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Someone posted a great thread the other day about his new job as a project manager for IT work that is outsourced to Russia and Poland. He said something to the effect that outsourcing the work to Eastern Europe has allowed the IT industry to reduce the cost of this particular system from $200,000 to $75,000.

"But look at those American jobs going overseas," someone complained, "That's $200,000 that would have been spent doing the work here in the U.S."

"Wrong," this guy replied, "Because if the work had cost $200,000 to begin with, my client would never have hired us at all. It only made sense for them to upgrade their inventory control system because the cost was $75,000 and not $200,000."

In other words, the net effect on the U.S. labor pool was zero. The client wasn't going to have Americans do the work for $75,000 (because the U.S. market rate for the work was $200,000), he wasn't going to have Americans (or Russians, for that matter) do the work for $200,000 either (because the cost would have been prohibitive).

I don't know what the answer to anyone's long-term employment problem is, but this little exchange was a rare look at exactly how the whole dynamic of "outsourcing" works.

Ok. What is the answer to slave labor? It is a seperate issue than the Indian educated professionals taking more advanced jobs.

"Wrong," this guy replied, "Because if the work had cost $200,000 to begin with, my client would never have hired us at all. It only made sense for them to upgrade their inventory control system because the cost was $75,000 and not $200,000."

BS. If an upgrade is needed it is done.

In other words, the net effect on the U.S. labor pool was zero. The client wasn't going to have Americans do the work for $75,000 (because the U.S. market rate for the work was $200,000), he wasn't going to have Americans (or Russians, for that matter) do the work for $200,000 either (because the cost would have been prohibitive).

The net effect was jobs lost in America and gained in Russia.

"In other words, the net effect on the U.S. labor pool was zero."

I remember the thread and the example. This is a small company and an extremely small part of the outsourcing picture.
Consider the large corporations that are outsourcing entire departments. These corporations were very profitable here in the U.S. while their entire workforce was Americans; they just want to increase their profits. The new increase in profits is not being passed on to the consumer or even the stockholder.
The business execs claim they outsource to compete, just like they said there was a shortage of programmers and they needed more H1B and L1 visa workers as recently as last year. They are simply greedy liars. And, by lobbying certain congressmen they have a nice racket going on. The Christian Conservative Phyllis Schlafly has written 3 articles on the subject; she calls it a racket and a scam.
On a related thread regarding illegal workers from Mexico, 3 Republican U.S. Senators have just sponsered a bill to allow illegals here to work. Mexican President Vicente Fox is very pleased with the bill. So are the businessmen who will continue to hire Mexican illegals (only now they will be legal to work here), rather than Americans.
http://www.freerepublic.com/focus/f-news/954159/posts
What we have is a governing body that is ignoring their Constitutional duties. Congress was given the power to regulate commerce and we are supposedly endowed with certain unalienable rights.

Because if the work had cost $200,000 to begin with, my client would never have hired us at all.

That was my post (I have become a committed off shorer), and you are correct. As outsourcing becomes more abundant, more firms can automate what they do. This creates wealth in the US. What is the impact of firms doing things more efficiently for their customers, even small firms? What is the gain to the GDP because of this? I believe it will be incalculable. Nobody talks about this, and I believe that is short sighted.

Why people want Americans to sit in cubicles and write tedious and repetitive lines of computer code is beyond me. Move to the next paradigm. The Internet will make the civil rights movement look like a tea party.

The Internet is the great equalizer.