (eg: France under Napoleon, the modern EU, the US of fucking A!). There are also lots of statistics that show that protectionist laws save a few jobs at the cost of much greater costs to the rest of the economy. A certain law that protects US textile workers saved 75,000 jobs at a cost of $15 billion a year. That $200,000 that each of those textile jobs is costing is being taken right out of *your* pocket. That's money you could have, but do not.

Free-trade is also the only thing that makes sense in a democracy. People have rights, and it takes a very strong argument to limit those rights. Strong moral arguments give us reason to limit the right of people to commit murder. Strong economic arguments give us reason to limit the right of companies to form cartels. There are no such arguments in favor of protectionism. Morality says that people should hire whom they damn-well please, and economics says that this freedom is best for the economy in the long run. The only arguments we get in favor of protectionism is crap about patriotism, and hand-waving about "the destruction of the US middle class." Two points: One, as a Virginian, I care about as much about a guy in Texas as I do about a guy in Afghanistan. Two, the middle class did just fine when farm work, which was a middle class job, disappeared. They did just fine when factory work, another middle class job, disappeared. They'll do just fine when the programming jobs disappear!

The predictions in this article are precisely those predicted by economic theory. A certain class of jobs will be destroyed, but many more jobs will be created. Such predictions have been borne out numerous times before (NAFTA really didn't cause all American jobs to be sucked to Mexico, did it???) and will be borne out again.

Of course, this is assuming you believe in capitalism. If you'd prefer the stability of a socialist system, then by all means, move to a communist country! I take particular pleasure in saying this --- as a liberal I rarely get the chance to call *other* people communists, but that doesn't change the fact that calls for protectionism are nothing less than attempt to subvert the capitalistic ideals of this country!

Re:This is basic economics people!

[o'reor]

OK, I'll bite:

(eg: France under Napoleon
Free trade ? Man, France was at war with pretty much all the countries they had not invaded back then! There was certainly no trade at all with the UK, for instance! If France did prosper during those years, it was by plundering the economy of invaded countries! Plus, a war economy, with huge government contracts, certainly stimulates growth.

the modern EU,
Er, with heavily subsidized farms ? You call this 'free trade'? Subsidizing agriculture was (and still is, at large) the the basics of the EU!!! And don't forget what the EU initially is: a collection of states that heavily interact with their own economies, through government contracts and public infrastructures. 'Free Trade' as defined by the WTO means 'no government-subsidized business'.

the US of fucking A!
Guess what boosted their economy in the 20s, and after the '29 krach ? Yes: a war economy! With government investments in heavy industries (steel & energy), and the Cold War competition with the Eastern block required the US to foster government funded research in aerospace and electronics... Was it 'free trade' that came up with that Internet idea and the 'new economy' that followed on ? No, it was a government-funded project: DARPA.

Sure, the government wouldn't have done everything on its own. Industries cannot be efficient with a civil-servant type of mentality. But as another poster added in one of the replies, what we need is more cooperation between the government and the industries. The corporate world must accept to pay taxes and therefore reduce their immediate profits, so that long-term government-funded research may yield results that industries will use in their products later on. A sort of planned economy would lead to an optimum balance between private profits, global economy and citizen's interests (jobs, environment and so on). 'Free trade' as defined by the WTO is the opposite of a planned economy: it will only reach a sub-optimal balance where everything benefits the corporate world, at the expense of jobs, the well-being of citizens and the environment.

In the end, it's also a matter of democracy and choosing who really decides of economic policies: we can leave this up to a handful of technocrats at the WTO and the Federal Reserve, or we can decide to handle this as citizens, with our own votes.

Re:This is basic economics people!

[dnnrly]

There is a school of thought that takes into account the development status of a nation when applying protectionist policies. In general, the less developed an economy is, the more protectionism required.
For example, a 3rd world African nation generally spends a lot of money on arming itself and less on basic infrastucture. This has 2 effects, 1. money is going out of that country to buy arms because these nations rarely have a local industry capable of supplying these needs. 2. lack of spending on infrastructure (including roads, hospitals and schools) means that there is no investment that will give that nation the ability to supply its own needs. All this occurs before considerations for monetary issues. Internal investment also distributes internally, which is required to list people out of poverty.

As a nation becomes more developed less protectionism is required but it shouldn't be removed altogether. It should be treated as a sliding scale. Protectionism isn't just stopping moeny going out of a nation, it's about persuading people in that nation to invest it in other people in that nation. It's about human factors too.

Re:This is basic economics people!

[An Onerous Coward]

Read your post, and start screaming.

