Posted on 07/06/2005 9:41:03 AM PDT by jb6
OUTSOURCING will inevitably eliminate many more American jobs, says Ron Hira, assistant professor of public policy at the Rochester Institute of Technology.
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Sean Kelly It's time for the federal government to take action to limit the damage, says Professor Hira, co-author with Anil Hira of "Outsourcing America: What's Behind Our National Crisis and How We Can Reclaim American Jobs" (American Management Association, $22). Here are excerpts from a conversation.
Q. Will more jobs be lost offshore?
A. We're just at the beginning of this trend, particularly in the services area. The manufacturing sector is much more mature, but in the services area we're just scratching the surface.
Q. What jobs are likely to move next?
A. Information technology jobs and call-centers jobs were the first movers. Now it's snowballing in industries that are information intensive. Companies in insurance and financial services, in particular, have seen that I.T. operations can be successfully offshored. Because of that, they're beginning to think about types of other jobs like claims processing or financial analysis. We're also seeing it in engineering and design.
(Excerpt) Read more at nytimes.com ...
A. There's nothing that can be done to stop it. The question is, how do we adapt to it and deal with the negative effects? Nobody has done anything on the policy front. We've more or less ignored it. We need to take some steps to deal with this new reality.
Some steps are pretty much no-brainers, like extending trade-adjustment assistance to service workers. If you lose your job in manufacturing because of trade, you get extended unemployment insurance. You get training and health benefits so that you can "adjust," as economists put it - so that you can find a new job in a different occupation. We do that for manufacturing workers, although the plan is underfunded, but we don't do it for service workers. Congress decided to kill that bill last year, and the reason was that we couldn't afford it, which is surprising.
Q. How well do retraining efforts work?
A. Most people think retraining doesn't work very well. We need to start experimenting with free training programs right away because there is a new class of workers who are being displaced. They are no longer blue-collar workers. These workers have degrees, sometimes advanced degrees, in computer science or engineering.
Over the longer term, we need basic things like gathering some data. The Department of Commerce spent $335,000 to do one outsourcing study, and that hasn't been released yet. When the government spends almost $1 trillion a year, it's pretty surprising they can't come up with more money to study this problem.
Q. Should companies face penalties for eliminating jobs?
A. There's a reasonable case to be made to extend the Worker Adjustment and Retraining Notification Act to these situations. The idea is to give some advance notification to workers that they're going to be laid off. That gives those workers enough time to begin the adjustment process. Companies don't like this. It's in their self-interest to keep it secret until the end. Companies would look at extending the WARN Act as a penalty. I would look at that as smart economics.
Q. You suggest that in some ways the government actually encourages the outsourcing of jobs. How?
A. One policy that was part of the presidential campaign last year was about tax deferrals that companies got for expanding offshore operations. Companies are able to defer their taxes on profits that are earned offshore as long as they don't repatriate those profits. What Senator John Kerry was proposing, and companies have been lobbying for, was to get a moratorium, or a holiday, for one year to bring those profits back in. Kerry wanted that as a quid pro quo for eliminating the policy. There was $600 billion involved, according to J. P. Morgan. Companies not only got the moratorium but they also got the deferral back in. So the perverse incentive is already back in place. In a few years, they'll say: "We have another $500 billion overseas. Why don't you give us a tax break for a year?" This game will go on.
Q. How else does the government encourage outsourcing?
A. You've got programs like the H-1B visa. The intent of the program is, when you can't find American workers, you bring in highly skilled foreign workers who work on temporary visas. They can stay up to six years. The way it's been used traditionally is as a bridge to immigration. You capture the best and the brightest, and they become permanent residents.
Unfortunately, some businesses have started using this in a different way. They're using it as a purely temporary means to bring in rank-and-file employees who will work for less money. They're not even bothering looking for American workers. This is pretty rampant in the I.T. sector in particular. Those workers then gain experience in the U.S. on the latest technologies, interfacing with customers, and then they are able to take that back to their home country.
Q. How can this situation be corrected?
A. The main thing is to ensure that American companies are looking for American workers first. That's the way Congress believes the program works, but more and more it doesn't.
William J. Holstein is editor in chief of Chief Executive magazine.
I lost a job 2 years ago to outsourcing ... grrrrr
One might suggest that tarrifs on manufactured goods, say at 100% rate would pretty quickly result in jobs like auto manufacturintg come back to America. It's not rocket science. But there is no will to do this.
