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

More IT jobs?

[MrDiablerie]

No I think it means more outsourced. IT jobs in Asia and India. And larger bonuses for american executives.

Re:More IT jobs?

[Anonymous Coward]

The point is that the people whose jobs are outsourced are not competitive. Whether you like it or not, it IS a global economy and when somebody else will do your job for less money, employing you instead puts your employer in a disadvantageous position. The competition will exploit this and drive your employer out of the market. The effect is the same: You're out of a job.

The question is not if outsourcing creates more jobs than an isolated domestic economy would. The question is: Does outsourcing save the jobs which are hard to outsource? Pretending to be in a non-global economy would drive these jobs away too in the long run.

Re:More IT jobs?

[kcbrown]

The point is that the people whose jobs are outsourced are not competitive. Whether you like it or not, it IS a global economy and when somebody else will do your job for less money, employing you instead puts your employer in a disadvantageous position. The competition will exploit this and drive your employer out of the market. The effect is the same: You're out of a job.

Yep. And the cheapest labor is that of a slave or prisoner who is being given barely enough to eat. Once you know that, you know that's exactly where the global job market is headed, as long as those countries that use slave/prison labor (China?) are allowed to participate in the competition.

That is why offshoring must be limited: the competition doesn't have to follow the same rules you do, and that inherently makes for a tilted playing field. The competition has no incentive to change their ways (they're more "competitive" than you, after all), so you're forced to adopt their ways. That means other countries that wish to compete in the global market must start making use of slave/prison labor, and that puts pressure on the governments to increase the size of their prison labor pool, which puts pressure on them to put more people in prison.

No, offshoring is acceptable only when the target countries have the same labor laws on the books that you have. Otherwise you may as well throw out 100+ years of economic and labor progress (what, you think the middle class just magically appeared? It came about as a direct result of sane labor laws, because the use of automation virtually guarantees that there is more human labor available than work to do).

It IS good for us.

[Stegersaurus2686]

Outsourcing also raises the amount of money third world countries have. As they get richer, they start buying more expensive luxuries made in the industrialized nations. In the end, it will help our economy. Also, it is true that we do lose jobs to outsourcing. Like the article mentioned, however, we gain new skilled labor positions that are better paying than the manual labor positions that were eliminated.

Re:It IS good for us.

[Marxist Hacker 42]

One slight problem with that theory- we don't make anything in the United States anymore, we're a POST-industrialized nation. So while this will help China, what new skilled labor positions are we going to get here? Especially since any Indian can supposedly do any skilled labor position just as well as any American and for 10% cheaper under the H-1b regulations?

Re:It IS good for us.

[kevinatilusa]

So outsourcing is a labor market version of trickle-down economics?

Re:It IS good for us.

[Kenja]

"Outsourcing also raises the amount of money third world countries have. As they get richer, they start buying more expensive luxuries made in the industrialized nations."

No they dont. They buy stuff made in India, China nad Taiwan.

"In the end, it will help our economy. Also, it is true that we do lose jobs to outsourcing. Like the article mentioned, however, we gain new skilled labor positions that are better paying than the manual labor positions that were eliminated."

Realy? Name them. If outsourcing jobs creates jobs, where are they? Why do we have such high levels of unemployment in the IT industry if all these jobs are being created?

Re:It IS good for us.

[BerntB]

In the end, [outsorcing] will help our economy.

That might be true.

But consider when industrialization became big in the 19th century (at least where I live). It was hell on the little people then. Mass unemployment and lots of suffering.

It was a good thing in the long run, though. The world is much better for it:
Infancy/child death rates where around 20-30% before industrialization. The rest of our quality of living has been raised similarly; to be able to study is half of life's meaning to me. Lots of people had brain damage because of bad harvests when they were children. Etc, etc.

This outsorcing trend will (almost) certainly be a Good Thing for the third world and all humanity in a few decades.

It just sucks to be us -- that has to live through the changes in the wrong place. Like the unemployed and workers of the early industrialization.

I find this whoring by spokespeople to claim otherwise disgusting.

Maybe what she means to say is ..

[YankeeInExile]

Since not all jobs can be efficiently outsourced, a company that raises their productivity by outsourcing the jobs that can be will have more resources to devote to those that can't be

Re:Maybe what she means to say is ..

