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An Independent Study on Offshoring IT?
vsprintf writes "What are the real effects of offshoring on the U.S. technology sector? Pick your economist on the subject. The Bush administration's Gregory Mankiw says it's all good, and exporting jobs is just a new way to do trade. In Congressional testimony, Ralph Gomory says a little bit is okay, but too much is bad, while Herman Daly says it's just plain bad. The ITAA's paid mouthpiece, Harris Miller, says it must be good because IT workers in India wear Nike tennis shoes. At last, it appears the IEEE-USA has persuaded Congress to pay for an independent study to determine how offshoring really affects U.S. IT."
So IT workers in India are wearing shoes made in Indonesia. How is this good for the US economy, again?
"[Regarding the 'cloud,'] ownership was what made America different than Russia." -- Woz
The only people who will benefit from outsourcing are corporate execs and stockholders.
The rest of us will be left with nothing to do and it won't matter if goods and services are cheaper if you don't have a wage to pay for them.
Meanwhile the Indians etc. will be undercut by the Chinese and they'll be undercut by someone else.
Where does it end?
He basically wrote all these economic books and once he was hired by the Bush administration, he contradicts his writings.
There's been discussion before on this subject which affects us here in the UK too.
I maintain the major problem is gradual de-skilling. If potential software engineers simply see that their future jobs are likely to go offshore, they will not go into the profession. Software is still a somewhat apprentice based profession in that you usually require some coding skills before becoming team leaders or designers and then development managers and CIOs or CTOs.
If you are pulling away base support in the profession, then de-skilling will gradually move up the ladder. More jobs,more high-powered jobs will move offshore until wage parity ensues. By then, it's too late, corporates will have followed the skill base. An industry responsible for (a rough guess) 15% of Western economies will have moved elsewhere.
And you can't compare the software industry to manufacturing. Software is not manufactured and, so far as I can see, will not be manufactured for at last 25-30 years. But guess which countries will reap the benefit of writing the code manufacturing software?
Did he inhale?
I dont live in the US, but the effects are clearly visible (in Europe less, because the outsourcing is since May within the EU, so basically there is not too much outsourcing)
a moderate outsourcing is good for everyone, it opens new markets because it helps to develop. Massively outsourcing, produces huge trade deficits and basically only shifts money.
What currently happens is following development, currently everybody thinks that companies can produce cheaply and sell expensive here. That only works as long as people have money. The long term trend goes towards crash of the monetary system in the west, or at least in the US, with trade deficits which are enourmous. The classical example of this was Argentina in the nineties, basically a classical example of a country which did not produce anything inshore but imported everything. The crash was imminent, and came around 2000-2001.
What currently happens is that some people thing a patent system which basically acts as a highway robbers tool might help. This might delay things but only for a certain period of time. Once the production is gone entirely, the research also will follow and with it the so called IP holders (which shift overtime, since patents run out), unless the current patent system crumbels under its own weight, because of the massive abuse which is currently happening before.
So what would be the solution. Simple, try to keep certain core industries and research in the country, and do moderate outsourcing which opens the doors for the wealth of everybody. But for heavens sake, keep some industries and research in the country or at least in the monetary zone.
Well, first you persuade other countries to open up their economies to your imports, claiming this will enable them to step up on the ladder towards geater societal wealth and towards a more skill-based economy.
Then, when they actually do, and start reaping some rewards from it, you start acting like it's the second coming of antichrist.
So what do you suggest? Stop outsourcing, stop manufacturing abroad? Are you also then prepared to accept the trade retaliations from the rest of the world? Some people applauded your steel tariffs as something good. Of course, the US ended up losing a lot more money - and more jobs - total than it saved in that particular sector by postponing an inevitable restructuring.
Trust the Computer. The Computer is your friend.
The big fallacy in all the economists' arguments for offshoring is right here: "US GDP increases, so that must be good for the US."
But what's really happening is this: incomes of a few CEOs go up from (say) $1M to $2M, while incomes of 10 times as many engineers go down from (say) $100k to $20k. That's a gain in money terms, but it's very bad for 90% of the people affected. So, it's bad for the USA.
I just think there is an ever-growing paranoia in the developed countries about software job offshoring. Hasn't such offshoring of other jobs happened in the past, like say, manufacturing? Aren't most cars and other white goods manufactured in Japan and China? What happened to the workers in that industry some of who would obviously have lost jobs?
