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.

[The Green Goblin]

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

In today's politcal climate, it won't need to reach depression levels, and I see layoff reports posted here on an almost daily basis. That can't be a good sign, Danie-wanie...

[holdmuhbeer]

I guess you would like for us to return to the guilded age and the robber barrons when only a few had everything and the rest of us had $hit? Thats what pure capitalism brings.

[mhking]

I just suspect that a good portion of what is going to be coming out of the mainstream media on the matter in the coming weeks will need to be scrutinized carefully.

I think this would have come to the fore much sooner, had we not been embroiled in the War, thanks to Osama bin Achmed and company. While I don't trust the mainstream media, given their motives, I don't think this was engineered - they're not smart enough to do this.

And watch - the story will simmer down for a few months now, since everyone is wrapped up in the Kobe & Arnold stories.

The administration needs to take some inititave on this issue; because next time it comes up, the candidates (read Hillary!™) will jump on it and worry it back and forth like a terrier with a rubber ball.

[Dane]

And in 1846 a new Corn Law was introduced that reduced the tariff on oats, barley and wheat to an insignificant amount.

All trade regulations must be done with fairness. And there is a lack of fairness in the current market. We have a huge Trade Deficit. The Yuan has been intentionally devalued by Red China. And, Americans cannot compete with the near slave-wages of Third World countries

JMO, but the tariff was reduced to benefit 19th century Britons who wanted to eat.

Why would you want to raise the tariff on those who want to have their own business and get in the way of running their business in the most efficeint way possible.

[William McKinley]

I agree with you that initiative is required here.

As for the media engineering it, no that is not what I think. I agree with you that they are not smart enough to do so. However, I do think that the major news outlets are unduly influenced by the Democrats. And I do think that some of them are more than crafty enough.

[Dane]

and I see layoff reports posted here on an almost daily basis.

Layoffs will always happen on a daily basis. It's called capitalism.

Oh that's right you must be hoping for the Marxist dream when on one day there will be no layoff notices.

The old Soviet thugs used to praise themselves about that and they lasted 73 years.

The US is still going strong after 227 years.

[harpseal]

Unemployment is going down. Economic indicators are going up, and yet you are wailing that we are in another depression.

No I am not I am stating we have some structural problems in our economy that result from teh curent trade envirornment. yes the unemployment numbers went down due to "discouraged workers leaving the work force." The number of people employed did not, however, go up. Jobs have been lost to our economy. This has ripple effects.

It ain't a depression, but a correction.

Actually i would describe it as a jobless recovery where structural problems are causing decreased employment in the USA. No that is clearly not a depression but if problems remain uncorrected it may lead to a disater suchas a depression.

Face it IT workers in India can compete with us now. They keep us competitive.

I do not have a problem with reasonable competition with India I never had and never will but due to teh subsidies provided to outsourcing to India via OPIC and Indian currency manipulations it is my opinion that a tariff is justified on those grounds alone. Due to the Stategic nature of IT and various types of engineering I also believe a tariff on software importation is in order. that level of tariff should be set so that neitehr natiopn's IT industry is destroyed. now when it comes to china the situation of trade with them is far worse. Tariffs are needed as bargaining chips. iwill discuiss this further if you would like.

Also from all the reports I have seen, at the most 10% of IT jobs are going overseas. That is much milder than the 50% contraction in employment the steel industry suffered in the late 70's and early 80's and the country survived and moved forward.

much of that 50% contaction in teh steel industry was due to obsolete plant and investment taht yielded higher productivity. as I hope has been made clear I am all for investment that improves productivity. i also have made clear in many other places we need to cut back on regulations and taxes even more. Especially we need to remove Corporate taxes on domestic economic activity. Clearly I do not want any tariffs imposed to be net rebue to the Frederal government in order for them to be effective in providing incentive for captal investment they need to be coordinated with other tax cuts.

[DugwayDuke]

Here's why I think the arguments for living wage and protective subsidies are the same.

Those who argue for a living wage, a mandate as you correctly call it, are saying that without such protections, competition will result in wages below that necessary to support a life style.

Those who argue for protective tarriffs are also arguing for mandate. Sure, the mandate takes a different form, but it is still a mandate, the exercise of federal power, to prevent competition in order to produce wages necessary to produce a life style.

You attempt to argue that tarriffs are "a protection of investment not a direct madate on wages or a subsidy." The problem with that argument is that those who support such tarriffs also argue that it is "unfair" to compete with low wage foreign countries. They don't argue that it's "unfair" to compete with "low investment" countries, now do they?

Indeed, it would seem that if you want to protect "investments", ie, capital, then you would be arguing that companies should be allowed to maximize profits by securing lower cost resources, not forcing them to use the highest cost resources.