Now, how in the hell could a law that keeps 75000 jobs in the US be costing $15 billion? It's certainly not because corporations are forced to pay local workers $200,000 each when they could move the jobs offshore and pay... nothing? Show me a US clothing manufacturer who pays their factory workers 1/10 that much, and I'll be surprised. Even factoring in those pesky worker safety laws and environmental regulations that drive up the cost of US manufacturing, and you still can't come close to $200K.

Nor can I imagine that the feds are spending $15B to administer this law. Cite a source, because I'm convinced this statistic of yours is bogus. It can't cost $15B to hire 75,000 low-skilled workers, therefore you cannot save $15B by moving 75,000 jobs offshore.

You talk about morality, but how is it moral to save a buck by moving labor to countries where worker protections don't exist, or where greedy governments force people to work fourteen hour days? If free trade means I might lose a job opportunity to someone in India, I have no problem with that. If free trade means my neighbor loses a factory job to a Chinese sweatshop which pays just enough to keep the hut thatched, that's an outrage.

I'm not in favor of protectionism because some "nasty furriner" is going to get my job. I'm in favor of protectionism because current open trade practices mean we don't have to live with the consequences of our actions.

Have a dangerous, highly polluting industry? We have four choices: Spend the money to clean it up. Rely on the industry less. Live in our own filth. Outsource the industry to the brown people, and let them live in our pollution. Guess which one we consistently choose?

Have a labor-intensive, low-yield industry like clothing manufacturing? Again, we have several options: We can dive in and do the grunt work ourselves (and deal with labor unrest if we don't compensate workers for their effort). We can work to automate the manufacturing, effectively driving down the costs of production while freeing up the time and energy of hundreds of thousands of people. We can live with less clothing, or clothing that is simpler to manufacture. Finally, we can shove the grunt work off to someone who is just happy having a crowded little apartment and enough kerosene to boil the dysentery out of the water.

In the end, we would have higher prices and crappier consumer goods, but we would also have more effective pollution control technology, less pollution, and more automation in manufacturing (read: More economic bang for each hour of labor, and more free time). But there is no need to make these investments, so long as we have the third world as cheap, commodity labor.

I caught a small glimpse of this phenomenon while volunteering for a short time at a non-profit food canning shop. Most of their labor came from unpaid volunteers, many of whom were receiving handouts from the organization that ran it. I wasn't there long, but I could see dozens of ways to improve the efficiency of their canning process. But most of them involved some level of investment in mechanization, so why install a conveyor belt between point A and point B when you can just have your free labor roll stuff around? Had they been paying their labor even minimum wage, the place would be losing money hand over fist. That's what we get with the current economic empirialism: labor so cheap that it makes no sense not to squander it on low-value activities.

Again, I don't mind losing opportunities to overseas workers. They've got to eat too. I'm not even that distraught about their ability to use their lower cost of living as a bargaining chip.

But I do get concerned when I see a bunch of executives sitting around a table, voting to move a thousand highly skilled technical jobs, and splitting the millions amongst themselves. I get concerned because their actions are so blatantly self-serving. I

Its getting too much

[tanveer1979]

Cant you stop whining for once. I mean I hardly see any posts saying that ford/GM etc should not sell cars in other countries.

sure, lets stop outsourcing completely. But before that lets make ford and GM shut down all their plants. US should stop dumping its products(Coke pepsi and other trash) in third world countries. And also should keep its troops within its own borders

C'mon guys, you cant have it both ways. Either go the complete close economy, as the anti-globalization fanatics preach. No hollywood movies, no pepsi, co coke no McDonalds blah blah, or you have to have it completely open. In a global economy you lose some you gain some its simple. Engineers may lose jobs and stockholders may gain value. But thats a different story altogether

Outsourcing is here to stay. find out how to live with it. Its no use to complain. But if you dont want it well close down your borders. Take away your pepsi coke Ford GM Mcdonalds KFC Levis etc., etc.,

economics and history

[sir_cello]

The reality is that outsourcing is good for the economy over the long run - low paid, low skilled jobs are moved elsewhere, and the economy focuses on new jobs. We've all heard these arguments in terms of blue collar work ("car manufacturing, etc"), yet the demand for information technology workers filled the gap.

The same goes for what's happening now: in the long run it will be good. The danger is in the short run: sudden loss of jobs without the ability to restructure could be damaging.

