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The Full Outsourcing Discussion
GileadGreene writes "Thomas Friedman of the New York Times recently did an interesting Op-Ed piece about the "silver lining of overseas outsourcing": the growth that it generates in the US job market as Indian companies outsource work that US workers are better at. Apparently total exports from US companies to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002 as well. So maybe this outsourcing thing isn't so bad after all." Ultimately, free trade works out well; I think one of the issues is that white collar jobs are just beginning to feel the pinch, and are acting like manufacturers did in the 1970s and 1980s.
Not to mention HP/Compaq is a major proponent of outsourcing and has been bleeding jobs to India heavily recently.
>The 90% of the shares owned by US investors aren't
>owned by your next door neighbours, they're owned
>by multimillionaire investment traders.
Wrong! Most of the shares are owned by individuals through:
1. pension funds
2. 401k plans
3. mutual funds
Institutional investors, such as those university endowments, own a much much smaller amount of stock than you think.
Most stock owners are way way below the millionaire level.
Get some facts and quit parroting democrat liberal mantra bs lines.
I really wonder if Harvard's endowment managers worry about whether or not the companies that they invest in send jobs overseas.
It certainly works out for the American companies selling the products.
Except whoops, they aren't American, turns out their headquartered in the Caymans for tax reasons. And their products are manufactured in China or Malaysia, and their customer support is in India.
But it does boost their executives, who live in the U.S. Though not legally, they also legally live offshore for tax reasons.
There are lots of good arguments for free trade, but Friedman doesn't know them.
Insourcing (the opposite of outsourcing) is actually increasing more quickly than outsourcing is. Over half of all Americans own equities (i.e. stocks or mutual funds). So either you have a better source for your facts than I do, or you don't. But the information I have flatly contradicts your concerns.
I do not have a signature
Firstly, I agree that free trade tends to work out well, in that it gets us closer to a perfect market, which theoretically will optimize allocatins of assets. If you think such an allocation is just (a big if), then free trade is good.
One way to reduce the pain that comes from the shifting of resources that accompanies the liberalization of an international trading regime is to to work at reducing frictional unemployment. The best way to do this is to subsidize education and other forms of training. More money always flows to innovators: those who engage in think-work as opposed to do-work or make-work (for lack of a more nuanced set of expressions). Subsidizing education increases our ability to create think-workers who will be more able to adapt to changing market conditions and shorten their stay in the frictional unemployment column.
In regards to the situation experienced by factory workers, and now lower-level programmers, we see yet another manifestation of ever-growing trend towards commodification. Widely available education will help move workers away from the commoditized industries and closer to more valuable forms of employment.
cleetus
Apparently fewer students are pursuing EE/CS as a career. Supposedly down 33% over the last two years at MIT, 23% in the country as a whole this year. Potential gradual students are opting for Wall Street instead. See an article in today's NYT
All the computers are from Compaq. The basic software is from Microsoft. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke
Right, the problem with this 'argument' is: 95% of the computer is made in Taiwan or China, the MS sofware is outsourced in India, the Coke is bottled right in India, the AC units are probably made in Japan, etc.
This article offers no proof of any kind that outsourcing is good for the US economy. It just uses a random collection of impressions ('oh my, they use Compaq here too', 'man, good thing they drink Coke, they don't get malaria') and then jumps to the conclusion: 'outsourcing is GREAT, it creates jobs in the USA!'.
Thomas Friedman has been the choir boy of the Bush administration at the NYT for quite some time now. So much for the 'liberal' media. I can't believe they keep him on staff.
there's no place like ~
sPh
Insightful? Give me a break.
What an idiotic strawman argument. "Liberals" think we're reached a point in civilization where nobody needs to be impoverished. Why the HELL should "liberals" support impoverishing one group at the expense of another? Maybe you should think before you post next time.
The wages in Germany and other European countries are higher than the US. But germany protects it's workers and there is a "buy german" ethic by many. Germans buy german made cars, beer, furniture etc. And they have laws protecting them from outsourcing.
