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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?"
I can say this study is wholly and completely inaccurate. Well, that's the diplomatic way to say it anyway ;).
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
Well, if a job is created elsewhere that could have been created in the US, isn't that a job lost?
Who's saying the job could have been created in the U.S.?
The theory of relativity doesn't work right in Arkansas.
No. Another job can be created here instead.
A song pirated is a lost revenue song!
Well - that may be what the study says, but that simply doesn't jive with Silicon Valley's experience. The valley (read US Semiconductor Industry) has never really recovered from the Dot-Bomb downturn. We lost around 200K jobs here in Silicon Valley after the downturn, and they have never really come back. What happened was Bangalore.
Just to highlight this - there was an entire division of Intel that was closed down and re-opened in India a few years ago. You could relocate to India or loose your job. Real simple choice. Speak Hindi??
Have you compiled your kernel today??
Just because it's a study doesn't mean it's scientifically valid or correct.
Reality is based on observation.
-- Tigger warning: This post may contain tiggers! --
Comment removed based on user account deletion
Wow, that is some astoundingly simplistic logic there. Good work!
Temporarily it may be a job lost, but cutting costs allows for further expansion of a business. (if the business is intent on growing, which 99.9% of businesses in the US ARE interested in doing I think.) I've been of this opinion all along that off-shoring was no great threat to jobs in America, just like buying Japanese cars or clothing made in Taiwan and China posed any major threat back in the 80's. It's the stifling of expansion and growth (like the stifling of 3G, wireless, and broadband spectrum use in the US) that poses a serious threat to jobs in America. Freedom is risky, but risk produces hefty rewards. No freedom, no risks, no rewards. If you don't want the risks of losing your job due to IT off-shoring, go move to France. I'm sure you'll find the rewards there are in much less frequent supply than here in the U.S.
Yeah but when the economy turns down, who are they gonna lay off, the guy in California making $50/hour or the guy in Mumbai making $9/hour? Sure, everyone's happy when things are humming along, but the cracks will show later.
Under 5% unemployment is termed "full employment".
The only idiots to claim that are class warriors attacking the middle class. One day the middle class will figure out that they're being attacked, and bullets will be flying in the economics departments of major colleges for insults such as this.
Hint to idiots: "Full Employment" to most people means 0% unemployment, not moving 20% of the labor force to disability to create an artificial 5% unemployment rate.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
If Company A is struggling and they outsource and save money, they may lose 100 jobs but save 1000.
Another company could become more competive and grow here as well as overseas. Different jobs that better utilize American talents may be created here.
Or a company may just slash jobs that go overseas.
Life and economics doesn't have a Tivo attached to it.
Except for ending slavery, the Nazis, communism, & securing American independence, war has never solved anything.
The equation isn't 2+0=2 to the middle class. The equation is 2-1=1 to the Middle Class. You can lie with artithmetic as easily as any other language.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
Above was going to be my original post, but it's pretty clear many others beat me to the punch, and it's (in my opinion) also seemingly clear there is a lot of opinion and sentiment the article is talking out its private parts.
It's interesting to me the ones making decisions to do the outsourcing are the ones funding the studies to somehow assuage their collective guilt. There's lots of empirical evidence jobs have been and continue to be lost through outsourcing.
The job market is a lot like demographics. When you cut the young out of the picture, you end up with a collapse over the horizon. Just as societies that have sub-replacement level birthrates get pummeled by other nations and immigrant groups that do in the long run, countries that cut off the supply of apprentice-level work to their young find that surprise, surprise, their young people never become older replacements for their field.
The problem is very complex. It's a cross between expensive regulation that makes Americans expensive, lack of foresight being called an asset by many business people and just general lack of concern about the future.
One day America will look around and say, there's so much opportunity for those that know where to go, but why aren't Americans filling these jobs? Then the displaced CS, EE, hard sciences, etc. students can say "you fuckers brought it on yourselves."
There is also a realpolitik aspect of it that should scare the hell out of our leadership. Capitalists of all stripes love to harp on human rationality, but humans are **rationalizing** not **rational** beings. Nations go to war at times for completely idiotic, abundantly obviously suicidal reasons. Witness Gulf War I and Iraq. Who actually thought that Iraq wasn't going to get pummeled into oblivion militarily? Yet they did it anyway!
See, the thing is, we might not always be allies with India, Pakistan, Taiwan, etc. We might actually end up at war with them in the future. It's slim, but who knows. The people who poo poo these concerns need to face up to the facts of history which is that nations have no permanent allies, only interests. One day, we may find that all of this regulation cost-imposed outsourcing has put America in dire threat of having not enough engineers to actually keep its economy strong, its military well-equipped, etc. We might find that some of these nations are also feeling stronger, and want to start doing things their way.
1. You do not own 'your' job.
/flame on
2. You are not entitled to a job.
3. If someone else is willing to do the same work for less money than you do, too damn bad for you.
4. Yes, it is a race to the bottom. No, that isn't necessarily a bad thing in the long run. When you want to fill a container you have to fill the bottom first.
5. If you think you're better than the people 'your' job was outsourced to, prove it.
"Prefiero morir de pie que vivir siempre arrodillado!"
It depends upon what they are measuring.
From TFA:
Notice the usage of "H-1B visas" in that statement? That tells you what they're actually looking for. Cheap labour. The cheaper, the better.
The question isn't whether there are enough H-1B visas available.
The question is how many programmers are there in the US vs how many programming jobs there are in the US.
I'm not seeing that question being asked. All I'm seeing is stuff on savings and such. If they're measuring cost savings, then they're not going to find any lost jobs, are they?
So, IOW, while we aren't actively replacing American workers, there are jobs that would otherwise have gone to American workers had they not offshored.
In economics, this is called opportunity cost.
The bottom line is the same, though: Instead of hiring American workers, they are paying foreign contractors
Now on to my experience. I was part of a team doing embedded development for a consumer electronics platform. We were under tremendous time pressure to get the product to market, so management decided to offshore the development of drivers which I had been working on. When I handed over my drivers to the offshore team:
- The driver was responding to interrupts, and used an interrupt driven model.
- The framework for using DMA was setup.
- The framework to work with the kernel's block specific device driver interface was setup.
- I estimated that it would have taken me another 4 to 6 weeks to complete the driver. The only things I had left to do were to write the routines which actually transferred the data to and from the device.
Now, 6 months and several deadlines go by, and we haven't heard anything regarding the drivers. Finally, we get our code back:- The interrupt code has been removed. The driver now works on a polling basis. Keep in mind how acceptable this would be in a real time system.
- The DMA code has likewise been removed.
- The driver doesn't interface at all with the kernel's specific device driver interface - instead, it uses a hack by which it talks to the block layer, bypassing the development track of every other said kind of device.
- Oh, did I mention that the driver didn't work?
So, not only are we now behind schedule, we ended up shipping a broken driver to the customer. Several of our customers missed the Christmas selling season because our code wasn't delivered in a timely manner; worse, it's now 6 months late and doesn't work.We had to spend several months of engineering time to debug/redo the driver to get it to a working state. Here's what offshoring cost my company:
In the end, offshoring was a net loss for everyone involved:
The only people who are getting rich from offshoring are the offshoring companies. The only reason why this fraud is allowed to continue is because it's hard to prosecute across national boundaries.
And, if anyone is wondering, we later learned that the engineers who wrote the broken code were formerly Java developers who had no experience writing embedded code. My company would not ever have hired these guys had they interviewed with us, yet we saw no problem in contracting a critical part of product to them.
The society for a thought-free internet welcomes you.
a Wal Mart job, for the most part.
Offshoring IT means new people will never get into the industry at all.
IT now demands high level network administrators and accomplished programmers. Americans cannot reach that level of expertise without starting out as a lower level programmer, software tester, sysadmin, tech support person, etc. - and those jobs have gone overseas.
The higher level jobs can't be filled because no new qualified workers are coming into the US workforce, and the qualified people are entrenched in jobs they won't leave, or are afraid to leave. And yes, before you say otherwise, I know this. I am a data center manager and I see our ads go unfilled constantly. Which is why since before this data center came up, I kept our jobs from going overseas and made sure we grow our talent right here, in house. My lead network administratress started out as our receptionist and then a tech support rep, then a tester, then a sysadmin, then a network admin. At other companies, that ain't gonna happen. Ever.
So no, another job was not created here - except low paying service jobs like Wal Mart cashiers, and super high end jobs that newcomer Americans can never qualify for.
--- Grow a pair, liberals... stop letting the Republicans bully you!
UbuntuDupe says that because some high paying IT jobs were lost overseas and were replaced by minimum wage or barely above minimum wage service jobs, we've scored a victory in the jobs arena?
That's BS.
That's called underemployment - the total reduction of an educated, skilled workforce to menial labor which itself can be automated.
That means a loss of buying power which means that in the end, those SAME Northwest LA drycleaners will be hurting for customers.
--- Grow a pair, liberals... stop letting the Republicans bully you!
I'm not entirely sure why so many people believe that hiring an American is somehow more virtuous than hiring a foreigner.
Enlightened self-interest. The fact that my American neighbor is employed has benefits for me: he's less likely to steal from me; he's more likely to keep his home in good shape which helps local property values; he's more likely to be able to afford soap and keep clean which helps combat the spread of transmittable diseases; he'll be more likely to buy whatever product or service I'm employed in making or providing.
The fact that someone on the other side of the planet has a job has no benefits for me. Oh, that the executive living across town got a bigger bonus due to offshoring hundreds of American jobs might be an increase in his salary, but that's vastly offset by the negative effect of those hundreds of unemployed people around.
To put it in starker terms: if people around me are going hungry, I have to deal with it in some form. If people on the other side of the globe are going hungry, it doesn't impact me (or at least is far less likely to).
No, but U.S. workers, and more importantly voters, don't really care. The purpose of the U.S. government is to do what's best for its citizens; if that also helps other people abroad, then that's great -- bonus! If not, they can complain to their own government. Countries exist for the mutual benefit of the governed; if a government is doing something that's fundamentally disadvantageous for its own people, something is wrong.
Sacrificing jobs in the United States in order to employ the rest of the world isn't something most people here are prepared to do, nor should they.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
Ok, let me get this straight. You did not cooperate with the new developers, or "teach them your code". You not only actively encouraged others to do the same, but also look for new jobs. You then in fact left the company - without, it seems, adequate documentation - and somehow you think they sold you out?
Wow.
Sounds like you really got screwed.
Take a DVD player. You can purchase a cheap DVD player for about $40. Now, the plastic and metal in the DVD is not very valuable, pretty much you are paying for the labor and logistics in manufacturing the DVD player.
Now, the DVD player is made in China, and lets say the labor to make the DVD player cost about 1/20th of what it costs in the U.S. (it is probably actually cheaper than that). That means, that the same DVD player would cost at least $800 if made in the U.S. (in reality, it would cost much more... I am not including the differences in enviornmental regulation, defending frivolous lawsuits, medical insurance, taxes, etc. all of which would be much higher in the U.S.).
Right now, when a DVD player cost $40, it means that DVD players are cheap and ubiquitous. The store is making money selling the DVD player and the DVDs you will buy to put into the player (all that is money made in the local economy). Movie companies are spending hundreds of millions on movies, expecting to recover that money in part on DVD sales - and most U.S. movies (and virtually all DVD manufacturing) happen IN the United States, creating tens of thousands of jobs.
Now, lets say we ban foreign manufactured media playing devices from being sold in the U.S., and now *CHEAP* DVD players are $800 (of course, assuming the same escilation of pricing, you would expect a good quality one to be around $8000). You have made DVD players into a luxury good, outside the realm of afordability to a good chunck of Americans. Not only are stores selling less DVD players and DVDs, but Hollywood cuts back on movie production because they can no longer recoup so much back from DVD sales (people without DVD players, don't buy or rent DVDs).
Now, if you look at the jobs that would be added to the U.S. by manufacturing DVD players locally, and how many jobs would be lost because fewer people could afford DVD players, it is easy to see you aren't creating any jobs locally by requiring that DVD players be made in the U.S. In fact, most likely you would end up losing a whole lot of jobs in the U.S..
If a company outsources IT, that can give free up money that it might use to make more TV commercials (which create jobs in the U.S.). Or it could free money to allow it to expand its retail outlets (creating jobs in construction and for the people working at the outlets in the U.S.). It could also allow the company to lower the price of its goods, meaning more people in the U.S. could afford the products being sold.
People are also ignoring the fact that as people overseas get more jobs and more money, they now have more money to purchase OUR goods and services. China, India, and elsewhere are now customers for many American products, unlike say Cuba, or Iran, or some other country that is economicly isolated from the United States because of artificial trade barriers.
I wouldn't call it funny: in my (albeit limited) experience, the work generated at home can far exceeed the 40 hours of work taken offshore. I've had offshoring go so poorly that it was cheaper to redo all the work than it was to *sort through* it to salvage what was usable. Seriously.
We paid off the tab, fired the offshoring firm, and automated better at home. We wound up reducing our on-shore costs by about the same amount we were hoping to with the offshoring, only we didn't have to pay the offshoring firm.
This was back when offshoring was a new and hot idea --I doubt a competent manager with offshoring experience could preside over a cluster-f*** like that today. But I think my experience does illustrate a worse case scenario.