Re:economics and history

[dafoomie]

low paid, low skilled jobs are moved elsewhere

We're not moving burger-flippers. We're moving upper middle class technical jobs. Good paying jobs that you need a degree for.

and the economy focuses on new jobs

What new jobs? Not one person has demonstrated what these new jobs will be. They make references to new, "knowledge" based jobs. What the hell are those? The only jobs we're creating are low level burger flipping jobs, that we will soon have to compete with Mexican immigrants for if Bush has his way.

sigh

[shagar_z]

It's soo suprising to see a research firm that pushes off-shoring is also a company that helps to reorganize companies... ooh i think thats a connection man these economists need to take a standard college research class again. Take the opinion of a non directly intrested organization then one that makes its money expecially now though the activity. (note: yes i know there really are non intrested orgaizations but seesh at least some try ;-P )

Second is the basic thing that i was reading higher in the posts also thinking the other day there are really 2 types of jobs that cant go over seas. Super high position jobs (the CEO's etc that make the outsorcing happen) and ones that require a physical presence such as plumbers automachanics store workers etc. While there are some high paying jobs that require this physical presence there are many more that pay ~minimum wage.

These just help pull to wage stratification. Is capitalizim bad no if it's done in moderation. Some is good all is bad it's nice to help your backyard and then help others.

Just remeber you should clean your own house before you clean others ;). You can help but why help when its of a visible detriment to the majority of who your affecting ;).

Where's the beef?

[labradore]

Without even speaking to the fact that these numbers seem quite dubious, there is almost no logical analysis in this article. The author, has failed to logically connect outsourcing jobs offshore to creating jobs in America. She has failed to characterize the 22M new jobs as a real benefit to the American popluation. Forgive me, but this article seems to like kind of work that one might expect from a contractor who bids a project at 1/5th the price of his competitors. It's reminicent of, say, the work done by some foreign outsourced service companies. The article is bareboned, uninspired and almost totally without merit as news. Only the editors who published and linked to this story could feel more ashamed of it than it's author.

That would appear to be the good news. I think that the bad news is that outsourcing isn't going to last long as a real solution for cutting certian labor costs. Instead, companies are going to realize that it really is dangerous and conterproductive to export too much proprietary data and work to outside firms. Instead of purely outsourcing a job to India or elsewhere, companies are going to put more effort to set up real offices in those countries bringing the foreign workers in-house. It has been going on for a while, but recent progress in telecommunication has led companies to choose quick-and-dirty outsourcing to bridge cultural and political gaps and reap cost savings. As executives become more adept at dealing with the foreign cultures and labor marketplaces (esp. by acquiring foreign executives who understand the foreign places) they will be able to achieve both better cost savings and better overall security by untying their internal organization from traditional geographic divisions. Companies will further embrace doing whatever part of their business "needs" to be done in whatever part of the world they can do it cheapest. It's still globalization, but it's more pervasive than just redistributing production centers and opening new markets to sales. It's re-distributing the locus of control within each company.

Here's some predicitons: The biggest U.S. export for a while is going to be culture. Foreigners who want to work for U.S. globalized companies in their own countries are going to have to work in many ways within western cultural frameworks and they will bring that culture home to their families and neighbors. The U.S. dollar will continue a long, slow decline in (relative) value, as will the Euro, eventually. This is a natural result of the strengthening of competing currencies of the foreign nations which will be supplying the new, eager middle-class labor forces. As more countries follow India's example of embracing western culture and education, they will gain a share in the job market.

Hopefully, as western culture (particularly the English language and the values of capitalism) become more pervasive, people will also break down political barriers. It all does seem a long way off, but almost certainly the 100 years of the 21st century will witness more and faster changes in the human landscape of the world than the 20th, due to the interconnectedness of the world (think about, for instance, that probably for all of the next 100 years, people will be able to make a phone call or send email anywhere in the world instantly. In 1900 this was hardly even a dream.) and the continuously-increasing pace of technological advance. Probably third world nations will not disappear, but wealth and poverty are likely to be distributed more evenly (geographically, anyway) throughout the globe. That is, after all, what we're ultimately worried about in out own small way. We (all) want the opportunity to make ourselves useful and prosperous. It's just going to take some suffering and upheaval before things equalize. Buckle up.

NAFTA tens years later

[gad_zuki!]

>NAFTA really didn't cause all American jobs to be sucked to Mexico, did it???

Why, yes it did.

Good piece here

>If you'd prefer the stability of a socialist system, then by all means, move to a communist country!

Logical fallacy here. You are ignoring other solutions like better economic planning and fixing the problems our policies have done.