[haruchai]

EXACTLY!! Unfortunately, the only jobs they don't try to outsource are the executives ( honestly, they should try harder) and, those newly-freed up resources - usually cash - go into the bigwigs pockets in one of two ways.
First, they get bigger raises, expense accounts, golden parachutes for reducing the company payroll. Second, the stock exchanges usually reward the newly productive company with an increase in share price, making those executive stock options more valuable.
It's win-win if you have the key to the big boys' bathroom.

I've heard this argument before...

[tekiegreg]

...and it appears valid at first bite. Ultimately the corporate motive is to make more profit however, so money saved by outsourcing probably wouldn't drain into more programmers (or whatever position abroad) more likely into the bottom line for the shareholders...not an entirely bad thing if you're a shareholder but if you're an employee...

CEOs

[savagedome]

Well, nice arguments and all. But fuck that. They can say all they want but before we stop paying multi-multi-millions to these greedy ass CEOs/CTOs and such, I don't want to listen to nothing. Do they have any answer to "If the CEO took a 50% pay cut, we could add another 2000 jobs in my company right now. So, why doesn't he?"

I guess I am just a little bitter but since they have announced 'massive' layoffs mid-sept, I can't do nothing but rant...

Executive Summary

[Lord Grey]

1. The .com bubble bursts, causing employees working for firms whose primary business is selling IT products to lose their jobs.
2. Bigger IT companies that didn't actually fold outsource some work to reduce expenses.
3. Due to public demand and reduced expenses, non-IT companies buy more computer crap.
4. Non-IT companies have to hire the old IT employees to run the new computers.

Net result: Those employees eventually have jobs in computers, just not with computer companies.

This actually makes sense, and I've seen it here locally. A lot of people I know who were laid off from startups are now working for their old customers. The problem is, this trend can take years. The number of businesses that totally went under put a ton of IT talent out of work. Compensating for that will take some time. That's not good news for the employees who haven't landed a job yet.

In the long run, we will all benefit

[dogfart]

But as the economist John Maynard Keynes said, "In the long run, we will all be dead."

Yes, but how long?

[gargonia]

I keep hearing this argument made in favor of outsourcing jobs, but what I never hear is a realistic estimate of the amount of time that has to pass before the good stuff comes back our way. If there's a fairly quick turnaround on work returning to the country of origin then it's a good argument, but I suspect that the amount of time that has to elapse in order for the jobs to start coming back is more likely to be measured in decades than years.

Re:This is a totally outrageous claim...

[enjo13]

No, her basic premise is sound economics. What outsourcing really does is grow the economies of those other countries. The money going into those economies results in higher economic spending power among the outsourcees. They in turn buy more goods, which employs more people in their local economy. This causes economic growth... at the same time it provides the ability for people in these countries to start their own business, utilizing cheaper local professionals, to produce products and outcompete the American companies. That sounds scary... but the net gain is cheaper goods and services for US as well. This in turn enables all of us to have more spending power and allows OUR economy to grow as well. This creates more jobs.. etc.. etc..

It's the concept of competitive advantage. The workers in India have a competitive advantage as they can do the IT jobs cheaper, and ostensibly at or near the same quality level. By allowing them to take that advantage they win (their economy grows), but they also begin producing products that out-compete the more expensive American products. This is the exact same cycle we saw with Japanese cars (which has come full circle with those companies opening up manufacturing plants in the United States).

Re:One more time

[gofreemarket]

I'm sorry, in the short term it might not benefit you as the programmer. But you were the one that chose to do programming and because of your choice, you have to face the fact that thousands of people overseas whose families earn 1/10th of your income also need to eat. They'll be asking the question how come they can do similar work as you and me and are willing to be paid 1/5 to 1/10th of what people in the US earn, but they shouldn't get the jobs?

Re:One more time

[sabat]

Well, slow down a little -- the world doesn't owe you anything because you made all that effort. Whether it's fair or not, it's up to each of us to find a way to be valuable to a company.

If they export our jobs, they'll get what they pay for (and usually do -- witness the failure that is outsourcing).

The only bad part of that situation is that it takes CEOs and boards a few years to figure out that they're not getting what they pay for when they outsource (shoddy code, slow response time, lack of understanding of American business, ad nauseum).

The reason outsourcing fails is that you can't easily just cut off one part of an organization and throw it across the world. To make that really work, you'd need to move the entire organization to that country -- and now you've just outsourced everyone except the board. Oops.

Trickle-down Reaganomics?

[erroneus]

I kinda have to disagree with all of that. Current trends is not that business uses the money it saves to buy new stuff, it's that the money they save, they tend to apply to top executive bonuses and salaries. The trickle stops at the top, generally speaking.

