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?"

Comments

Uh-huh - Ask the Intel employees that lost jobs

[stevew]

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??

Offshoring cost me my job

[JavaManJim]

I worked for a major retailer for 17 years, then Feb 18 2005 wammo! My job was replaced by offshoring. The person now at my desk is a figurehead (or project manager) for a programming group in Bangalore.

Thanks,
Jim

Comment removed

[account_deleted]

Comment removed based on user account deletion

every job lost is a job gained.

[bunions]

Sure, we lose a 40 hour/week programmer position to [india|china|vietnam|swaziland], but we generate 40 hours/week worth of bugfixing and project management work, so it's really a wash.

Re:Duh

[dr_dank]

Temporarily it may be a job lost, but cutting costs allows for further expansion of a business.

Expansion to where? Third world countries may benefit from having a pool of low-cost labor with little regulation, but that doesn't help the labor at home. Even if they are lower level IT/support jobs that are typically affected by outsourcing. How can you expect to train the next generation of workers if theres no bottom rung for them to start from? Take a look at Monster.com postings and see the experience demanded for jobs. A system where the entry level really doesn't exist cannot sustain itself for the long term.

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.

I know France is used as an insult, but if they protect their middle class rather than let the greedheads in corporate management gut their job base for their short term gain before ejecting with their golden parachutes onto their next abomination, maybe its not so bad.

My experience with offshoring says otherwise

[gillbates]

"[Offshoring] was used almost entirely as a form of expansion, not as a replacement," Thomas said.

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:

• We lost goodwill with almost all of our customers.
• The licensing revenue for these customers was delayed by two quarters. We're lucky they paid us at all...
• We lost the royalty revenues for the Christmas selling season for all our customers whose products were delayed.

In the end, offshoring was a net loss for everyone involved:

• There are our customers, who lost potential revenue.
• There is the American engineer who didn't get hired.
• There are the overseas engineers, who were paid substandard wages.
• There is the company, who may lose marketshare because of the reputation damage...

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.

Not relevant.

[Kadin2048]

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.

Another Example:

[RexRhino]

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.

Re:who's saying that?

[hackstraw]

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.

Re:Speaking as someone who's lost opportunies

[gitchel]

Actually, I heard they switched the fast food folks to the Manufacturing sector (assemby workers, doncha know) a while back. It looked better in the stats to lose Service sector jobs - which most people assume are close to minimum wage - and to gain thousands of Manufacturing jobs - which people assume pay a good deal more. So, hocus pocus, switcherino, walla, PING. The economy must be inproving since so many people moved from low paying service sector jobs to high paying manufacuring jobs. It's clear our manufacturing secor is NOT being denuded by the Chinese, as we once thought ;-) Jeff