Good piece at the nation here:

The business-backed politicians who pushed the agreement through the three legislatures promised that NAFTA would generate prosperity that would more than compensate "ordinary" people for its lack of social protections. Foreign investors would make Mexico an economic tiger, turning its poor workers into middle-class consumers who would then buy US and Canadian goods, creating more jobs in the high-wage countries.

But as soon as the ink was dry on NAFTA, US factories began to shift production to maquiladora factories along the border, where the Mexican government assures a docile labor force and virtually no environmental restrictions. The US trade surplus with Mexico quickly turned into a deficit, and since then at least a half-million jobs have been lost, many of them in small towns and rural areas where there are no job alternatives.

Meanwhile, Mexico's overall growth rate has been half of what it needs to be just to generate enough jobs for its growing labor force. The NAFTA-inspired strategy of export-led growth undermined Mexican industries that sold to the domestic market as well as the sixty-year-old social bargain in which workers and peasant farmers shared the benefits of growth in exchange for their support for a privileged oligarchy. NAFTA provided the oligarchs with new partners--the multinational corporations--allowing them to abandon their obligations to their fellow Mexicans. Average real wages in Mexican manufacturing are actually lower than they were ten years ago. Two and a half million farmers and their families have been driven out of their local markets and off their land by heavily subsidized US and Canadian agribusiness. For most Mexicans, half of whom live in poverty, basic food has gotten even more expensive: Today the Mexican minimum wage buys less than half the tortillas it bought in 1994. As a result, hundreds of thousands of Mexicans continue to risk their lives crossing the border to get low-wage jobs in the United States.

Lets not forget that free trade is largely an illusion when farmers keep getting subsidized and when social safety nets, wages, and the environment take a beating in the name of 'free trade.'

Re:NAFTA tens years later

[MadHungarian1917]

In theory "Free Trade" is a good thing however in practice it has led to a global race to the bottom for wages in all countries.

What modern megacorporations have forgotten is the social contract which allowed them to exist in the first place. Simply stated the corporation would be allowed to accumulate capital and generate profits for its shareholders in exchange for creating jobs for workers in its marketplace.
In the past the management of the corporation lived in the community they could see the effect of their policies on the community. Hence in times past when times got tough salaries would be reduced but people would retain their jobs because the management actually saw these people every day. Now since employees are nothing but an abstraction on an excel spreadsheet the management does not see them as people but as chattel and acts accordingly.

In the Reagan years the watchword became "Maximization of shareholder value" and the implied contract dropped off the map we are now reaping the whirlwind from the seeds sown in the Reagan era. We are now seeing the rebirth of lasse faire" capitalism which caused the economic disaster known as the 1890's.

History has shown us repeatedly that "pure" socialism does not work and "pure" capitalism does not work. Both systems benefit a small minority of the population in the first system the commissar's or the nomenklatura benefit in the second the Investor's and the top echelon of management benefit. In both cases the middle class is destroyed and the economy tanks.

In closing the only way to fix this is to vote the miscreants out of office. It is convenient to blame the Bushies but each senator and representative needs to be examined on a case by case basis and YOU need to find out WHO is funding their campaign's.

In Florida for instance the congresscritters from both parties were on a junket to Mumbai funded by a outsourcer. In this case I would say that they ALL need to be voted out of office posthaste regardless of party affiliation since by their actions they seem to acting against the interests of the people they supposedly represent.

Stop your pathetic whining!

[munter]

I fucking laugh out loud watching the architects of the american dream squeal when the game gets played on your own terms. The reason why outsourcing is attractive is because your economy is inflated. It's as simple as that. Welcome to the rest of the world americanos. Sorry, but I have no sympathy. At the very least, you could continue the american ideal and do what this guy did: here For god's sake, get over it. While you guys have been blowing dotcom dollars, the rest of us have just watched in disbelief. Hello! Surprise!

Re:I smell bull

[schrockn]

All of this antiglobalization and anti-free trade banter drives me up the wall. The trend of outsourcing and globalizing IT jobs is about the best possible example of free trade I have ever seen, because the jobs being exported actually do have labor standards and do dignify the population; and it is very good for America.

Take some hypothetical math here. Say there are 100,000 U.S. Programmers making about 80,000 dollars a year (with benefits and business side social security tax). That's

80,000 * 100,000 = 8,000,000,000 dollars a year.

Now imagine, aggregated, U.S companies via outsourcing eliminate those jobs (so-called creative destruction) and instead pay 100,000 indian folks an average of 20,000 a year.

100,000 * 20,000 = 2,000,000,000 dollars a year.

So, for 2 billion dollars Indian programmers are delivering the exact same amount of business value as the 8 billion dollar American programmers.