Yeah..just great...bash the economists.

[carcass]

I just love it when you IT people get all pompous about economists. Of course you're all the smartest people on the face of the earth, so people who've actually STUDIED economics can't possibly be right about anything, especially when you disagree with it on a visceral level.

You guys sound as pathetic as the steel workers and miners where I grew up, compaining about how the corporate "man" keeps you down. Get with the times: many IT people were the first to say that to the "old economy" manufacturing employees back when getting an IT degree meant a paycheck that was completely outsized compared to your actual skills.

Now that you're not making mad money right out of college, you're all more than willing to join up with the Union and be protectionists.

It's a known economic fact that lower labor costs translate to lower finished goods costs. You think you'd be able to afford the latest graphics hardware and a new box everytime the next killer FPS came out if they weren't being manufactured overseas for way less than they could be made in the U.S.? You all benefit from outsourcing and globalization, but you're too fixated on your own careers to see the benefits.

Of Course, I Follow It...

[reallocate]

Outsourcing is bad for the person whose job goes elsewhere.

But the job goes elsewhere because someone else can do it cheaper.

It happens all the time. Sooner or later, all those guys in India will price themselves out of the market and lose their jobs to people in China or Africa.

I have sympathy for people who lose their jobs. I have no sympathy for people who want government to distort economics.

Re:Of Course, I Follow It...

[Tony]

I have no sympathy for people who want government to distort economics.

Well, considering that economics is poorly-understood to start with, I find it hard to imagine how governments can distort economics worse than corporations distort economics.

The "free market" concept which is so prevalent among libertarians and corporatists is based upon an ideal model, in which everyone in the model is a free agent. Unfortunately, that's not a true model.

In the corporate model, a select few in charge get to make up the wages paid. Now, this is somewhat constrained by the market availability, but as we discovered with outsourcing, there is no lack of people willing to work at pretty much anything, for almost nothing (comparatively speaking). Meanwhile, those who fix the game (upper management) ensure their own positions are not outsourced, while paying very little to everyone else.

Meanwhile, those with the money are able to influence government policy to a much greater degree than those without much money. This also shifts the balance of power just a little more to those running corporations. Whether the DMCA, the INDUCE act, or the consolidation of giant media, the individual loses out, while the corporations gain.

Economics in the US is warped. There is no such thing as a free market. Nor is there any indication that the free market is a good model to start with, let alone the best model. The only thing we've discovered so far is that empirically is better than fuedalism, socialism, monocracies (including monarchies, dictatorships, etc), hegemonies, and bozocracies (in which clowns run the show, like in the US).

Inevitable

[loqi]

Bitch and moan as we may, this ridiculous imbalance in world wealth doesn't look very stable to me. Outsourcing this kind of stuff had to happen.

There are masses of very poor people out there now able to afford a computer and internet access. Their disadvantages are many, their only advantage is that they're poor. So of course they will work for less. Suck-it-up dept is right.

I don't support the exploitation of workers in poor countries, but it's hardly exploitation if these people are making a living doing what they do.

Yeah, I follow that arguement

[buss_error]

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?"

Yeah, I follow that arguement...all the way to the unemployment line.

First, all tech is crap. Let me repeat that. Our careers are based on crap. First, for any non-tech company, computers are a support accounting item. This means that computers are not in the business of making money for the company, they are an expense. (Get over it, I'm not done yet, so hold the flames til you see where I'm going.)

Let's look at the grocery store. It's full of tech in my area. PCs on the check out lines. PCs to weigh and print tickets for fruit and veggies, computers to check the temps in the coolers, computers to do the accounting, timeclocks that are really T104 form factor motherboards with full computers, hell, almost every isle has a computer. (I understand that some stores are replacing the security camera VCRs with computers now.)

Second, when these devices are first installed, there is some sort of cost/benifit study, both before and after they buy it. (If they are a cluefull company. Uncluefull don't do them, simi-clued do one before. Only fully clued do both.)

Third, after a few years, these productivity gaining devices stop being seen as something that saved them money, but just another expense. They forget they replaced things that cost even more, or the savings they got from installing them.

Now comes the down cycle (remember when all the wall street anaylists said we beat the down cycle markets? Cheap talk, and while I never believed it, many did.) and busineses have to cut expenses.

Gee, where do we cut? Almost always the answer is IT, because IT is seen as an expense. They almost always forget the productivity gains they get from the use of technology, they only see that line item cost IT people are on the balance sheet.