More sophisticated investment vehicles such as hedge funds usually have their money tied even more closely to the fund. The managers of LTCM, for example, used to be heavy investors in their own fund. Additionally, their fees were usually a percentage of the return -- if they made no money, then they (virtually) didn't get paid, whereas if they showed positive returns, they took a (large) cut of the returns.
Saying Free Trade works out well because faceless corporation make billions is just plain wrong.
You are correct, that reasoning is dead wrong. Luckily it is not the actual reason people say it works out well...
Consider that "between 1983 and 2003, outsourcing went from 6.5 million jobs to about 10 million jobs. Between 1983 and 2002 jobs in-sourcing -- jobs coming TO the United States -- went from 2.5 million to 6.5 million."
That is a net increase of half a million jobs coming TO the united states. The above was quoted from Neal Boortz's website, where he stated that he obtained this information from the Bureau of Labor Statistics.
Boortz also brought up how this outsourcing has worked out in the past... near the time of the civil war in the US, the north was 'outsourcing' jobs to the south. The jobs being outsourced were menial jobs, and the result was good for both sides: the work force in the north learned more desirable job skills, and increased the quality of life in the north, while the south gained much needed jobs, and also increase quality of life.
This is why free trade works out well.
Ironically, the word ironically is often used incorrectly.
For similar arguements, check out a recent op-ed by economist Paul Krugman and a recent article on outsourcing in the Economist.
Yes, I referenced an article from the Economist. I realize that makes me a f#$%'n prick.
Why is this insightful?
The buggy whip manufacturers didn't see their jobs being outsourced to other countries. Rather, they say their industry evolve or sink, based on other local companies taking over.
Bad analogy.
Saying Android is a family of phones is akin to saying Linux is a family of PCs.
Very interesting to read.
Since when were 3rd world counties banned from having economies?
America has done astoundingly well through free trade. The fact is that, like Britain a few hundred years ago, you're very good at it. Opening up free trade with Japan (which you did at gun point, I might add) is a great example of free trade's win-win effects. Sure your car makers got a cick up the butt in the 70s, but they deserved it, and you've still got a vibrant car indurstry. Sure most toys are now made in China, but who wants to pack card board boxes with floppy bunnies every day anyway? Your economy and technology has always advanced fast enough to more than compensate.
Your economy, and therefore every enfranchised citizen, has benefited enormously from your access to other countries resources, markets, and even labour force. It was only a matter of time before the newest industry - IT - matured to the point that it became more internationaly integrated.
For a country that prides itself on it's own freedoms, and despite the overwhelmingly positive record of the US on the international stage, I'm afraid many Americans still seem very unwilling to allow that other human beings have any right to fair treatment at all.
Simon Hibbs, London.
Do a little research please...
The reason why the unemployment rate has been falling is because people have been being crapped out the other side of the unemployment intestine, so to speak.
The rate has been going down because less people have been in the workforce, as it's measured. Compared to the numbers normally entering the workforce, the number of jobs has been dropping like a rock for the last 3 years or so.
I don't know, look at these statistics. Yes, it's a small sample group but more interesting to me is that it's my peer group!!!
1 - I lost my job
2 - I move in with a friend in a different city while looking for a new job. My friend gets laid off due to restructuring.
3 - A month later my girlfriend is laid off due to consolidation.
4 - I wait for the rest of my relatives and friends to lose thier jobs.
The unemployment rate is dropping not because of domestic job creation, the rate is dropping because people are falling out of the bottom of the system. According to the Bureau of Labor Statistics, we are in the middle of the highest rate of long term unemployment (not working 6 months or longer) in 20 years. There are more than enough stats to support the arguments of liberal and conservative consituencies, which as one poster already suggested implies that the debate is not necessarliy a politically oriented one.