The end result? Well, at first, 100,000 less American jobs, and 6 billion more dollars for our "evil" corporate masters.

Yes some of that money will go to the clever executive who thought of the idea. Yes some of that money will go (gasp!) investors, who probably include many of the readers here.

And where will the rest of that money go?: to investment; to research; to newer jobs, etc. This is the inexorable march of progress here people. Can I predict what those new jobs will be? Of course not. Otherwise I would have already thought of it. But someone will drive innovation. This is all about a more effecient allocation of resources.

Undeniably, it sucks for those 100,000 programmers. There are a lot of hidden costs to creative destruction, soceital costs that do not show up in GDP numbers (family and emotional distress, for one). But those people, like lots of other people have, will have to reinvent themselves, to discover new talents, to retrain. In the end, it will be good for the country, and the world, as a whole. I mean, I'm sure it sucked for typewriter makers when computers gained popularity, or for horse farmers when the car was first mass produced, but for the whole soceity the creative destruction of those jobs was a good thing.

In any case, this is the best possible outcome from the development of a large educated populace in India. We are utilizing their resources, rather than competing against them. A worse scenario, from the American perspective, are the Indians out-innovating us and driving entire American businesses out of business in the global marketplace.

So, where is all this outsourcing?

[cruachan]

As a European independent consultant/developer contracting to a range of clients in the SME and similar sectors I've seen absolutly no impact from outsourcing over the past few years and I'm still scratching my head trying to figure how it could.

The problem is that for my clients the idea that they could develop any system specification sufficently precise to give to an outsourcing company is frankly ludicrous. For example I've been writing a medium sized clothing hire program for a client for the past 6 months. This sounds like an ideal 'specify and hand out to india' project, except that the client really didn't have much idea what they wanted when we started beyond 'we want a hire program', 'here's an old DOS based-system that does something like' and 'we have these bits of paper'. The amount of iteration, exploration, respecification and general systems analysis that has gone on from then is frightening, but hardly unusual. In the process I've crawled though virtually every aspect of the business and even sat in with them on visits to their suppliers, associates and clients. You can't do that from india.

Now, of course I've considered splitting the work by doing the systems analysis myself and subcontracting the rest to india. However because of the iterative nature of the process that's not really feasible, plus the relatively small size of the project would mean setting up overheads etc would negate the cost saving. Some might say that the development process shouldn't be iterative but I should insist on completing and signing off a full spec up front, but while that could be done it wouldn't lead to satisified clients, and my clients do have the wit to realize that.

The same goes for all my clients. I simply don't see how they could replace me by outsourcing to india because they simply don't have the analysis skills to do so. The only way I can see it happening is with a larger 'software' house who can scale by having multiple projects which they outsource for, but do the analysis work here. Trouble is it's difficult to see how the additional overheads of such a company could compete with my almost complete lack of them.

Now, having worked in big business IT a few years ago (financial & manufactoring sectors) I can see how outsourcing would work there because the analysts developed tight specs which were then handled by the programmers - obvious candidates for shipping offshore. Even their though I distinctly remember when I reached analyst (and even analyst/programmer) level that I spent large amounts of time walking around manufacturing plant and talking with people to understand jobs I was adding IT functionality too worked. In fact doing what I do now to some extent, but on an intra-company level.

So, I'm not disputing that development jobs can be outsourced, but surely because of the human interaction needed for much analysis and development work there is a natural limit as to how far it can go and result in satisfied clients. Also, because the use of IT increases all the time in breadth of penetration into the business environment I'd postulate that the general trend for work will be upwards - although there will be a natural impact while the pecentage of work that can be done by outsourcing reaches it's natural effective level, and this impact will be sever in some areas of developer employment but non-existent in others.

Fine, but look at core competencies

[fastdecade]

Fine, personally I'm not arguing against free market - companies can send jobs to India if it's more economic, more jobs in western countries etc etc etc

But this is interesting.

it allows US companies to concentrate on their core competencies and the people (in the US) can move on to higher paying, more creative, more value generating jobs.

That's a typical motivation - the problem is, do companies actually have a good handle on their core competencies. Is customer service just a commodity? In this information era, is software development just a commodity?

Of course not. In the case of software development, smart companies have vast opportunities to differentiate themselves, leapfrog competitors, eliminate wasteful processes, receive up-to-date reporting, etc.

You could say that the requirements are the core competency, and the implementation is just a commodity. But if you did, I'd have to accuse you of lacking any practical experience in software development.

