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Study Claims Offshoring Doesn't Cost US Jobs
SwashbucklingCowboy writes "Infoworld has an article up about a survey by the Software & Information Industry Association claiming that offshoring doesn't cost American jobs. The article quotes the executive director of the SIIA as saying, '[Offshoring] was used almost entirely as a form of expansion, not as a replacement.' Well, if a job is created elsewhere that could have been created in the US, isn't that a job lost?"
The idea that the economy is a zero-sum affair is so abundantly contradicted by readily available evidence that I find it almost amusing that it holds such sway over people.
No, a job created elsewhere instead of here does not automatically mean that it "costs" us a job here. Jobs aren't a resource that is mined from the Earth, jobs are created by the economy. If that overseas person does well enough, it may "create" two jobs here.
It's not even right to speak of jobs being "created"; a more appropriate verb might be funded. There's a "job" that involves you being my personal punchmonkey, but there's no way we're going to come to mutually beneficial agreement about that "job", so it isn't funded.
But the flip side holds; the net impact could be more than one job "destroyed". It's not zero-sum.
The whole thing is very complicated, because even if off-shoring a developer creates/funds five jobs over here, it may be the case that none of them are development work. Or one off-shored developer may well create three more development jobs, but not in Silicon Valley. (No, you don't get to say all three of those jobs are cleaning up after the off-shore guy; if off-shoring is a net negative value, the economy will eventually cut off the off-shoring, even if that means driving a particularly stubborn company that refuses to see it as a negative value bankrupt.)
But one thing it's not is "zero-sum".
(Even if you don't "like" capitalism, it's vital to come to understand what capital is and why capital produces more capital. Communism, and to a lesser extent socialism, can be seen as starting with the assumption the economy is a zero-sum game, and they end up creating a self-fulfilling prophecy on that front as in their zeal to make sure capital/wealth is evenly distributed, they destroy the mechanisms of capital/wealth creation. Actually, they end up with a negative-sum game. I'm not defending any particular instantiation of capitalism at this time, I'm just saying you damn well need to understand why it does what it does if you want to understand how economies work.)
I remember awhile back reading an article about how IBM was opening a new center in India and "creating" 1000 new jobs, and IN A COMPLETELY UNRELATED MOVE closing a center in the U.S., where they would be cutting 1000 jobs.
The report did correctly state at least one factor in outsourcing: "Seventy-three percent of respondents report a positive impact on profits".
Sure you might have lost your job to outsourcing but why is it hard to believe that the money the company saves by firing you will be used to expand the companies operations? Eventually expansion involves hiring more local (US) workers. Companies that stay in business tend not to make irrational decisions. They have their best interests in mind which in turn means they have the US economies best interests in mind. Economy goes up, unemployment goes down. Not immediately but given time it happens.
do you know squarepusher?
"Also, there's no correlation between the loss of American jobs and offshoring. In fact, far more offshoring went on during the 90's than the 2000's and nobody can say the US had fewer jobs afterwards."
Um, bullshit. As someone who was working corporate during that time, many jobs were 'let' and no, those jobs did not come back home at any time. So, those jobs were lost. Saw it with my own eyes.
"Somewhere in there it trickles down, but you can take an economics class to learn about that."
That's an affirmation on your part only. I suggest you take that class and learn that there is no necessity for it to 'trickle'.
They have created an industry, and are competing very well. They are offering their services and any one is free to get them for a fee. Yes it is hurts but atleast people are not dying here. That is what happened during the industrial "revolution" when the west introduced their mass produced, cheap goods to the east, driving a lot of people out of work and into death from starvation.
You can pick a hell of a lot more oranges than 3 an hour. Most orange harvest crews pick between nine and eleven field boxes per hour per person. A field box is a 90 lb box. Nearly half (49%) of the oranges harvested by the sampled crews were harvested at a piece rate of $.70 per 90 pound field box. During the first week of January 1998, orange harvesters earned an average of $60 per day.
Increasing the amount these workers make would not significantly effect prices. Doubling the rate of the 90 pound field box to $1.40 would increase the average worker's pay from $60 to $120 per day. Tripling the rate of the 90 pound field box to $2.10 would increase the average worker's pay from $60 to $180 per day. Neither increase would significantly increase the cost of individual oranges in the supermarket. Further, either increase would mean more Americans taking those jobs.
Competition makes everyone better off - just look at the progress for the last century and it becomes abundantly clear.
The problem is that for me to be "competative" to a multi-national corporation as a worker I must forgo the progress of the last century and my lifetime.
I'm more "competitive" when I demand lower wages, lower my standard of living, lower my need for healthcare, lower my need for a clean environment, lower my expectations to talk with someone who actually knows english, etc, etc.
Unfortunately, there is no right answer here. Outsourcing looks great on paper for the bottom line. It seems to be failing for customer support, helpdesks, and call centers because even if you get a hold of a person that speaks good english and can help you with your problem, at least here in the USA, I still feel cheated for some reason, and the liklihood that you get a person that can speak good english and help you with your problem is unlikely at best.
Manufacturing simply makes sense for many people. It means cheaper goods for us as consumers and it moves a ton of the nastyness of manufacturing out of our back yard. None of the pollution, or any of that jazz.