:-)
Proponents of offshoring like Bush economic advisor Gregory Mankiw like to talk about how increased productivity eventually leads to job creating investment in the economy. That's fine of you're talking about a domestic economy -- growth stays home. In a global economy, the same principle holds, in toto -- the job creation doesn't necessarily occur in the same countries where the productivity is reported because outsourcing works for commodities (sorry guys, software IS a commodity these days) and the focus is no longer placed on whiz-bang ways to make it, but rather how to make it cheaper. Hmmm, does this mean we can thank object oriented programming and code re-use for the outsourcing fiasco? Bring me the head of Grady Booch!
Jokes aside, we need to remember that (especially since the bubble burst), corporations are run by bean counters. And to bean counters are like crackheads, if saving a little money is good, saving a shitload of money is great -- even if there are negative side effects (like the destruction of the middle class). And like the addicts they are, they will go through all sorts of mental gymnastics to explain/justify their addiction. Only when confronted with the truth, in the right way, can you make an addict accept the truth of his disease. What we could benefit from is an economic/mathematical model that would confirm the hollowing out effect we constantly complain about.
Just to qualify myself on that addiction stuff, I've been clean & sober for 16 years by the grace of God.
"You can never win or lose if you don't run the race"
The unemployment rate is dropping because there is less people looking for work. How can we have less unemployement when there are less jobs now than there was in 2001? So why are there less people looking for work? Is it because so many people are discouraged because they can not find any decent jobs? Are more people retiring each year than are being added because of immigrants and our youth? Just come to western Michigan and discover how many jobs are going to foreign workers and have yet to be replace with any new jobs. How can anyone have a decent career when one has to start over with every recession in another career thus losing any benifits one has earned in the previous career.
In the last survey of this type done (Bush cancelled these reports), the wealthiest 1% of Americans own 42.2% of the stock market, while the 90% of Americans not within the wealthiest 10% own only 15.6% of the stock market. As far as the dynamics of how they're owned it varies - directly, through mutual funds, trusts, whatever. This is what the distribution ultimately is however. If you look at the surveys, wealth distribution has been drifting upward to the top 1% increasingly in each survey done. The bond market is even more lopsided. Anyhow, it is quite correct that multimillionaires benefit mostly from owning rentier items to expropriate rent, dividends and interest from; while workers rely mostly on wages. It's interesting to look at the statistics regarding inheritance pertaining to this as well.
Well first off this article sucks. The guy didn't present a single argument as to why tree trade is good, just said "we sell stuff there too", and went into some irrelivent story about Indian animation. So if I had to base my opinion on crap like that I would think that free trade is bullshit as well.
The Economist also had a story on the issue, which was better than this one, although, IMHO it wouldn't have dismissed all my doubts. Unfortuneatly, back issue articles are only available online to subscribers.
So I will try to explain (in 15 minutes - I really shouldn't be posting at all this morning) why free trade is good. The central point is that the only possible thing that increases the standard of living, is increasing efficiency. This can be done several ways, such as better procedures, business methods, technology advances, and trade.
Why trade? If someone can do something cheaper than you (either because they have a lower standard of living, or because they have a resource which you don't), then having them do it will save you money (yes, you being a large multinational corporation). Now contrary to popular belief, this saved money does not all go into some blackhole called Profits or Upper Management. If it did then they wouldn't be competitive with other companies. While CEO's do make alot of money (arguable more than they deserve), it is still miniscule compared to the about of revinue flowing through the company. The savings will go to 1) the customers, 2) expanding the company via profit, or 3) The employees salaries. If the savings go to the customers, they will have more money to spend elsewhere thus causing growth in other industries, creating more jobs. If it goes to expanding the company that will directly create more jobs. If it goes to the employees, even the CEO, they will either spend it or invest it, both of which cause growth and create more jobs. So increases in efficiency always creates more and/or higher paying jobs - regardless of how the effeciency is obtained.
Everytime efficency increases, some people do loose jobs. Whether they are laid-off because switching to an assembly line requires less workers, or because the new factory is all automated, or because workers in china are doing it instead. However, the economy as a whole ends up with more new jobs than it destroyed. In economics this is called churning, and is why we always have a certain about of unempolyment - because people are in-between jobs.