Protectionism

[Einer2]

Trust me, I'm normally one of the most vocal opponents of protectionism. However, beyond a point, you simply have to drop ideology and adopt a more pragmatic position. The loss of so many jobs overseas without a new industry to replace them (and right now there really isn't one) will seriously weaken our country.

And regarding the analogy - a better one would be to consider import of raw materials. The government has a long history of imposing tariffs on foreign sources of raw materials when they threaten the health of our domestic industries. Well, right now companies are "importing" the tech support services of foreign employees and are undercutting the domestic supply, and I'm willing to suspend my anti-protectionism leanings and support some manpower tariffs in the name of stabilizing our economy until there's another industry to transition all the extra workers into.

*shrug* As I said, I don't like it when the government interferes in the economy. I just don't see a better option in the near future.

Take this MacJob and shove it.

[Alien54]

What's sauce for the goose is sauce for the gander

Well in this case, the suaces are mostly to be found in MacDonald's Happy Meals.

It takes at least 3 to 5 MacJobs to replace a high paying high knowledge high quality job. It's not a straight swap. It's a sucker's deal.

But

[beforewisdom]

# US unemployment right now is 5.6% [itfacts.biz], the lowest it had been in 2 years. # Silicon Valley will ad 17,000 jobs this year [itfacts.biz] and 33,000 next year.

Its not just about number of jobs, but the quality of jobs.

Who cares if there are more minimum wage McJobs or low paying low end prosaic jobs in the silicon valley ( running the coffe shop in the IBM headquarters? )?

Its about fulfilling, and well paying jobs. Jobs that interest you, where you get treated with respect, where you can support yourself, support your family, educate your children, and provide for your retirement.

I almost feel glutonious writing that, what a sad statement about what America is coming too!

Re:I smell bull

[Thomasje]

Offshore was about global wealth creation and integrating economies, she explained, adding that it would create more high-value jobs in the US than people could imagine today.

She's right. I can't imagine those new high-value jobs!
(Neither can she, or there'd be a few examples, no?)

Re:The rich, backwards

[TRACK-YOUR-POSITION]

Yeah, that unfair income distibution in Venezuela really makes their economy soar. What you're saying makes no sense--who the fuck is going to buy an American luxury car? If you're poor, you buy from China, if you're rich, you buy from Japan and Germany. Even if it did make sense, the reason we need there to be more jobs is to make the world a better place for the poor and middle class--if you're suggesting we restructure our economy so that the vast majority of people are working to make products for the rich, which appears to be Bush's plan, you and your sick plutocrat plans can go fuck yourselves.

And then you have the nerve to repeat this supply-side bullshit--look how much the stock market soared when Clinton raised taxes on capital gains! The taxes on capital gains have to be incredibly huge before they start to matter--people will invest if an investment makes money, they won't invest if it doesn't make money--taxes on the profit made will have little effect on this.

On the other hand, taxes on labor have a very direct and simple effect on jobs. Corporations have to pay more wage taxes for every additional employee they hire IF they choose to hire that worker in the United States. Wage taxes and the lack of a nationalized health care systems (an exponentially increasing cost our employers are also expected to pay for, unless workers do without) are incentives for factories to move to either completely undervalued countries (India) or more progressive countries like Canada, which currently has a fantastically booming economy.

Bottom line: there has been no economy in the history of the world that has been able to withstand long-term trade deficits. It's great to save money on Indian labor, but unless we can find something else for American workers to do, unless we can find something else to export, then it doesn't do either the world or America any long term good. If you save 58 cents by outsourcing to India, hey, great, that's 58 cents more for the American economy. If you just spend the whole dollar on American labor, that's a whole dollar spent in the American economy.

Re:Economically none of this is surprising

[BlackHawk]

And exactly how much "excess cash" does a programmer, out of work for 15 months now and counting, with no prospects for any job paying more than $5.50/hr, have?

Your naivete is amazing if you think that this viscious cycle of corporate greed will result in anything good. Follow the logic: in order to get the cheaper products, the products are bought from overseas manufacturers. This in turn puts an American worker in that same industry out of work, as the company that makes that product offshores the job. That out-of-work worker now must accept any job he can get, probably in low-pating service, or in the actual sales of the products he used to manufacture (think Walmart stock boy). With his reduced income, he must purchase cheaper goods in order to maintain a level of lifestyle (or at least check its reduction). This means he's buying from a company that offshores its manufacturing as well, putting other American workers out of work, and into direct competition with him for that low-paying job. And so on, and so on.

Where does it end, given that the wealthy stockholders and executives of the corporations driving this machine can continue to rake in huge profits?