More to the issue, I'm not sure what decides the level of outsourcing - "some", "moderate" or "massive". Even when offshoring wasn't happening, a lot of companies prefered "outsourcing" - subcontracting their IT needs and business to specialist companies who had the skills and knowledge to fulfill them, leaving the parent organization free from the usual worries of delivery, quality, acceptance etc. So if the same happens now, it's bad? Because there is growing fear of losing jobs? Surely, the involved professionals would be smart enough to know that economics drives a business, not preferences!
Further, if the products of US-based companies are used/consumed by people elsewhere, from the (less) money earned from US companies, surely the profits are going back to USA. So the article gave an example of Nike. I'm sure more parallels can be drawn without stretching the imagination too far!
Finally, if the cost of building a product, be it software, is relatively less (and so is the cost of maintaining it), then the cost of direct users/consumers would be much lesser. Say, if the Air-traffic control systems cost less to build and operate, it would lead to less fees towards airlines, which means they can cut costs further and offer cheaper tickets.
And contrary to what another poster mentioned, yes, the corporates may follow the skills, but why would they distance themselves from consumers? They have nothing to gain there, if there is a growing resentment against their products/services. And if they decide to not pursue offshoring, they stand to lose considerable market share simply due to the cost-benefits offered by the competitors. So, from their perspective, its a downward spiral.
Outsourcing is happening. Live with it. Some jobs are going elsewhere. Sure. Are those the best jobs? Surely, it gives the professionals in the developed world better jobs (creative as compared to monotonous, boring, trivial).
Maybe this brouhaha is there because IT professionals have a bigger mouthpiece, and a cheaper and far easier means of voicing their concerns.
http://efil.blogspot.com/
As it is today, people in poor countries see their young children starve to death, or die from lack of medicine, just so people in rich countries don't have to suffer the discomfort of looking for a new job. Outsourcing is part of a re-shuffling of wealth that may be uncomfortable for a while, but in the long run economies around the world will become more similar, so we won't see the extreme cruelties and conflicts of desperation that we see today.
Terrorists can't threaten a country's freedom and democracy. Only lawmakers and voters can do that.
...if the three points below are realized.
1. Free trade of goods. Almost done. Shipping goods from country A to country B is cheap (even if some tariffs are applied).
2. Free movement of workforce. Countries all over the world have a limitation on this. You just can't go to work in an other country. Even in the EU it is not easy (lot of paperwork) to do so. Also, language and cultural differences make a person reluctant to move.
3. Free trade of knowledge. Patents and copyrights restrict the sharing of knowlegde. They should be eliminated entirely.
Big businesses want point 1 to be realized, but do not want point 2 and 3. Until point 2 and 3 become true, outsourcing is most probably bad for everyone.
Government cannot make man richer, but it can make him poorer. - Ludwig von Mises
Problem...not everyone can live like the US...if they do...then we all die. There aren't enough resources to go around. 6 billion plus people all can't drive cadilacs. Not that we shouldn't raise the standard of living...but we need population control before that becomes a universal option.
Some people live in the desert and complain that there's no rain
You are correct to remind us that capitalism is not a zero-sum game; wealth is created. It is unevenly distributed, but still, most people have gained in the past. If your boss increases his own income by $100k and increases yours by $5k, well, the bottom line for you is a gain of $5k.
Now, that is changing. Today's CEO is greedier than Carnegie or Rockefeller or J. P. Morgan were. To increase his personal income by $1M, today's CEO will destroy the careers of dozens of engineers. They are not being replaced by automation, which increases the productivity of other American workers. They are being replaced by Indians and Chinese. To economists, it's a gain if one man gains $1M while 10 others lose $80K each. In the real world, it's a disaster for our society.
One possible way to attack the problem, without unduly restricting the economic freedom which helps the whole world to progress, would be to recognize what these CEO's are doing. They determine their own salaries, in reality. A CEO who takes home more than 40 times the median salary of employees in his company is basically a thief. "Compensation" in excess of 40 times the median salary in the same company should be regarded as prima facie evidence of theft.
What I'm personally seeing is that the US/EU companies are firing the junior programmers and keeping the senior architects due to outsourcing to India. The effect of this is to essentially cut out the entire next generation of software architects because they do not get enough experience (and often quit IT totally).