Now onto the next point - the types of new jobs created. When people talk about tech replacing workers, they always point out that there will need to be people to design, build, and maintain theses machines. Which is true, but if that was the whole story we would have problems because those type of jobs require smarter/more highly trained people than the jobs they are replacing. What are the displaced workers supposed to do, if they can't perform these new jobs? Luckily, this is not the whole story. As I mentioned, the customers also save money as prices go down, and thus spend this money on all sorts of things, not all of which require rocket scientists as employees. Hence the big increase in service jobs lately which, btw were almost always better than the manufactring jobs that were replaced.
You brought up a good point, that just because jobs are created, does not mean that they are necisarily in the US. But you have to remember that the customers of these outsourcing companies are in the US, and spend money here, and the majority of personal expenses cannot be outsourced. Furthermore, as we become more wealthy we tend to spend more money on better, houses, and recreation than we do on gadgets, so the percentage of non-relocatable jobs increases as our standard of living increases.
Lastly, loosing jobs to India really isn't the problem. The problem is that everyone and their brother went into IT during the dot-com bubble, and after the bubble went burst (because all the companies and jobs did things that no-one actually want
The fund company gets an expense ratio (usually assumed at 0.75% but I think the average is between 1.00% and 1.25% now. The fund manager usually gets a six figure salary and a bonus that is tied to how much he beats the index (typically the S&P 500) in a given year. The bonus is usually in the seven to eight figure range. However if he underperforms he will generally be replaced in a year or two.
Hedge funds, venture capital, and other private equity funds have compensation structures of the following nature. The fund management company usually gets an expense fee of 2-3% per year, but returns are split in the following manner, the investors recieve their investment back. Then any additional returns are split 80/20 investors to fund partners. This is virtually standard, although I've seen some small variences. Don't worry about the fees in this group, unless you started a company that went public (and you got out) you'll never have to pay them.
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
This is where comparison with American unemployment rates with European unemployment rates break down. For one thing, unemployment payments in the US lasts only six months (where I live anyway). In Germany you can stay on unemployment forever theoretically, as long as you're really applying for jobs. I'm sure if the US did away with unemployment payments altogether, unemployment rates would go down even more as people laid off from white-collar jobs would be applying to work at McDonalds and whatnot that much quicker. Whether this is good or bad depends on whether you are a worker, or a member of the idle class like Paris Hilton who benefits from the misery of people who work for a living.
The government survey of household employment showed a record 136.2 million non-agricultural jobs in December which is up over 1.5 million in 2003. In addition, unemployment claims fell to 347,500 in the four week average through January 10 which indicates that people got jobs. That is consistent with the fast drop in the unemployment rate. However, there is another statistic which you may be concerned about. The Establishment Survey showed that the number of jobs in non-farm establishments fell by 74,000 in 2003. However, the Establishment survey does not respond very quickly to new businesses and self-employment. It is very often adjust as much as 2 years after its initial publication because of this. -Jacob
Is that so? Maybe you meant that our rate of loss of jobs has been dropping, 'cause our unemployment rate JUST leveled off about 2-4 months ago. Or maybe you were only counting people who "matter"? Conveniently disregarding certain groups?
Between listening to NPR (ooh, those liberal slimeballs...) and CNN, and reading a variety of random sources (that are not all liberal) from news.google.com , it's my understanding that the mainstream estimates of unemployment have a few caveats:
first, there is not one single "exactly correct" estimate, rather there are a range of estimates which have garnered consensus. One estimate is that we have been losing jobs like a rock since '04, and that the loss has slowed or stopped, but that overall job growth is approximately zero, considering jobs created, jobs lost, and discounting people who have stopped looking for work (because of disillusionment, or other committments (like to family)). That is the estimate which, considered politically, lends weight to a liberal speaker.
The other estimate IIRC essentially says the same thing, except that it puts current job growth somewhere above zero. Not very high, not anywhere near what we were losing, but above zero. That is the estimate that favors a conservative speaker.
I'm a liberal (yeah, I know you already figured that out:). So for discussion I'll presume that the conservative estimate is the one that is a closer picture of reality than the other estimate (which I might choose if I just wanted to win an argument). Even in the more "conservatively favorable" estimate, we face the issue that those jobs which are created are much, much crappier than the ones we lost. Replacing a $55,000/yr technician job with one, or even two burger flippers at $14k/yr IS NOT GOOD FOR THE ECONOMY. Not for the rich, not for the poor. Granted, one particular rich person might make a few grand off the change, but his peers lose out at the same time, and the guy who used to drive his Dodge Ram to the office who now drives a bus seat to McDonals, he sure doesn't win. I the taxpayer sure don't win. Taxpayer's children don't win. Who wins?
Idealogues.
Oh, I almost forgot.
Where did you get your figures? I don't believe you, you neo-con fascist, sexist, racist, elitist cockroach. I hope the Christian Church is right about the afterlife, cuz I want a seat next to you in hell just so I can watch you fry.
The total real value of goods manufactured in the US is higner now than it was 20 years ago -- hardly a sign of a "dead" business. It's true that we let China manufacture DVD players and stuffed animals for us, but that doesn't mean domestic manufacturing has died. It's also true that manufacturing employs fewer people while producing more goods -- productivity increases have eliminated far more manufacturing jobs than offshoring. By your argument, farming is a "dead" industry because it employs so few -- but that dead industry still feeds us all.
Jobs in IT are suffering from a two-way whammy just now. Yes, some jobs are being shipped to other countries. However, in the late 1990s, hundreds of billions of dollars were "misallocated" in the dot-com and telecom bubbles. Some of that misallocation was spent on thousands of miles of interstate fiber that may never be lit. Some of it was spent on $80K annual salaries for people to design and implement worthless Web sites. Correction of those misallocations has eliminated far more IT positions than offshoring has. Improvements in productivity continue as well -- when two banks merge, and one Web site is eliminated, one set of Web site maintenance jobs is also eliminated.
Here's how you 'stop' looking for work. Let's say I'm a high power software developer, and get laid off. I apply for unemployment benefits, so now I'm included in the unemployment statistics. My unemployment benefits run out in say, 8 months, but I've stil not found a job. My unemployment benefits run out. Eventually I can't survive on $0/month any more, so I get a job at the local movie theatre. I'm no longer counted as unemployed.
USSR collapsed not because of the military spending spree (they were spending A LOT during all the time of their existence, and Military Industry was providing TONS of jobs).
The real reason for the collapse was the death of the Communist ideology in the population's minds. Thus, there was no stimulus to work well and invent.
As late Soviet saying nicely summed it up: "They pretend paying us, and we pretend working".
Such an attitude can't sustain participating in a technological race. Certainly, there were inventors and scientists who have worked for the sake of it, but it was not enough. Thus, the quality of manufacturing, ergonomics and comfort&convenience were very low et al.
Also, the economy was inflexible with the planning athorities trying to plan in 1980 how many soap bars the country will need in Y2K.
This was what killed the economy and not the arms race.
Tigers respect lions, elephants and hippos. Maggots respect no one. (C) S. Dovlatov
Array Services is an open source, network solutions provider. Offering innovative, yet proven Linux solutions for network, and e-commerce applications. We feel that by offering open source solutions we can better serve your specific infrastructure needs....
It sounds an awful lot like you guys package and integrate existing software to apply it to various customer needs. Some paint, duct tape, nails, glue, perhaps the odd pulley or two, et voila': another e-commerce widget. There's nothing wrong with that; it's honorable work, and I don't doubt that you provide real value to your customers. But it's also a long way away from the sort of hardcore R&D taking place at companies pushing the edge of the technologically possible. So, with that in mind, I tentatively call bullshit on the following claim:
Could you please repeat that about low-grade tech skills to all of my recently laid-off friends with Masters of CompSci degrees and patents pending?
If:
- your friends really have masters degrees that they didn't get out of cracker jack boxes;
- their patents aren't raging crocks;
- they're still looking for work;
- and they're willing to relocate to the Bay Area
have them send me a resume. I could use the referral bonus. And yes, I'm quite serious.