Outsourcing is Good for You 963
gManZboy writes "Catherine Mann, from the Institute for International Economics, has a look at What Global Outsourcing Means for U.S. IT Workers up over at Queue. She's got an interesting argument: outsourcing means cheaper IT products, meaning businesses will buy more, meaning more products to make & manage = net gain of IT jobs in the US. Ummm, did you follow that?"
Figures lie and liars figure (Score:5, Informative)
First, basing conclusions on an incomplete dataset is foolhardy. The quoted numbers do not capture the complete status of affairs. Much work in IT is done via contract/consultancy and those job losses arn't reflected in the numbers listed. If Fortune 500 companies replace domestic consultants with those working for offshore vendors, it really won't register in those quoted statistics. But it's been happening on a grand scale - as I type this, I am surrounded by ~500 offshore visa workers.
Numbers aside, there is a larger theme that Ms. Mann and others of her ilk neglect - if lower end "grunt" positions are being snuffed out in lieu of higher, "up the skills ladder" posts, then shortly, in a few years, both ends will inevitably be filled in such capacity. Where, pray tell, do qualified IT "engineers" earn the experience and prove their mettle? By toiling on systems bottom-up and then gaining an appreciation and understanding of complex system underpinnings. Or am I to understand that these ranks are now to be filled entirely by MBAs and sociology majors? Young folks are choosing alternate career paths, heeding the alarms that the parents and older friends send their way.
Re:Outsourcing your own job. (Score:3, Informative)
Oh, no. It's deja vu, all over again:- Outsource your job to earn more! [indiatimes.com].
Re:It IS good for us. (Score:3, Informative)
Take the US and India for example. A US worker makes say $120K, the same worker in India might make $5K. Demand for the Indian labour will increase, therefore price will increase, vice versa in the US.
And it's true. Wages in the US/Canada tech sector aren't what they were 5 years. New grads aren't making $80K out school anymore. At the same time salaries in India have gone up.
Globalism evens out the spread of wealth, and theoretically the emergance of middle-classes in developing countries will create enough new wealth to offset the losses initially felt in wealthier countries.
Re:How can you compete with $9.60/hour? (Score:3, Informative)
Don't kid yourself, though... it's work. In order to make the highest pay rate you have to pretty consistently satisfy the clients and keep them on the line, which is not as easy as you might think. People are different, and different things get them off. You have to figure out what they want pretty quickly or they'll move to someone else. You also have to be careful not to give them too much of what they want too quickly or they won't stay on the line long. There's a fair amount of psychology involved in doing it well.
Re:Chewbacca Economic Theory (Score:3, Informative)
Oh yes, it does... Labour force is a very limited resource, so with outsourcing those low-grade jobs, you have more people who can concentrate on doing the more profitable (ie. higher added value) jobs. The trick is doing that right and not outsourcing _everything_.
A Tale Of Two Hardware Companies. (Score:3, Informative)
I've recently been to two hardware companies, one a small business doing about $10 million in annual sales, another with $2.7 billion in annual sales. Both of them have attempted to outsource their hardware manufacturing to taiwan. Both of them ended up deciding they could do it cheaper and with better quality by keeping it in house.
For the small shop, the problem wasn't the cost, it was cheaper per-board to have it outsourced. Their biggest problem was that it took a month or more for turnaround. The next biggest problem was that they had to ship out the specified BOM to taiwan, since there were few manufacturers for some of the components.
For the big shop, the problem wasn't cost. It was the dynamic nature of the work. Every day, they fill and empty a warehouse of a different product. The complaints that the manager mentioned were that the products were more likely to break, were more often defective, and were often made with cheaper or inferior parts than the specification, sometimes causing the product to fail FCC standards. This was an intermittent problem, so they found that to preserve brand recognition for quality, they needed to keep it in house.
I don't believe that cost alone is the overriding factor. If a company decides based on that alone, the company will have shoddy products, choosing cost over quality.
Of course, I'm not saying that outsourced stuff is necessarily bad, only that the experineces of the companies I've worked with have found it to be the case.
frob
Re:It IS good for us. (Score:3, Informative)
You realize that is false, right? Looking at a cross section of wages for the past 100 years in the US, wages have risen. They have even risen in the past 5 years. 100 years of manufacturing outsourcing, tech outsourcing, immigration, etc, etc, and wages still posted gains. I cannot find a single time in the past 100 years were the 10-year moving average for wages sank.