One might also suggest that "jobs like auto manufacturing" have been coming back to America for years -- as evidenced by the record sales of "foreign" automobiles manufactured right here in the United States.
Doesn't Toyota have a HUGE plant in Washington, near seattle?
"Companies in insurance and financial services, in particular, have seen that I.T. operations can be successfully offshored. Because of that, they're beginning to think about types of other jobs like claims processing or financial analysis."
So in addition to waiting 6 hours on hold with an offshore call center, we can now look forward to waiting 6 months for an insurance claim to be processed.
I read somewhere that only 5 of Toyota's 18 or 19 major manufacturing facilities are actually located in Japan.
Big surprise that kids are fleeing the IT field.
Yes, it all started with those little import quotas that Reagan (God rest his soul) put down. That was a very smart move.
And some where along the line, someone saves money, just not you.
I'll never understand how a major corporation is willing to take the risk of trusting their sensitive data, operations, call centers, etc. to an overseas firm ... aside from the immense savings, the risks of compromised data and customer dissatisfaction are huge.
The best way to deal with it is to make very public the names of the companies that outsource... perhaps require full public disclosure regarding the amount of outsourced jobs and revenue... and let the market run its course through boycotts, customer choice, etc.
"These workers have degrees, sometimes advanced degrees, in
computer science or engineering."
Well we can retrain them to drive taxi cabs.
I saw this Hira guy on CSPAN over the holidays. He makes a compelling case that the problem is being ignored by Democrat and Republican elites.
Whatever your position (mine is that I'm a free trade advocate, but there are acute problems that require solving)...this Hira guy seems very reasonable on the issue and I intend to read his book, "Outsourcing America" to get a perspective different from what the mainstream media and elites feed us.
"Q. What jobs are likely to move next?
A. Information technology jobs and call-centers jobs were the first movers. Now it's snowballing in industries that are information intensive. Companies in insurance and financial services, in particular, have seen that I.T. operations can be successfully offshored. Because of that, they're beginning to think about types of other jobs like claims processing or financial analysis. We're also seeing it in engineering and design."
These were the jewels of the "new economy" not too long ago. Limbaugh and the rest of the neo-cons were spewing that nonsense for a decade now...."get an education in order to be on the cutting edge of the new American economy". Ok, well now that those jobs are leaving too, what's left? Apparently nothing is safe anymore.
Want something really radical? Cap the salaries of CEO's and their executive/administrative staffs.......because that's what this mass exodus of American jobs is really about. Cutting employment increases the bottom line and stock value........which of course kicks in the seven figure bonuses.
Yeah I know, that's much too radical.......in a "free market economy" (/sarcasm on)
Welcome to life in the lower middle class segment of American life. You earn just enough to hang in there, not enough to prosper. You pay the same ridiculously high taxes as people with higher earning power, so you have to cut back in many areas. You have to pare everything to the bare minimum. And maybe you'll make enough to pay your taxes that support the highly paid teachers in your school district.
Sure it does, those quotas are still on the books. This way, they get around the quotas (note that most of the parts are still shipped in) and get to produce right at the market point. This is the same reason that in Russia, after Putin put down a 25% tariff on imported cars, Renault, Chevi, Crystler Jeep, BMW, Mercadies, and Ford have openned plants and this year Toyota, Honda and Nissan are expected to open plants. Not one plant was openned from 1991 to 1999.
First, for the most part it is not 'their sensitive data' they are risking. It is ours and it would seem they couldn't care less.
Second, when was the last time you heard of any mass boycott over bad service, loss of vital information, etc.?
Third, there is now a growing monthly subscription based personal credit watch industry in our midst due in part to the careless handling of our information by these 'major corporations' and I would not be at all surprised if some of their principals were cleaning up on that as well.
I'm presently finishing up B-school and getting the hell out of IT. B-school has started to teach that a CEO's duty is to grow the wealth of the company through long term investment and planning and not simply short term stock value. That's great but about 10 years to late, since it will be another 15-20 years before the present students are in CEO positions.
The additional problem is that CEOs are now mercs. Most not only did not grow up in the company they are entrusted with, but most didn't even grow up in said industries. To think someone who is totally unfamiliar with an industry can step in and manage a success just like he did in his home industry is ludicrous. Each industry has its own specific and unique attributes.
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