Newsweek column on outsourcing

Newsweek ^ | 8-07-2003 | Michael Rogers

[samuel_adams_us]

Aug. 7, 2003 / 5:32 PM ET Readers on outsourcing: I’ve been corresponding with readers this week about two Newsweek pieces, one on the “jobless recovery” phenomenon and the other on offshore outsourcing. It’s a major hot-button topic, particularly among IT workers, but the mail for the most part has been quite reasoned, if somewhat sorrowful and resigned. A few readers asked some pointed questions:

Name: Marc Hansen Hometown: Seattle When all the Microsoft, Oracle, and IBM software production has been outsourced offshore, and when all Intel factories are completely automated, and when all Home Depot stores have self-check-out lines. ... my question is: Who, in America, will be able to afford the food that the McDonald’s robots cook?

Name: EV Hometown: Annapolis, Md. Where do all of these upper level managers think they will be when everyone has been outsourced? Guess they better learn Hindi or one of the other 18 dialects. You are only a manager if there is someone left to manage.

Name: Daniel E. Platt Hometown: Putnam Valley, N.Y. Sixteenth century Spain was quite rich on gold from America. While they funded the industrial revolution in the rest of Europe, they were largely left behind in the end. Are we doomed to the same fate? Or should we purchase a future at the cost of lower profit margins now?

Rogers replies: All good questions. Here are some personal tales from the trenches:

Name: Toni Klinger Hometown: Massillon, Ohio I am so angry. My husband is 59 and lost his job to Canada four months ago. Yesterday, my sister-in-law was notified that her skip-tracing job was going to India. Hey, no problem, she’s only been with the company for 21 years! I have never been so frustrated in my life. People in their 50s just can’t start over. I hate life!

Name: G. Popsworth Hometown: Dallas, Texas I am struggling with what to suggest to my children for a course of study at college. It is becoming more and more difficult for college grads to find employment. Now with outsourcing rampant, they need something stable for their career opportunities. A small town dentist, doctor or lawyer might be appropriate.

Name: Thela Jinseet Hometown: Clinton, N.J. Here’s my story: I am a journalist for an online publication, and I’m bracing for impact. My employer’s entire technical staff is from India, making up nearly 50% of the employees here. The owners of the company are also Indian and they outsource to a team in India. Our Indian employees are a real bargain because they work ungodly hours: 10- to 12-hour days every day and on the weekends. They are also extremely bright. And it’s for low pay. But there’s more. My husband lost his electrical engineering job four days after 9-11 from a major Japanese company that closed its plant and moved its operations to France. Despite graduating with honors from a top university, it took more than a year for him to find work. And just in time: We had two weeks of unemployment benefits left, which was barely enough to pay for our mortgage. This time, he saw a substantial cut in pay. I am truly frightened after our experience. I am scared to buy another house. (We had to sell ours for his new job.) I am scared to have a baby. We can’t afford to save for retirement. Pensions are a thing of the past. My company doesn’t even have a 401(k) plan or even direct deposit for paychecks. I fear we will be poverty-stricken when we retire at 75. Why isn’t Congress listening?

Rogers replies: There were also some suggestions about what to do:

Name: Bill Hometown: Roswell, Ga. Outsourcing customer service jobs overseas is a double-edged sword. One side slashes the number of jobs that are available to U.S. employees and the other side slashes the income taxes that the federal government can collect. Uncle Sam ends up funding unemployment benefits for U.S. citizens who are denied jobs that have been sent overseas. One solution may be to penalize these outsourcing companies in the form of a negative subsidy so that they can help pay benefits for the unemployed.

Name: Mike K. Hometown: Aurora, Ill. Outsourcing makes for some really profitable companies, but fewer consumers have the money to buy that company’s products. That profit won’t last for long. Remember the big “Buy American” kick back in the 80s? I think we’re on the way to the “Hire American” craze. Find out who outsources and who doesn’t and support those who support America by hiring Americans.

[samuel_adams_us]

It's not my job to help india, last time I looked I lived in the United States. I guess some of us forget where we live?

[harpseal]

I don't like that attitude, and I don't care who is espousing that entitlement mentality - be it Paul Craig Roberts or Jesse Jackson. I am EQUALLY disgusted with both of them.

I also hate the entitlement mentality and you have no entitlement to import products into the USA. Companies should not have an entitlement to a full faith and credit guarantee from the US government of their investment from political risk.

I guess teh entitlement thing is all in how you look at it. See Article ! of the US Constitution for the ability to levy duties and imposts.

I veiw a comment of Whiner on these threads as name calling as much as racist or traitor but you seemed to not have a problem with it. I view equating Paul Craig Roberts with Jesse Jackson as a very unfair comment.

Now once again would you like to discuss any of the issues involved or would you perfer to stick to name calling.