Personally I'm not sure what my opinion is on the free-trade vs. job-protection continuum, but since you seem to have an opinion, perhaps you can give you thoughts on a question that's been bugging me for a while.
What, exactly, is the long-term, steady-state outcome of globalization going to look like for the U.S.? I mean, it doesn't seem like what we're doing right now is really sustainable. Massive current-account deficit (trade deficit), loss of manufacturing capacity and jobs in exchange for service-sector jobs, etc. I keep hearing people say that "the future is the service sector," but forgive me if I'm econometrically challenged, but I'm not quite sure how that's supposed to work, long term.
If all we have left is service sector jobs, and we're basically paying each other to do stuff, while at the same time importing all our manufactured goods from abroad and exporting little to nothing (or at least less than we're importing), how do we keep going? It seems like that's a ticket to economic collapse. There's no way that people here can compete on wages with folks in Asia and other parts of the Third World, just because of the cost of living, so eventually all the jobs that can be exported and offshored, will be. The only jobs left are ones that have to be done in person: doctors, lawyers, truck drivers, waiters, etc. But they're all selling their services to other people in this country, so in the long run, you're still hemorrhaging cash.
The line I keep hearing from politicans is that, somehow, "American innovation" is going to keep us so far ahead of the rest of the world technologically (apparently forever) that we'll be able to sustain this lifestyle. But I don't see that happening. And frankly, the basis for it seems suspiciously ethnocentric/racist. Now, I don't particularly care about ethnocentrism or racism per se, but in this case I think it's leading to a fallacious assumption, namely that Americans are somehow naturally superior to the rest of the world, and that we'll naturally figure out a way to stay on top, even when we're driving cars made in Japan using gasoline from Saudi Arabia and watching DVDs made in Malaysia on players produced in the PRC. I just don't buy it. Our educational system isn't that good, and a country filled with unemployed people isn't exactly going to roll out the welcome mat to immigrants, no matter how skilled they are (particularly if they're skilled, in fact). That we've managed to maintain the lead in technological development over the past 100 years is remarkable, but there were also two World Wars in there to spur development (not to mention razing much of Europe), plus waves of economic expansion and immigration, and a whole lot of luck. It's enough to make a nation dangerously cocky, and as an American, that worries the hell out of me.
So what exactly does a first-world country that's gotten accustomed to a very high standard of living do, in the brave new world of free trade? I'm just not sure I see a way out through that, which doesn't involve either a sinking average quality of life, or hyperinflation followed by economic collapse.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
Yes, we all know how trustworthy and much loved those organizations whose acronyms end in AA: RIAA, MPAA, and ITAA. So, I have no doubt that SIAA is a truthful and honest and accurate as the afformentioned organizations. And, of course, there is no correlation between H1B number reductions and the increase of offshore jobs. Not to mention that older and more experienced workers are much valued.
We all have a right to live in a carboard box. We all have a right to starve. We all have a right to be miserable and poor. You do not, however, have a right to a shopping cart to push your belongings around in. Handy tip - For a cheap drunk, Listerine is 40% alcohol. Even if you stink, your breath won't.
America is not only addicted to oil it's addicted to cheap labor and has been so since day 1. From indentured servants and slaves to Irish and Chinese to Italians and Polish to high tech coolies from India and "undocumented workers" from Mexico and Central America.
Today's big business maxin: Give a man a fish then you'll realize no profit. Teach a man to fish and you'll create a competitor. Giving only works if you can create a repeat customer. So give a man a pack of cigarrettes instead. He'll be back to buy more.
"You'll get nothing, and you'll like it!"
Except how many of those pickers are U.S. Citizens, and how many are actually Mexicans, living in the U.S. illegally?
Maybe there's a reason why they only get paid $0.70 per box: that's all they need to pay to get the workers. If you eliminated the vast supply of cheap, illegal labor, you might create a labor shortage and drive wages up. But when you've got people willing to work for peanuts, that's what the jobs are going to pay.
This cost isn't included in most (at least not that I've seen, anyway) analyses of illegal labor, because it's hard to quantify. The presence of a vast cheap-labor pool prevents wages from increasing, and also prevents mechanized technology from being brought to bear on problems. There's a reason that a mechanical cotton-picker wasn't invented until long after the South's Great Migration: when you had slaves, and later sharecroppers, there was no impetus to spend the capital necessary to mechanize.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
What is the *typical* American saving? How are student loans accounted for in your -1.2% number(good unsecured debt...). My entire direct family is in the black. We are well off, but we ain't rich.