I personally have more issues with the hiring of illegals here in the us than outsourcing.
Try moving to India some time. Tons of East Indian people come here.
Offshored jobs aren't replaced by better ones - they're replaced by low paying service jobs. There are a flood of high end jobs that no applicant in America is qualified to fill: you can't get those jobs without lower end job experience and you can't get lower end job experience anymore because it has all gone overseas.
Now, I suspect you'll be telling me all these success stories about college students paying for plane tickets to India and how they bribed Government officials to get work visas to work at these offshored jobs so they could get the experience they needed to work at the high end jobs in the US. It should make an interesting read!
--- Grow a pair, liberals... stop letting the Republicans bully you!
I agree I lost my job because to expand the number of workers at my job location they would need to build a bigger building.
So they just let us all go and hired a bunch of people offshore.
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Ya, I hate it when people assume that those 200k people somehow deserve their jobs. If you make widgets for a living, and someone appears that can make widgets just as well and as fast as you, but needs less money, you're out of your job.
In Tim Harford's "Undercover Economist" book, which I recently read, he gave a great example.
Did you know that instead of manufacturing GM cars in Detroit, you could grow Toyotas in Iowa? There's this new technology that just became available! You put a bunch of corn on ships, send those ships to this new technology called "Japan", and we receive back Toyota cars! It's amazing!
In other words, if you oppose free trade, and support protectionism, you're a form of Luddite. A change in the programmer job market is not much different than a change in technology.
Imagine, for a moment, that you are a country. Do you satisfy all your want and desires through your own labour?
No you don't. You outsource so much of your needs that it's incredible if you stop to think about it. Do you grow your own food? Do you make your own car? Do you make your own TV?
The reason you do this is specialisation. I don't know your profession but lets assume for the moment that you are a high-poobah. You are better at being a high-poobah than you are at being a farmer. So, rather than trying to be both a high-poobah and a mediocre famer. You devote yourself to being a full-time high-poobah and buy the food you need from the full-time farmer who is a better farmer than you will ever be. The result of this is that you will have more food and more goombahs (the highly valuvable output of high-poobahs).
We can even do it with numbers if you like:
Assume you can produce 3 goombahs if you work full time as a high-poobah.
Assume you can produce 3 nutritious and delicious meals if you work full time as a farmer.
(Assume you can make any linear combination of those two extremes by dividing your time.)
Now consider the farmer (who is more farmer that you will ever be).
Assume he can produce 2 goombahs if he works full time as a high-poobah. (He's not a very good high-poobah.)
Assume he can produce 6 nutrituous and delicious meals if he works full time as a farmer.
If you both work half time on each job, you end up with 1.5 goombahs and 1.5 meals. He has 1 goombah and 3 meals.
That means that there are a total of 2.5 goombahs and 4.5 meals to be divided between you both. (How they get divided up can be left as an exercise for another time.)
Now suppose you both work full time at what you are best at. You produce 3 goombahs and he produces 6 meals. There are now 0.5 goombahs and 1.5 more meals available to divide up between you all. That is a net gain and everyone can be better off than they were before.
That is the point of outsourcing. As was stated above - it is not a zero sum game. It is about making sure that everyone is doing what they do best through specialisation.
You outsource your needs as an individual - why can't the country outsource its needs as a country. Both you and the country are better off as a result.
I generally do not answer ACs, but in your case I will. You are making me roll on the floor laughing. Like most Americans when talking about immigration and other countries you do not have the slightest clue what are you talking about. The only developed countries with tighter rules than America are France and Israel. EU is way more lax. Japan has also been relaxing rules year after year.
Baker's Law: Misery no longer loves company. Nowadays it insists on it
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Because they're smart enough to see that although people aren't unemployed in droves yet, the quality of the jobs they have is steadily falling, and the pay they're getting is steadily falling (inflation-adjusted). What's happening, long-term, is a greater and greater separation between the rich and the poor, and the middle class is drying up and disappearing.
A greater separation between the rich and poor (or even rich and middle class) does not mean the poor and middle class are any worse off. You claim that the middle class pay is steadily falling (inflation-adjusted), but that simply isnt true.
From 1973-1998 the inflation adjusted pay for the middle class rose by 11.0%. The pay for the poor raised by 3.9%. That means the poor and middle class have more spare money now than they did 30 years ago. Sure the richest 5% of Americans had their wealth go up 81.7%, but that just means they have more money. It does not mean that the middle class has less money.
After the recession early this decade there was a drop in median household income. But it is going up again (up 1.1% from 2004-2005 after adjusted for inflation). There were great gains in the 90s, and whenever pay goes up that fast it is of course going to level out. But that isnt because of outsourcing, it is just because the boom in our economy in the 90s gave rise to household income too quickly. Its basically the same thing as the current housing bubble that has just started to bust.
The simple fact is that Real Median Household Income has risen by 31% in the last 40 years (adjusted for inflation). The average american family has a bigger house, more food (maybe a bad thing with obesity being a problem), more cars, etc.
If there is any problem with outsourcing, it is the fact that we are using outsourcing to improve our economy while exploiting the third world.
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-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke