Outsourcing is Good for You

gManZboy writes "Catherine Mann, from the Institute for International Economics, has a look at What Global Outsourcing Means for U.S. IT Workers up over at Queue. She's got an interesting argument: outsourcing means cheaper IT products, meaning businesses will buy more, meaning more products to make & manage = net gain of IT jobs in the US. Ummm, did you follow that?"

Comments

Figures lie and liars figure

[Naum]

From 1999 to 2002 (last available data), the number of "programming" jobs in the U.S. earning on average $64,000 fell by some 71,000. But jobs held by application and system software engineers earning on average $74,000 increased by 115,000. Thus, even as it increases the number of IT jobs, global sourcing of software and services changes the nature of IT jobs, moving them up the skills ladder and diffusing them throughout the U.S. economy.

First, basing conclusions on an incomplete dataset is foolhardy. The quoted numbers do not capture the complete status of affairs. Much work in IT is done via contract/consultancy and those job losses arn't reflected in the numbers listed. If Fortune 500 companies replace domestic consultants with those working for offshore vendors, it really won't register in those quoted statistics. But it's been happening on a grand scale - as I type this, I am surrounded by ~500 offshore visa workers.

Numbers aside, there is a larger theme that Ms. Mann and others of her ilk neglect - if lower end "grunt" positions are being snuffed out in lieu of higher, "up the skills ladder" posts, then shortly, in a few years, both ends will inevitably be filled in such capacity. Where, pray tell, do qualified IT "engineers" earn the experience and prove their mettle? By toiling on systems bottom-up and then gaining an appreciation and understanding of complex system underpinnings. Or am I to understand that these ranks are now to be filled entirely by MBAs and sociology majors? Young folks are choosing alternate career paths, heeding the alarms that the parents and older friends send their way.

Re:How can you compete with $9.60/hour?

[gargonia]

You still can anytime you want, from the comfort of your own home. I know someone that did it and she made pretty good money doing so (about $15/hour, I think). When I inquired about male employment she said they do hire men, but that most callers for men are gay, so men have to be prepared to do the gay thing (at least on the phone) if they want to work a phone sex line.

Don't kid yourself, though... it's work. In order to make the highest pay rate you have to pretty consistently satisfy the clients and keep them on the line, which is not as easy as you might think. People are different, and different things get them off. You have to figure out what they want pretty quickly or they'll move to someone else. You also have to be careful not to give them too much of what they want too quickly or they won't stay on the line long. There's a fair amount of psychology involved in doing it well.

Re:Chewbacca Economic Theory

[pyce]

"None of this makes any sense."

Oh yes, it does... Labour force is a very limited resource, so with outsourcing those low-grade jobs, you have more people who can concentrate on doing the more profitable (ie. higher added value) jobs. The trick is doing that right and not outsourcing _everything_.

sure, that's easy.

[twitter]

However, can you explain how outsourcing is an example of the broken window parable?

Outsourcing is vandalism, like breaking glass, that ends up costing everyone. Caroline argues that outsourcing (dollars spent somewhere else) benefits everyone, including the programmer who's picking his nose and filling out resumes instead of being paid for the same work. It is clear that the programmer would differ. The programmer would also argue that the outsourced work is inferior in quality and that he's not allowed to compete effectively due to further government vandalism though insane IP laws. The supposed work that's created is click and drool upkeep of Winblows, which pays very poorly, while others do the brain work. Everyone pays the price for this, if they are not sensible enough to use free software, by paying monopoly fees for software that could and does cost much less. These hidden costs are carried by all in the form of higher general costs lower efficiency and inconvenience. The situation with non free software is much closer to the case of the boy who's paid by the glazier to break windows. That's what the upgrade train is.

Re:bah

[nwbvt]

Do you know what is even more amazing? That people who have no knowledge on the matter think they can do a better job than virtually every economist who has studied the issue.

Re:Theory (and more theory)

[admiralh]

Proponents (not perhaps without some justification, I suppose) argue that since no Americans want to pick strawberries or mow lawns for a living, without the illegal/legal migrant workers, the work will never get done.

"Free trade" proponents always say that. The truth is that Americans don't wan't to pick strawberries for the salaries the growers offer, because you simply cannot support a family in the US on those salaries. If the growers up the salaries, then Americans will do it, but that makes the price of strawberries go up. Then we'll just buy strawberries from Banana Republic where they're willing to work for $1/day and can actually support a family.

Those with the "have" are in a position to call the shots here. Or put another way, capitalism being tied to the private ownership of the means of production allows the private appropriation of surplus value. Companies outsource more for marginal benefits at best it seems, and yet nobody things to cut the salaries of the top executives?

You haven't been following the news lately. CEO salaries are out of control because of all the "good ol' boy" networks in these corporate compensation committees. Stockholders can't get rid of them because too much is held by insiders. Look how the effort to oust Eisner at Disney failed, and he's been paid insane salaries to run the company into the ground.

The problem is that CEO's and their ilk live in a totally separate reality from the rest of us, and have lost any sense of "social responsibility". And the last defense we have against the "aristocracy of wealth" is the estate tax, which the Bushies want to permanently abolish.

Also, there is a movie released in 2003 called The Corporation which, as one of its premises, stated that if you consider the typical corporation as a person and diagnose it using the Diagnostic and Statistical Manual of Mental Disorders, it would be a sociopath.