As for tech companies, very clued know that IT keeps the plates spinning and productivity high. They may cut a few in IT, but mostly by quietly asking "who are the bottom 10% we can do without best?" and those hit the bricks.

Simiclued tech companies just cut the last hired.

Unclued cut a lot of IT, regardless of why.

Likewise, consertives say "outsourcing is GOOD for jobs!". Look at thier reasoning, folks. If you believe it, then outsourcing is good all the way up the chain of command, yet you don't see CFOs and CEOs being outsourced. Oh, no! What you do see is that they get multi-million dollar bonuses and raises for cutting 2,000 jobs here, 5,000 there.

This is why I say IT workers are the modern black gang of the world. We stoke the boilers, fire the engines, make the computers run. But are we asked our opinions on all the jimcrack geegaws PHBs demand? Hell no! Most of the time we are accused of "slacking off", "being uncooperative", "geeks" with a roll of the eyes and shake of the head, and the only respect we get is when we save their ass and the empty mouthings of praise during those "all hands" meetings where the bosses give each other awards.

(OK, so I'm bitter right now. I'm miffed because I just came from one of those all hands meetings, and it was a complete waste of THREE FREAKIN' HOURS.)

But let the pager go off at two in the morning, and we are there. Someone has spyware on their system? We are there. Virus? Ditto, gritting our teeth all the while they regale us with how smart they are about technology or how absolutely they can't do a thing with a computer. Thinking how this person makes twice what I do, with an IQ measured in irrational numbers....

But what really gets me is the number of times when the very people that depend on IT to get their computers working bypass IT, and go spec out and order servers and software and then expect us to keep it running, or second guess us the rare times we are asked our opinion.

You know, I'd never dream of tryi

Re:Chewbacca Economic Theory

[jsebrech]

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.

Wait, so you're saying that if we fire people they'll go find better jobs.

I'm sorry, it still doesn't make any sense. If there really were better jobs, people would already have them.

Re:Theory

[MooseByte]

"Since programmers don't need to be physically close, why not hire the cheapest capable person? If you only pay $10/hr, you make $40/their hour, of course minus your management work."

Works fine until people wonder why they're paying the middleman $50 at all when they can turn around and hire the $10/hour worker directly. And that is exactly the situation here.

IT staff aren't getting magically "promoted" into "higher value added positions" when their jobs are outsourced. Their actual job is leaving the country, and they're being laid off. Whether that's better or worse is a relative viewpoint. Regardless, there aren't any equal-paying (much less better-paying) jobs replacing them.

" What about this doesn't make sense, when I was 14, I worked for a guy cutting lawns doing almost exactly this."

Yeah that's great, except you can't offshore outsource lawn mowing. Going offshore you can exploit a completely different tier of societies that aren't tied to the ecomonic regulations and expenses of the corporation's home country. You can't live on $3/day here in the States.

Completely different situations.

Sour Grapes

[isa-kuruption]

Call me a troll, fine... but it seems to me that most of the responses of negativity towards the article is with the reasoning, "I'm not employed, so therefore IT jobs arent being created."

However, I must say, as I am currently looking for alternate employment, I have had several opprotunities for job interviews (about 10). And these jobs range from technical support at 30k/yr through Sr Network Engineer and Security Analysts at 100k/yr and more.

The jobs are out there, people... however (here's the troll) whether you're qualified for them is another thing altogether. Whether you want to be a tech support guy is yet another... It also depends on where you live (I happen to live in the NYC area and there are plenty of IT jobs around). Yes, my current company is outsourcing to India, but we're still hiring IT people... just not the same group of IT people.

Oh and one other thing... most of the people that were laid off here in the US due to my company's outsourcing have been Indians who are here on work visas.... so if you're going to get the same people at 1/2 the price because they are 6000 miles away, then why wouldn't a company do that?

Middle man

[nuggz]

Well if you want to skim off money you have to add value somehow.
Supervision, hiring good people, project management, ensure quality, provide customer support, all those things customers want.

You know all that stuff Redhat is doing with Linux.

Fits with the Big Picture

[Pushnell]

This all seems to be pretty simple to me, and fits into "the big picture" quite firmly.

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.

So, programmers overseas are now writing the programs that businesses depend on, and we're hiring more people (44,000 more people in 3 years) to try to implement / support that software. Makes sense to me.