If you were a selfish nationalist , they are selling tomorrow for today. But if you were a Capitalist nation , it makes perfect senseDon't dish it out , if you can't take it applies for Capitalism as well. (think of this as payback for all the agent orange and napalam used in name of Capitali^H^H^HDemocracy)
The real sad part is that actual losers in this nothing to do with the past events which built up to this (and neither will those of the future).-- 250 USD per month and 70 hour weeks does not a sweatshop make.
Quidquid latine dictum sit, altum videtur
Big corporations, the ones doing the outsourcing, do not provide the bulk of the jobs. For geeks, which to some implies having more intelligence than the common worker, some of you are dumber than the proverbial doorknob.
The primary job creation engine of the economy is the small businessman (or woman). Big corporations get the headlines because they usually affect people in larger numbers at one time. However their numbers are really not that meaningful when you look at the number of people employed in this country. There are 138 MILLION people working in the US.
How many jobs were outsourced? Now, looking back on history shouldn't we consider the 70s the age of outsourcing automobile workers? The 80s textile workers?
As for the job creation. The capital gains tax cuts and similar equalizing of the percentage of income tax benefit the small business greatly. I know, I have four relatives with small businesses who have grosses from as low as 500k to nearly 5 million. Guess what, they have more money and they did exactly what was expected, they hired to grow even bigger.
Now what will stop this? Simple, raising the taxes on the "evil rich". Sorry, the proposed plans will smack down more small businesses than anyone. The ones with the millions and billions have relatively no income and have the means to dodge nearly most forms of taxes.
In the end the only proper way to deal with taxation is by consumption. The rich consume in a very big fashion and the fairtax will accomplish that. http://www.fairtax.org
* Winners compare their achievements to their goals, losers compare theirs to that of others.
Somehow I don't think that the service men/women who died trying to "save" South Vietnam were thinking about "Capitalism" or "Democracy" either. I am sure that most of them were thinking something like "I've got to get out of here".
However I do think that this was exactly the thinking that led the senior brass in Washington to send them there. The Vietnam war (and the Korean war too) was prosecuted because the rise of communism was seen as a threat to the American way of life - in other words a threat to Capitalism.
Unfortunately America preaches capitalism and free market economics all the time but is very two-faced about this kind of stuff. Massive subsidies to domestic industries and sanctions against foreign industries is directly contrary to these ideals.
Interference in the affairs of other nations is rarely welcomed, whether that is done through economic means or with a gun. The US doesn't like it when other nations try to interfere with its own internal affairs. For some reason though they seem to think it's perfectly OK for them to interfere with the affairs of others.
When you behave like that payback is inevitable - another name for this concept is Karma.
These "Benidict Arnold" corporations, in exporting good paying jobs to other countries, will do themselves in in the long run.
These megacorps want to get away without paying US wages, while at the same time, being dependent on a US consumer-supported MARKET to sustain their product.
Dell and HP, for example, aren't selling their expensive services and products to India. They are selling them to the USA and Europe.
Therefore, outsourcers depend on EVERYONE ELSE NOT outsourcing middle-class jobs, or else their market will ultimately collapse.
It's not just the corps that are betraying the American worker. Corporations will do anything allowed by law to make a buck. I don't have a problem with that, if business didn't make money, NONE of us would have jobs.
The traitor here is our government which does NOTHING to stop this practice, nor to even discourage it. Both parties are responsible. Both parties are beholden to the corps.
John Kerry gave some lip service to stopping outsourcing, but when you look at where his fortune comes from (his wife), mainly from OFFSHORING Heinz plants, one must wonder how serious he is about it.
The problem of outsourcing, like the IP cartels (MPAA/RIAA) are enemies that we can't vote out of power because BOTH parties are under their spell.
My solution to outsourcing is very simple.
Give all American businesses a tax credit equal to the salaries of all American citizens they employ inside the USA, minus the salary of all non-US citizens employed outside the USA.
This will allow outsourcers to play by the existing rules, while giving businesses who employ Americans a tax advantage over them.
There really won't be a loss in tax revenue, as all corporate taxes are illusory (all taxes get passed on to the customer), and it will help it, as it will encourage employers to employ more people and to pay higher wages.
Corporatism != Free Market