[Dane]

Now if you have any problems with this history of Japanese economics from the 80's please let me know. I believe everthing is factual but I am not posting from referneces today. If we have a disagrement perhaps others vcan provide appropriate references

I am not an economics professor, thank God, but I do remember the vast plethora of articles back in the late 80's how the 21st century was going to be the Japanese century and how MITI(the Japanese beauracracy that was hearlded as unbeatable) was the way to go.

Well that has been proven wrong in 2003.

Your alls rhetoric, IMO, mirrors the doom and gloom that was being said 20 years about Japan.

You can go into economic theory all you want, but I look at history, since those who don't learn from history are doomed to repeat it.

[samuel_adams_us]

Freedom being personal freedom, or corporate freedom? Constitution doesn't say anything about corporate freedom and when my person freedom is threatened by corporate freedom, I take action, which is my right.

[Paul Ross]

We have the right to our national security...and the necessary industry that affords that. I suggest you look at this link which shows how the foreign liberals are now reveling in our declining industry...and weakening military posture. And these are not advocates of free trade, or anything other than socialism. They are cheering against us. Please rethink where this policy you are supporting is really taking us. Our enemies are gloating already in anticipation of our national collapse.

As for your own proposed 'Turn-Around' policy prescription: No amount of wage-cutting or rule-eliminations you will get you down to the China-competitive level, nor would you want to go, to the 'pennies per hour' that China is charging for its slave labor.

I am really surprised the CATO-ites have not emigrated en mass to China to celebrate their pseudo pure capitalism.

[Dialup Llama]

>Corporations exist to make a profit! I'm not a traitor, sympathetic to outsourcing, etc..., but this is a reality.

Very well Mr. "No Right to a Job." These corps are not getting much of my sympathy when they come to me as a consumer or when they want me to salute some tax payer subsidy for them. People should do business with entities that support the economy from which they derive their income.

If you don't like BOA, or the offshoring policy of US Bank, there are many local banks you can do business with.

There is no reason to buy from the offshoring Dell when locally there are good white box computer makers.

If you need to buy computer programming or professional services, a local firm is probably going to charge very similar to what the Indian firm will. (That 5 to 1 salary differential is not going to lower prices for the US end customer. It is going to pad the bonuses of CEOs and executives.)

[harpseal]

I don't doubt that you are a registered republican. But can you explain the difference between tarriffs to "protect jobs" and a "living wage"? That's really my whole point, these arguments are indistinguishable, one from another. If you're going to subsidize the income of one segment of the population by limiting competition, then how can you oppose subsidizing the income of another segment because they too are underpayed?

Since ytou are asking a reasonable question here you will get a reasonable answer. A "living wage" is a government mandate that is a direct order to companies to pay a specified level of compensation. A prtective tariff is a duty laid on imports that provides an envirornment whereby investment and the Free market will provide wages. It is a protection of investment not a direct madate on wages or a subsidy. It is an encouragement fort free market activity by providing an envirornment where predatoryy practices by foreign entities usually gobvernments are not allowed to destroy competition within the American market. It functions very simnilarly to the anti-trust laws in preventing pedatory practices. I am presuming from your past statements regarding unions you are in favor of anti-trust laws since they are the original means of stopping unions.

You aske dfor an explanation you have one. when you are discussing issues instead of making false assertions you get a whole different type reply.

[hchutch]

I can back up the "whiner" comment - I'm calling it as I see it. I can cite the name-calling by those on your side of the issue, including yourself.

The truth hurts, doesn't it?

The only difference between Paul Craig Roberts and Jesse Jackson are the groups they claim to act on behalf of in carrying out their shakedowns. I stand by that comment, too.

[Dane]

1. What are you going to do when all of the IT people, highly paid living in good areas near you turn their house over to the bank and devalue the property of your home. 2. What are you going to do when all of the IT people, highly paid, driving nice cars, turn their new car back to the dealer and cause a glut of new cars on the market thus putting more engineers and auto workers out of business and pushing the value of automotive stock down. 3. What are you going to do when all of the IT people, highly paid, pay lots of taxes, are no longer contributing to the bottom line of your community and the city where you live starts laying off their staff, not fixing roads, not keeping your parks clean, etc. and it goes on and on and on.... If the average IT workers makes 60k a year, he probably pays 1/3 of that in taxes, take 2 million people out of the US economy each paying 20k a year in taxes and you have a problem, especially with all the old folks taking the SocSec and medicare and the fact that they outnumber the younger generation 2 to 1. I see trouble on the horizon.

For arguement, let's say your worst case scenario pans out.

There will be Americans there to pick up some bargains, such as the houses and cars.

Should they be hung for seeing a good bargain and capitalizing on it.

Look on these threads, I have stated that I have been laid off, buy clothes at discount store, drive a used car, and clip coupons, and have hardly any debt.