There's been lots of discussion on /. about how overseas programmers are less "in tune" with the business problems that the software is to provide the solution for, and how in some cases the programmers are not as well-trained.

Therefore, it should be no suprise that it takes that much more work(ers) to crowbar this software into place & pound it into submission so that it does the job, and to keep it doing so every day. Additionally, when you consider that the personnel doing the implementation/support are that much further disconnected (language barriers & such) from those who actually built it, this becomes a no-brainer.

The real question is, is the trend of software requiring more and more maintenance & support year after year for myriad reasons a good thing? This article claims that it is in the short-term (more jobs), but what about when the whole card house tumbles?

Don't worry, CEOs are next

[hacksoncode]

Once all the IT jobs are outsourced, it will only be a matter of time before the Indians decide they don't need the American companies to tell them what to do, and can just send over some Indians on L-1 visas to interface with *their* customers.

Re:Chewbacca Economic Theory

[EddWo]

I'd like to believe you but I don't think it works this way.
Suppose we can specify a software product to be produced. UML models, use cases etc. Now we can give that to a programmer and they can produce the actual product. The programmer doesn't need to know much about the actual business issues, just follow the spec, so we can get the cheapest programmer from the other side of the world who is capable of following the spec.

So there are fewer low level programming jobs in the US, great lets all become software architects, we are freed from the low level work and have higher valued jobs, Yippee a promotion.

Except you realise that you don't actually need as many software architects a you had programmers, and not all programmers are capable of becoming software architects, so we keep the best few and drop the rest.

A problem arises in a few years, where do you find good software architects. Usually you might start out as a programmer and after a few years experience on the job you can understand all the issues to take on the greater challenge. Well how do you get those years of experience if all the low level jobs have been shipped overseas?

The only people qualified to be software architects are the supposed low level programmers you outsourced the work to. Except now they have enough money to set up their own development shops and can undercut your business in providing software development services.

This has already happened with Clothing and Electronics, it could easily happen with software too.

The only jobs that remain here are those that require an on-site presence, cleaning, maintenance, services, shopping and the management who sent the jobs abroad.

Re:Chewbacca Economic Theory

[servognome]

If there really were better jobs, people would already have them
The higher paying jobs don't exist yet. In the 80s when electronic manufacturing jobs were outsourced, it freed up capital and intellectual resources to pursue activities that used the more cheaply made components (software, networking, etc).
As software becomes cheaper it is reasonable to expect people to find ways to better utilize that software, thus creating new industries and expanding existing ones.

assembly, not manufacturing...

[zogger]

Stop calling assembly manufacturing please, some of the biggest FUD out there now. Use the correct terms. Picky point but it's true. We used to manufacture cars, now we do not, we put together car kits.

And how is it "all of us" when it's not "all of us" who can get these cheaper goods and services? Aren't you leaving out the ones displaced, out of work, rehired at less wages, etc? That means it's not "all" of us, correct? Seems like you are assuming two things at the same time, that outsourced jobs result in zero loss of jobs here, and that they make more jobs at the same time. Say whut? How are people who have now much less money or no money supposed to take advantage of just cheaper trinkets, when basic bills and utilities aren't even being met?

Sorry, it ain't working, been hearing this scam pushed for over 20 years now. Stuff in general costs more, and good well paying jobs are much harder to come by, you can't just pick and choose a few selected entries like CPU chips or something and call it the total economy. Got the personal memory, don't need an article to tell me that. Stuff costs more now, not less, generally speaking.Yes, there are new products on the market, but in general, nope, stuff costs more. Food, energy, housing,clothing, all costs more. People have lost purchaising power, not gained. Bankruptcies are at record levels-why if these games are making the economy so good? Why is that? Really, why? Savings at all time historic lows-why is that? if we are all so better off, wouldn't it be trivially easy to sock away more now? But it's not happening. House notes are now common at 30 years, I can remember when 10 was common. Why are they at 30 now, is it because houses cost more, or less? and yes, I even mean the same excact size houses in the same areas. And interest only loans? Excuse me? WTF is that noise? People are getting so desparate to hang onto their houses-just a place to live- they basically agree to rent them forever? That's simply...weird, but I'm seeing the ads now on Tv and such, never used to be that way. Car notes are at 60 months now, I remember 12 month loans, and any random middle of the road joe normal blue collar paycheck could pay them off to boot, let alone a white collar at 2x the average wage. And some people are being forced to a perpetual lease, they can never really own a car (that runs and ain't beat to snot) now, it's turned into an expected monthly utility bill because the lease is all that's affordable. I remember when leasing was extremely uncommon for joe sixpack, now they push those magic cheaper numbers because outright purchase is so hig-where's the cheaper cars at? I remember a ton of cars brand new at under 2 grand when I first started driving, where are they now?