Re:Some more statistics on the subject

[EvilBuu]

Additionally they don't count incarcerated felons. This may seem ridiculous but seeing as how there are over 1.3 MILLION people in the prison system, it is quite a sizable population (more than Rhode Island!) to exclude from employment statistics.

Re:Central planning falacy. All "jobs" not equal.

[AKnightCowboy]

Even assuming the numbers claimed by the Bureau of Labor Statistics' talking head are true, what good does it do to replace one lost 6-figure engineering position with eleven minimum-wage, no health plan, burger-flipper slots?

I think Slashdot is blowing the whole economy thing out of proportion because it has adversely affected the tech sector. If you'll all remember, we were riding high for 4 or 5 years on completely inflated stock prices, endless supplies of venture capital, and completely crazy business plans with no hope of producing profit. The market corrected for these problems and we're back where we should have been today if we continued the same level of growth as we had 5 years ago. The only reason it seems horrible is because 25 year olds fresh out of college can no longer expect to make $75k/year making web sites. Boo friggin hoo. Many people work their entire lives in their profession and never earn more than $45k/year. Quit crying about it and acting like it's some personal tragedy that your 4 year degree doesn't automatically entitle you to a 6 figure salary anymore.

Re:Central planning falacy. All "jobs" not equal.

[EastCoastSurfer]

Well said. I would like to add, that the boom made a lot of people *think* they could do technical jobs when in fact they were underqualified.

In my last job, (yes, I found a better paying job in this down economy) I interviewed countless wannabe techies trying to find someone to do rather simple stuff. Most people who came through the door were underqualified and wanted too much money.

Re:Central planning falacy. All "jobs" not equal.

[Kombat]

Many people work their entire lives in their profession and never earn more than $45k/year.

Uh, buddy? That's a problem. How can anyone expect to pay off education debt, raise a family, and retire comfortably without burdening an already-crippled social security infrastructure if we begin to accept the notion that a $45k salary after 35 years of service is "normal?"

I'm not saying they should be making 6-figures either, but I am saying that in our culture, it is impossible for a family to live comfortably on $45k/year perpetually, while trying to put 2.5 kids through college and save for retirement. It can't be done.

Now, if both parents want to work and bring in that kind of money, well then it becomes possible, but if both parents are working, who's raising the kids? A stranger. And THAT, my friends, is a huge part of what's wrong with society today. THAT is why your kids won't listen to your or respect you.

But I'm getting off-topic.

Re:I smell bull - (investment WHERE?)

[steve_of_AR]

> And where will the rest of that money go?: to
> investment; to research; to newer jobs, etc.

It seems to me that this is where the argument fails - you assume that investment will go back into the *US* economy. But there is nothing to gaurantee that. In fact, as the offshore centers become the technology hot centers and they become more autonomous, I would imagine more and more of the investment itself will be offshore.

Clear and compelling logic

[dbc001]

This is true. By sending out jobs overseas, we actually gain jobs. We are giving jobs away to ourselves!!! By the same token, When we give breaks to large corporations and rich people, it is the average people who benefit!

Also, by killing people in Iraq, we are actually improving their lives.

big hit to social security and medicare

[peter303]

The high end jobs pay about $11,000 a year in social security and medicare taxes (counting the employer half of the contribution). 3.3 million of these will off-source to locations where no tax is paid, just as the boomers are retiring.

Re:Central planning falacy. All "jobs" not equal.

[Anonymous Coward]

I think this is somewhere in the category of: If your neighbor loses his job, that's a recession, if you lose your job it's a depression.
But realize, the people running the country now are capitalists. They believe that everyone is on their own. If you can't make it, too bad for you. I disagree with that philosophy, but there are many to subscribe to it dogmatically. (Most are wealthy, and many are in power right now).

Re:Unfortunately, there is another way

[ZoneGray]

I should have noted earlier that I also agree that it's hogwash to suggest that trade creates jobs. It does, however, lead to lower-cost goods, which benefits the lowest earners.

Unfortunately, the person who lost his $20K job knows he lost his job, and the 2 million people who subsequently saved a dime on their shower flip-flops don't even notice the savings individually. But when we tried protectionisom with autos in the 70's, the point was made much more clearly. At the time, import quoatas meant that it cost $4K to buy a $3K Toyota. The alternative was to buy a $3500 Chevy, which at the time were a pieces of shit. And average-income folks got pissed. Yeah, workers were happy in Detroit. But only in Detroit.

Am I reading this right?

[Caffeine Pill]

Wait, let me get this straight.