BTW, we already have laws against predatory practices. These laws are designed to prevent other countries from dumping goods below the cost of manufacture. I note that the argument here has not been "dumping" but that foreign countries can sell goods and services here at a lower price because of their lower costs. That is not "dumping".

[StolarStorm]

"The US is still going strong after 227 years."

Yes, and most of those years we had strong tariffs. You know, the years where we were the biggest creditor nation.

[DugwayDuke]

"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."

Now, just exactly what makes you think I'm jealous of IT personnel? You have no idea of my profession or my salary so you have no basis for such an assertion, do you?

Besides, I'm not out to pull someone down. I'm out to prevent some from reaching into the pockets of their fellow americans just because they think it unfair that they've lost thier job.

[ninenot]

NuCor is a success--but here's a question: are they organized by the USW?

USSteel, Bethlehem, Wheeling-Pittsburgh, et.al, were union shops--not bad in and of itself--but the union contracts for benefits, work rules, and retirement were extremely expensive.

IN COMBINATION with the enviro-regs which required the old-line companies to spend zillions on remediation and upgrades, the old-liners were dead men walking.

[hedgetrimmer]

Yep, slave labor is a pretty efficient way of running a business.

Many posters here seem to think that business should or does exist in a moral vacuum. There are some of us who say they don't, but the globalists don't like to hear that.

[Dane]

much of that 50% contaction in teh steel industry was due to obsolete plant and investment taht yielded higher productivity.

So, according to you the above is okeley dokeley in regards to the steel industry, but all of the sudden is the spawn of satan when it happens in the IT field.

Can anybody say special interest.

[DugwayDuke]

"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..."

Surely, you not advocating just a little socialism to head off the real thing?

[hchutch]

A good economic environment is one thing - that is best dealt with by dealing with things like the overtaxation and overregulation of Americna businesses. The "lawyer tax" would also be a very good thing to address. Encouraging the use of new technologies in manufacturing would be another thing as well.

Protecting the American economy from the bad consequences of overtaxation, over-regulation, and allowing the "lawyer tax" to go unaddressed is not an option that will solve the problems we face.

It is no different than not dealing with the real problems in the inner cities, caused by the very high illegitimacy rate and the serious damage done to the family in the inner cities.

Paul Craig Roberts has chosen to attack a "demon" in free trade rather than deal with the overtaxation, overregulation, and the "lawyer tax", just as Jesse Jackson has chosen his "demon" of racism rather than deal with the sources of the problems in the inner cities and elsewhere.

They took the easy way out. They are demanding protection from the consequences of bad policy in the past that will only get worse if they are not fixed. They would rather whine about "demons" that make convenient scapegoats as opposed to addressing the real problems that involve heavy lifting.

Sorry, but I'll stand by that comparison. If you wish to see it as a slur, I can't stop you, but it only proves my point.

[The Green Goblin]

Oh that's right you must be hoping for the Marxist dream when on one day there will be no layoff notices.

You are wrong in that assumption. And as far as layoffs are concerned, the numbers we're seeing around here on a daily basis are generally quite large. A nick on the finger and a slit throat both result in loss of blood, but you wouldn't equate them...would you?

[Keyes2000mt]

The quality of support you get from India is pathetic. Many can barely understand English.

If I had a hardware corporation, I wouldn't give the employees caviar, I'd market my products with the guarantee that when they called tech. support, they'd speak to an American, someone who understood their language and I'd make all call centers hire people who spoke clearly.

I'd charge a little extra for products but people would pay for the service.

[The Green Goblin]

Surely, you not advocating just a little socialism to head off the real thing?

I'm not advocating anything...just pointing out what's headed our way.

[Dane]

Yes, and most of those years we had strong tariffs. You know, the years where we were the biggest creditor nation

Huh, according to most reports, it seems that most nations see the US as the only superpower in the world.

You know all that criticsm of the US going into Iraq by itself, dissing the UN, North Korea acquiesing to the US on multi lateral talks yada, yada, yada.

And gee that all came about from the Reagan/Bush era of free trade.

[DugwayDuke]

"Spoken like someone who has a full 401k from years of employment. For those of us, just starting out, we should be concerned. Your concern is clearly to keep your retirement investments doing well."

No, that accusation of selfishness won't hold water either. You see, when you're old and flush (which I'm not), there will be another problem and another call to regulate profits and wages (all in the interest of fairness, of course) and it will be your wealth that they want to regulate. Each generation faces pretty much the same challenges and each generation has pretty much the same choices. Do you really want to establish a world now that will think it "fair" to redistribute your wealth then?