Less people have jobs with full benefits now. More people have lost their primary jobs and have been forced to take lesser paying jobs with less or zero benefits, sometimes not even getting a full work week. They just screwed people over on overtime this week with that new law to boot. More households require two checks to function, when one used to cut it easily.

How is this "better"?

Nope, the US did well when we pushed a full, completely diverse, vertically integrated and protected economy, the whole magilla, manufacturing, agriculture, energy production, etc, all of the above. It went downhill when they pushed swapping the cow-working- for the magic beans of get rich quick "investing" in whoknowswhereistan and making millionaires into billionaires. The only servicing I am seeing is the US middle class getting "serviced" right up the tuchus by the same old slick snakeoil guys.

The better era with a better styled economy would have been the 50's to late 60's. Since then, coincidentaly with allowing dumping of autos and the start of offshoring,and allowing huge tariff imbalances, and also giving TAX BREAKS to offshore, we've gone steadily down hill. Just because we have some shinier stuff now doesn't mean we have a bette

Numbers game.

[nuggz]

What if N developers migrate to N management positions and 3*N offshored developers?

Now you have more total global employment, higher value US employment, and more productivity for everyone.

I know that is the rosy scenerio, the other (obvious) one is all the jobs go away and we're all unemployed.

Fighting against the second with protectionism doesn't work. Working towards the first scenerio can work.

I won't argue it is easy, or it will happen quickly, just that is how I think we should view this opportunity.

"Opportunity is missed by most people because it is dressed in overalls and looks like work;" --Edison

Re:Something Similar

[CAIMLAS]

You might think that economists study people, but what they tend to do is make blanket statements about economic forces that support their political views first and foremost - and then try to fabricate some 'scientific' reasoning to back it up.

The problem with economists is that they try to be real scientists, when they're not. They're social scientists. Social scientists should study trends and events, over a long period of time, and make assessments based on those trends. There is no trend that even remotely relates to the current outsourcing of IT, as there has never been a situation where a country has sent high-paid, high-education jobs overseas! At best, you might be able to use the "outsourcing" of the Roman Legions to the barbarian hordes as a similar situation. At best.

There is no evidence, circumstantial or otherwise, that outsoucing tech jobs is helping anyone but the richest in America. That alone should be evidence enough for you that outsourcing is bad.

Somebody gets it

[ishmaelflood]

Now, we pay the N managers 60$ per hour, and the offshore guys $10 per hour, each. So the net cost is $90 per hour for 3 times as much work as one onshore guy at $50.

So, which company will succeed? Output of one man at $50 per hour, or output of three for $90 per hour?

There is a net benefit to society, the ex-programmer is making more money, and he's producing cheaper code. There's a net benefit to the offshore society, they are earning reasonable wages in context.

The loser, admittedly, is the competing on-shore programmer, who either has to drop his hourly rate to $30, or figure out how to become more productive, or go and find 3 dudes to write code for him. Any of those three is a viable strategy, I'd suggest option 2 is the least stressful and the most satisfying, since I don't enjoy management or poverty.

Re:bah

[bskin]

The amazing thing is that people think they can be right about anything but the most basic. Economics is at least as complex as the weather, which we know we get wrong much of the time, except with all the added predictability of being a social science...

This is actually a much better metaphor than it appears.

Economics is a lot like meteorology. Meteorology is far from random...it's very, very complex, and it's often easy to look back and say 'this is why that happened.' You can come up with general principles...how certain things are likely to interact. And then you go to apply it...and you're still wrong 60% (number pulled out of my ass) of the time. Does that mean that meteorology is complete junk and worthless, and that all those principles they found were completely wrong? No, it just means that the influencing factors are so numerous that it's hard to make a solid prediction.

Is economics perfect? Of course not, especially when it comes to trying to influence change on a major economy. But that doesn't make it worthless. That just means that it's damn hard to make a prediction about how any system that complex is going to behave.

That said, most slashdotters would be well-served by pulling their heads out of their asses, and actually learning something about business and economics before shooting their mouths off about it. (??? PROFIT! HAHA THOSE BUSINESS GUYS ARE SO DUMB) The article is really, really basic market economics. Just laughing at it and declaring it bullshit without understanding it is about equivilent to if an MBA started arguing with a compsci guy about how all the computers in a company should be running some flavor of Windows because 'so many people run it, it must be the best, right?' It just reveals him as a retard when it comes to computers, just like the sort of reactions I'm seeing in this article reveal the average slashdotter to be a retard when it comes to economics.