First she says that companies save $.58 on the dollar in outsourcing - then states that this goes to the investors. How does that benefit workers?

Then she states that India consumes goods as a result of their increased wealth. Ok, so I lose my job as a developer but I can always go to work in a factory to produce goods that will be shipped to India for consumption?
Oh wait, that won't work because all of the factory jobs are now in Mexico.

Good thing that that investor has his extra pocket change. Maybe he'll drop it in my cup on the way by.

Re:Unfortunately, there is another way

[Poligraf]

Again, 3K Toyota was competing with 3.5K Chevy mostly on the merit, especially build quality.

7K$ Indian programmers do not leave a chance to the 50K$ American ones.

As for the savings in the channel, it mostly affects cheaper goods. AFAIK, significant percentage of what we pay in the supermarket is marked up at the post-production stage.

Shipping and handling, retail spaces, credit card processiong - all of it diminishes the role of savings in the manufacturing.

Also, I think that certain things MUST be more expensive. Look at consumer electronics that is a field where many people throw away perfectly working equipment because of the trendy fads (the worst offenders here are cell phones). Most of the replacement equipment does not give much advantage in functional department or quality.

Making it more expensive will lead to less natural resources wasted, less stuff at the landfills, less pollution et al.

Global Capital vs. Global Labor

[Phoenix666]

IAAE (I am an economist). See, the problem with free trade is that the people who tout it are really only talking about the free movement of capital. Free movement of labor does not really exist. If a U.S. company outsources your job to India, can you pick up and move to India to get it back? No. Foreign workers can come here (yes, it's a pain in the ass to get the visa, but it is done) and take jobs from Americans, and foreign workers can take jobs away from Americans through outsourcing. But can Americans go take away their jobs where they are? No.

So you get an imbalance in the global market. The Chicago School of Economics would say that given free movement of capital and labor that the market would seek a global equilibrium whereby the programmer in India would make the same wages as a programmer in America. But in reality there are significant barriers to entry, especially for the American worker trying to go elsewhere to take jobs away from the locals. So if you really are a free-trader, and not just an MBA trying to justify your ridiculously high bonus, then you'd push for the elimination of structural barriers to free labor flow. Then all kinds of neat things will happen like foreign MBAs coming to America to drive down the cost of executive pay, and you the American techie can go get yourself a good job in sunny Goa.

But somehow I don't think that the MBAs making these outsourcing decisions would like that kind of free trade.

Re:I smell bull

[figa]

We also have freedom to vote for universal healthcare to reduce the total cost of human ownership for our corporate overlords, or other legislation to gently remind them of their obligations to the communities that foster them and frankly are civil enough not to raid their executive golf courses and steal their gold-plated trash cans.

Why is it that we have to acknowledge the freedom of corporations to screw us, as in offshoring, but we are never allowed the freedom to protect our best interests against economic priniples every bit as destructive, short-sighted, and totalitarian as Communism? Supply-side economics fell along with the Berlin wall in 91. Get over it.

Corporations are inherently anti-human, as their ultimate goal is profit, not human good. When corporations can use prison, sweatshop, or slave labor, as they do now when offshoring in China and Africa, they prove that out. When corporations have private armies that kill people to defend their oil operations in Africa, I'd say that's evil. As a human, I feel morally obligated to look at it that way, and it pretty well coincides with my best interests. Are you incorporated, and view yourself as a corporation first, human second?

about $2-$3 billion in lost income tax as well

[Anonymous Coward]

Losing those jobs also means losing the income tax generated by the income (the main source of income for the US government) and the loss of goods and services that the high income person would consume in the local economy.

Left out the usual

[sacrilicious]

for every dollar invested in the offshore space, $0.58 was directly saved. This could be either redistributed to investors or customers.

Makes it sound like execs will forget their usual antics: taking ever-more-astronomically-high salaries.

Re:Tired of being Trickled on

[workindev]

You forgot to mention all the companies that fraudulently overstated earnings to the tune of billions of dollars during the Clinton/Gore years (I guess its a good economy even if you are just saying that your making money), the Clinton Administration overstating the strength of the economy and tax revenues by as much as 30%, stock market inflation causing companies that had not even made a penny in profit to trade at PE ratios in the several hundreds, massive spending by state governments that has caused a state budget crisis in many states after economic growth declined to a more reasonable (and sustainable) level, and finally the millions of jobs that were "created" on such an unstable foundation that they all went *POOF* when investors finally realized that the Internet and Tech stocks that they funneled trillions of dollars into were overvalued by as much as 300% so they yanked their money out.

Yeah. Times were really good.