I tend to think a $20 minimum wage would have poverty waaaaay higher than it is today. Having a shitty job is often better than not having a job.
Nerd rage is the funniest rage.
Hell with that. I'm against offshoring for two reasons:
1. In my own extensive experience with work coming back from offshore, it's crap. Period. Anything that we save in up-front cost, we have to pay down the line when the the bugs are getting fixed.
2. I am of the unpopular belief that there's nothing wrong with looking out for the self interest of my family, my friends, and myself. Our lives and livelihoods are more important to me than some stranger I've never met and never will meet. And yes, if it came to a choice between me starving, and that stranger starving, I'd pick the stranger every time. I place value on my own life above others -- it's called survival, though these days we're supposed to call it selfish.
/rant.
What you are describing, in economic terms, is leakage.
In Keynesian economics, there is a model called the Injection-Leakage Model that describes the circular flow of production, income, and resources between producers and consumers within a national economy.
In short, you work for a business, which pays you for making goods or services. You then use your money to then buy from other businesses. There is a circular flow of money.
Investment, government purchases, and exports inject money into the system, making more money available for everyone in the economy. Savings, taxes, and money spent overseas come out in the form of leakage, reducing the amount of money in the system for everyone.
Offshoring is just another form of leakage. And no, it is not good.
I have yet to meet anybody in Detroit (and I lived in MI for 15 years) go into debt with student
loans so they could learn to fit nut A onto bolt B. Comparing task-based assembly with the
modern skills needed to build software (communicating with customers, unit testing, integration,
design & design patterns, refactoring, multiple computer languages, framework knowledge,
OS knowledge, databases, & ongoing professional development) is insane. My father got paid
a tidy sum at the time in the late 70's to seal and fit the back windows onto GM cars. With only
on the job training and a barely passed high school diploma? That's a windfall. Not something earned.
His work tallents could have been just as well applied to sweeping floors & emptying trash and he wouldn't
have made nearly the same money.
The real problem? Software development & other IT people are PROFESSIONALS who have to build and
maintain professional skill sets through self-study and/or taking new job opportunities. The cryin' shame
is that we aren't smart enough to set up a cartel like the lawyers (bar assc.) and doctors (medical board) do
in order to prevent competition from low-quality & low-wage sources as well as establish peer-review for
the needed skills and recognition in hiring process.
*** Sigs are a stupid waste of bandwidth.
Can you actually point to any sources which credibly claim that those foreign IT workers who aren't "treated like human beings" are complaining at all about their treatment? It seems to me like their treatment is probably far better than anything they could have achieved prior to acquiring jobs in IT. Personally I think you're the one not treating them like human beings; by not letting them make their own choices with regards to what constitutes fair pay you're treating them like ignorant children.
As for those decrying the supposed loss of the American middle-class as a result of this offshoring -- what do you suppose globalization is doing for the middle classes in the countries we're offshoring to? Surely they have far more need of such opportunities than any of the industrialized, first-world countries.
Lastly, for those worried about falling wages, consider that alongside the fall in nominal wages resulting from offshoring there is also a corresponding fall in prices, driven by that same offshoring trend. The two counteract each other, and historically prices have always fallen no less quickly than wages under such circumstances -- in other words, real wages (what you can buy with your pay) have always remained the same, or increased, due to advances in stable international trade. I don't intend to guarantee that real prices won't fall this time (no one could make such a promise; there are too many unknowns), but just the same, falling nominal wages do not have to equate to any decrease in wealth or quality of living in real terms.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
My knee-jerk is to say, "Yuh-huh!! Are too!!!"
Think about it for a moment, Mr. Soda. What do lawyers, marketing consultants, and SOX compliancy officers produce?
If you can't think of a tangible product that any of these occupations yield, bring forth, generate, or synthesize, then the occupations fit the definition of services jobs. No physical product created? Service is all that can be claimed.
I think you may have narrowed your own definition of "services jobs" to "menial services jobs." For example, every politician is a service provider. So is Slashdot.
When I'm really inebriated and need to come down fast, I just think of how many manufacturing concerns there were in the US 20 years ago. Then I drive home and count the number remaining in my community. Guaranteed buzzkill.
If, for some potent reason, I'm still high, I contemplate how the US once exported finished goods. Now we export raw materials and buy finished goods. Then we sell them--with excellent customer service.
"Press to test."
(click)
"Release to detonate."
Cheating is always easier than playing fair, but I'm sure corporations can find good liars for far less than they're paying an average CEO these days.