Re:Chewbacca Economic Theory

[E_elven]

Right.

Yes, it's the logical conclusion and would be the eventual result: the republican heaven where no-one works but lives off their company stock. Of course, at some point a wall will be hit and this will never be realized. Instead, a part of the nation will continue doing the high-level management jobs and the rest will work in the service sector (retail of all sorts) that has to be done locally.

It's all pretty sad, but hey, if you're one of the high-level managers, why would you care?

Re:Perpetual Employment!

[Chrax]

Right, because we shouldn't be charging the people that use the roads to maintain them. Believe it or not, roads tend to degrade over time, as well as require more use. Our highways and byways are not fine the way they are. In Missouri, among other places, traffic is increasing so that in some places having a two or four lane road is insufficient. Also no matter where you are, you'll get potholes and cracks that need to be fixed. I just don't see how it's regressive to tax gas. It's just like the electric company charging more than the electricity actually costs so that they can maintain the power lines and generators.

Re:Chewbacca Economic Theory

[E_elven]

Er, the article does not define those fields in any terms nor does it take into account other factors -for example, the fact that 'programming' jobs were lost and 'engineering' jobs gained falls prey to a basic logical flaw: correlation is not causality. By your (or her) interpretation, these jobs were created because the 'lesser' ones were lost, a claim which is patently absurd -the 'good' jobs rely on the 'bad' ones and there would have been the demand anyway. The actual stats were that 71000 'bad' jobs were lost and 11500 'good' ones gained.

A more logical assertion would be that without outsourcing, instead of having gained (again, dubitable) 11500 - 71000 = 40500 jobs, we would have gained 71000 + 11500 = 186000 jobs. (Yes, I'm aware that it's not that simple but my assertion is realistically more accurate.)

Dissecting the article a bit:

It may come as a surprise, but global sourcing in the 1990s, by reducing the price of IT hardware, yielded increased investment in IT and more jobs for U.S. workers with IT skills.

Nice spin. One has to have read Orwell's 'Dictionary' for this one. The fact, of course, is that IT jobs increased because there was more IT to go around. Her causality is (intentionally) skewed.

The value to the U.S. economy of cheaper outsourced software and IT services is that it reduces the price of customized software. Econometric estimates are that, to an even greater degree than IT hardware, demand for software and services increases more than one-for-one with reductions in price. Therefore, as prices fall, demand for services and software rises more than one-for-one, diffusing IT into the lagging sectors and deepening the use of IT in the leading sectors, thus increasing demand for workers with IT skills in all sectors.

This is what is known as an assertion. Realistically, there is nothing that indicates that these potential jobs, too, couldn't be outsourced -quite the contrary: the capitalist principle of maximising profit is a strong argument for outsourcing, one that she has not one of a comparable magnitude for.

Hope that's enough of a rebuttal.

Re:Chewbacca Economic Theory

[Tablizer]

That's the thing. In the past there was always a "next big thing" to hop onto. However, as commentator Cringley[*] has also pointed out, the next big thing is late this time.

Also, factory workers have generally not found "higher paying" jobs to replace those they lost. They usually move into the service sector, such as cash register clerks. Maybe offshoring creates jobs for OTHER industries, but not theirs. If it didn't help factory workers, why should it help IT workers?

* I will try to find the link

Re:Perpetual Employment!

[Catbeller]

And no roads, military, health services, cops, sidewalks, airports, student loans, wilderness areas, national parks, trains, R&D, space exploration, intelligence, social security, emergency services, free television, radio, clean water, clean air, urban planning, food inspection, border patrol, aid for starving kids, or SCHOOLS!

Everything you utiize EVERY DAY is paid for by all of us collectively to give you the opportunity to drive to work and make a living. Your argument is the quintessential reduction of what is wrong with libertarian philosopy -- what was ultimately wrong with my favorite philosopher, Heinelin's, line of reasoning -- the idea that the individual alone is responsible for and should be the sole beneficiary of his labors. Even Heinlein understood that no man existed as an island -- "Conventry" should be the example here, not the silly far-rightism of his later years -- and that every aspect of your existence as the lone hero is dependent on the close cooperation and contributed taxes of those who maintain your universe. Semantic nonsense: "penailized" for making money. You're putting money into the kitty for the society and the world which makes it possible for you to get out of bed alive every day.

