More on Offshoring

William Hackos, Jr., PhD
Vice President, Comtech Services, Inc.
www.comtech-serv.com

From the New York Times

In this election year, offshoring is becoming a hot political topic. We’ve noticed that everyone, not just the high-tech community, is getting involved. On Tuesday, January 6, an op-ed article in the New York Times by Senator Charles Schumer (New York) and Paul Craig Roberts (Assistant Treasury Secretary under Reagan) addresses the issue of offshoring. They report that it is incorrect to link offshoring with “Free Trade.” Historically, free trade relates to the sale of products from one country to another. Free trade encourages each country to sell those products, which it produces with its own resources (factors of production) to other countries with minimal interference by the governments of those countries. The theory is that countries will specialize, depending on what they do best, and everyone in the world will have the advantage of the cheapest and highest quality products. In the theory of free trade, everyone benefits.

No one expected that it would ever be possible to have inexpensive instantaneous communication between individuals worldwide. Corporations now have the ability to manage people globally and, therefore, to shop around for the lowest cost workers. In effect, the world has become a single labor market. Countries are encouraged to manipulate their fiscal policies to keep wages in their countries as low as possible. Taken to its conclusion, this practice will eventually equalize wages worldwide, great for India, but not a pleasant prospect for a country or a discipline with wages among the highest in the world.

Offshoring not only affects high-tech workers. Anyone whose job does not need close contact with his or her customers can be outsourced offshore. Even medical diagnoses are now being done using offshore radiologists and digital imaging of x-ray and MRI data. Publications managers are also targets for offshoring. I know writing managers who manage remotely now. It’s just a small step to offshoring. Schumer and Roberts point out that the current financial recovery in the U.S. is not a “jobless recovery.” Many jobs are being created, just not here in the United States.

Schumer and Roberts conclude that old-fashioned protectionism is not the answer. “The first step is to begin an honest debate about where our economy really is and where we are headed as a nation.” “The new era will demand new thinking and new solutions.”

Read theop-ed piece.

From the Computer Systems Policy Project

The Computer Systems Policy Project, (CSPP), a lobbying group whose members include Dell, EMC Corporation, Hewlett-Packard, IBM, Intel, Motorola, NCR, and Unisys issued a report, “Choose to compete: How innovation, investment, and productivity can grow U.S. jobs and ensure American competitiveness in the 21st century.” This report argues that moving jobs to countries such as China or India, where labor costs are lower, helps companies more readily break into foreign markets and hire skilled and creative employees in countries where students perform far better than U.S. students in math and science. “Americans who think foreign workers are no match for U.S. workers in knowledge skills and creativity are mistaken.”

I wonder if the incentive companies have for offshoring is to get higher quality workers, or, perhaps the fact that they pay these people one tenth as much as Americans in wages has something to do with it.

Read the full report at www.cspp.org.

From the Bangalore Times

This week a Bangalore, India newspaper reported that there are now more people employed in high-tech jobs in the Bangalore area than in the Silicon Valley, making Bangalore the world center for the high-tech industry.

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