Why should I feel sorry for people who lived way beyond their means, riding the dot com bubble. I said to myself in the late 90's there is no way this bubble could sustain itself, and was proven correct.

Are you sammy saying that we should have a permanant bubble economy?

Sorry to burst your bubble sammy, but that is economically unfeasible.

[Doodle]

Freedom being personal freedom, or corporate freedom?

So if I personally own a business and you "take action," you aren't trying to interfere with my freedom?

[samuel_adams_us]

So are IT people spoiled because they were smarter than you and got paid more because of it? Sounds like you just have those who have made better for themselves. There you go, pull someone else down because they are doing better, that's the new american way I guess.

[dfwgator]

There is no reason to buy from the offshoring Dell when locally there are good white box computer makers.

Hell, it's easy enough to just build your own anyway.

[Dialup Llama]

>There is no reason to buy from the offshoring Dell when locally there are good white box computer makers.

BTW I went the white box route on my last computer. No problem. Maybe I'll use the Dell configurations as a model and then make it myself the next time. I've just downsized Michael Dell. Never again with that traitorous company.

[The Green Goblin]

But if we start using tarriffs to subsidize jobs, then we'll take a big step in the direction of socialism.

Heh, heh. What do you think people are going to vote for when the unemployment numbers reach critical mass? Ever hear of the New Deal? What's coming down the pike will make the New Deal look like laissez faire capitalism...

[samuel_adams_us]

What about those IT people who saved, most that I know do and have good net worths. I am not for the bubble economy but I am not for the US giving handouts to the rest of the world either. Since when is it your job or mine to support some aids infected indian?

[samuel_adams_us]

Your business is not a person, it has no right to personal freedom.

[William McKinley]

I suppose it may be.

I am suspicious about something though. Half a year ago, you heard practically nothing in any of the media over the matter. Today, it is starting to be pushed by big media-- as a situation so dire that something must be done.

Did things change so much in the past 6 months? If so, what, how and why? These would be important questions then.

But my perception is that not much has changed in the last 6 months. Outsourcing was happening before, and it may be happening more now but only on an incremental level from 6 months ago-- but the coverage of it is exponentially higher now. This makes me suspect that it is somewhat of a manufactured issue. There is no way that it went from a non-story to the top story in 6 months without something radically changed-- or unless the media was downplaying it before and/or overplaying it now. There would have been no media pressure to downplay it before. That leaves overplaying it now. With it in Newsweek (which had Dean on the cover), and with it being an issue aimed at computer savvy people and with Dean treating the internet as his home state, it wouldn't shock me if some of the outsourcing drumbeat was being prodded on by his camp.

[harpseal]

I am not an economics professor, thank God, but I do remember the vast plethora of articles back in the late 80's how the 21st century was going to be the Japanese century and how MITI(the Japanese beauracracy that was hearlded as unbeatable) was the way to go.

There were also those most especially in the Reagan adminsitration who used tariffs, quotas and the threat of higher tariffs to eliminate some of japan's predatory trade practices. Ronald Reagan recognized the issue and dealt with it. Look up that history and you will see that. this has been explained to you before.

Well that has been proven wrong in 2003.

and for that you should be grateful to Ronald Reagan and his policies. He also won the Cold War for which you should be grateful.

Your alls rhetoric, IMO, mirrors the doom and gloom that was being said 20 years about Japan.

While you are entitled to your opinion on my rhetoric I am do not consider it doom and gloom to point out problems that I see as structural. I want GWB to be able to run for relection on a platform of stay the course or something similar. If we contiunue to have fewer people employed every month then such will not be possible and he will haver to run on Prosperity is just arround the corner. The two platforms are vastly different. Again this has been explained before. Perhaps we would not have been having this discussion if the full Bush tax cut had been implemented but it was not. Of course again IMO we would simply have deferred the date of this discussion.

You can go into economic theory all you want, but I look at history, since those who don't learn from history are doomed to repeat it.

I also look at History and am an Historian by education. Now i have given you some detailed history and the devil is in the details.

[Dane]

Heh, heh. What do you think people are going to vote for when the unemployment numbers reach critical mass? Ever hear of the New Deal? What's coming down the pike will make the New Deal look like laissez faire capitalism..

Ping me, when unemployment reaches depression levels, especially since unemployment is going down gradually.

Oh yeah BTW, my father said that the recession of 38 was another mini-depression, and if it wasn't for the war in Europe going on at the time, Roosevelt wouldn't have had a third term.

[samuel_adams_us]

BTW, my freedom ends at the end of my nose and my responsibility starts there. Same goes for everyone else. I do have the right to free speech which is what I am doing, and so do you. Nobody said we have to agree, but we both have the right to speak our opinion and defend our freedom as we see fit.