The sad thing is that this concept resonates so well amongst Americans. It's why we're drowning in Federal debt payments, paying the highest health prices in the world and getting worse care than those paying half what we do elsewhere, and killing our public school systems -- which will ultimately reduce us to a joke among nations, broke, sickly, and fucking stupid.

Re:Perpetual Employment!

[Catbeller]

Stockman, the economist who fronted supply side economics for the Reagan White House, later recanted his entire justification for the tax cuts. He said there had been no justification for the cuts other than paying back Reagan's supporters. Period. It was a con. The numbers were a sham.

And it did not work, unless you think charging up 4 trillion in debt on a credit card to finance a "boom" is success. Any dingo can be rich for a few years if he doesn't pay cash for his binges.

Reagan was lucky. As is true today, our economy depends entirely on the price of oil, and in 1982, OPEC's iron control of crude prices collapsed, removing the true cause of our national malaise since 1973 -- high oil prices. In SPITE of Reagan's catastrophic spending and tax cut combination, we got to keep enough of our national wealth in-country to enable a magnificent boom.

Today, oil prices are rising because there is no way to increase oil production worldwide to keep up with the growth in demand by asia and the US combined. There is no spare capacity. It's three decades too late to switch to alternative sources. We're screwed. There will be no Bush miracle. Bush assumes that Reagan's cuts caused the 80's boom -- this is why he was a C student -- and he is still ideologically unable to figure out that his assumption is wrong. He's supply-siding us into the grave. His only hope will be a Kerry victory, for his supporters can then blame the successor for the back-ended fiscal disaster caused by Genius Boy.

In a way, I hope Kerry loses. Then the Reaganauts, Cheney and Rice and Bush, will finally, after all these decades, have to face the steaming pile of dung they've created with no one else to blame. Okay, maybe Iran.

Re:Perpetual Employment!

[atriusofbricia]

Damn, and I was going to use mod points on this topic. Oh well...

I make around 55K a year (USD) and consider myself very fortunate. However, I'm more than a little tired of watching a huge chunk of my work, IE my money, vaporize in taxes each month.

I didn't always make this money and even though I knew taxes were high when you got to this point, it's still a shock to be loosing 19,000/year in taxes.

Raise taxes? I can't believe people put up with taxes as high as they are!!

Re:Perpetual Employment!

[An Onerous Coward]

We're not asking to "punish the rich." We're simply asking that the tax burden be shifted away from those with the least ability to pay. I recognize that business success isn't an evil, and the goal isn't to tax successful people out of existence. The goal is simply to provide the government with the money it needs to operate, without putting the hurt on the lower middle class.

One misconception you seem to have is that somebody might avoid making more money for fear of being pushed into a higher tax bracket. That's not the way our current tax system works. If you make $36,900 or less, you are taxed at the lowest rate of 15%. The next higher rate is 28%, but if you make $36,901, only $1 of income is taxed at the 28% mark, with the rest being taxed at the lower rate. So at no point does anyone have to fear that an increase in earnings will lead to a reduction in actual take home pay.

See http://www.fourmilab.ch/ustax/www/t26-A-1-A-I-1.ht ml for confirmation.

I've never gotten this "disincentive to produce" thing. Who wouldn't rather have 60% of $10,000,000 a year than 85% of $30,000/year? But the way blowhards like Rush Limbaugh and Bill O'Reilly talk, you would think that if the tax rate is brought back up to pre-Bush levels for the top 2% of earners, they're just going to have to close up shop and start collecting welfare checks.

If I were in charge, I would add a new tax bracket: 100% tax on every dollar over $100M. The people affected would still have plenty of money to buy Lear jets and politicians.

Re:Perpetual Employment!

[Dirk van der Broek]

Another cluless fuckwit! I've watched people adjust their work to avoid getting taxed at a higher rate, including my own father, who scaled back his work after going on Social Security and stopped working each year just before he reached the earnings limit after which his SS would be reduced.

Well I'm sure you will win him over to you point of view calling him names like that. Also, The example you give to back up you claim is flawed. By your own admission you father scaled back his work so as not to reduce his social security payments. That's hardly the same as scaling back your work hours to avoid being put in a higher tax bracket.

It's a real tragedy that people as ignorant and/or destructively oriented as you are allowed to vote.

neocon == neofascist ?!