If you compare the middle class person of 1950 to someone at the 20-th percentile today (in other words, the top of "poor"), the person today is better off in all measurable ways. Better health care, better education, indoor plumbing, better sanitation, better food, and higher wages.
(As a thought in socioeconomics, consider that, although the modern day "top of poor" man is better off in all measureable ways than the 1950 middle-class man, the 1950 middle-class man was happier and felt better off. People judge their position compared with others, not in absolute terms.)
Harry Truman said it best... (Score:2, Informative)
IT should vote Democrat (Score:1, Informative)
Re:It IS good for us. (Score:1, Informative)
There's no such thing as unemployment in an industry. The industry hires as many people as necessary. People who used to be part of an industry but are no longer employable in that industry are not in the industry, they are part of the general unemployed population. An unemployed ex-IT person is no different than an unemployed ex-Biologist, and trying to say you still belong to an industry that you aren't competent to work in is just skewing the facts to make things look worse than they are.
sure, that's easy. (Score:4, Informative)
Outsourcing is vandalism, like breaking glass, that ends up costing everyone. Caroline argues that outsourcing (dollars spent somewhere else) benefits everyone, including the programmer who's picking his nose and filling out resumes instead of being paid for the same work. It is clear that the programmer would differ. The programmer would also argue that the outsourced work is inferior in quality and that he's not allowed to compete effectively due to further government vandalism though insane IP laws. The supposed work that's created is click and drool upkeep of Winblows, which pays very poorly, while others do the brain work. Everyone pays the price for this, if they are not sensible enough to use free software, by paying monopoly fees for software that could and does cost much less. These hidden costs are carried by all in the form of higher general costs lower efficiency and inconvenience. The situation with non free software is much closer to the case of the boy who's paid by the glazier to break windows. That's what the upgrade train is.
Re:bah (Score:5, Informative)
Re:One more time (Score:2, Informative)
I'd be interested to know how you are measuring power as well.
Re:Theory (and more theory) (Score:4, Informative)
"Free trade" proponents always say that. The truth is that Americans don't wan't to pick strawberries for the salaries the growers offer, because you simply cannot support a family in the US on those salaries. If the growers up the salaries, then Americans will do it, but that makes the price of strawberries go up. Then we'll just buy strawberries from Banana Republic where they're willing to work for $1/day and can actually support a family.
Those with the "have" are in a position to call the shots here. Or put another way, capitalism being tied to the private ownership of the means of production allows the private appropriation of surplus value. Companies outsource more for marginal benefits at best it seems, and yet nobody things to cut the salaries of the top executives?
You haven't been following the news lately. CEO salaries are out of control because of all the "good ol' boy" networks in these corporate compensation committees. Stockholders can't get rid of them because too much is held by insiders. Look how the effort to oust Eisner at Disney failed, and he's been paid insane salaries to run the company into the ground.
The problem is that CEO's and their ilk live in a totally separate reality from the rest of us, and have lost any sense of "social responsibility". And the last defense we have against the "aristocracy of wealth" is the estate tax, which the Bushies want to permanently abolish.
Also, there is a movie released in 2003 called The Corporation [imdb.com] which, as one of its premises, stated that if you consider the typical corporation as a person [wikipedia.org] and diagnose it using the Diagnostic and Statistical Manual of Mental Disorders, it would be a sociopath [wikipedia.org].
Re:Theory (and more theory) (Score:3, Informative)
I was being rhetorical when discussing CEO salary. I had in mind Ricardo's view of "the iron law of wages". Put essentially, if an employer (according to Marx, Ricardo, Malthus, perhaps others) introduces new machinery that will double the output of the worker in a day. Does he then double the wages? Not at all; he keeps the surplus value for himself.
Subsitute cheaper labour for new machinery. Yes, the old-boy networks exist. They are a neccessity to justify this sort of behavior.
I also recommend the movie you referred to. Well worth watching.
The top country receiving outsourced US jobs... (Score:1, Informative)
...is the United States.
Outsourcing != Overseas exportation of jobs
If a company outsources to another company in the same country, it is at worst a zero-sum. Factor in some additional management positions, the revenue generated in the real estate, office supply, and other non-IT industries, and the migration of jobs away from large corporations toward small businesses, and suddenly you have a net benefit.
Intellectual Dishonesty (Score:3, Informative)
was one of the most intellectually dishonest pieces I've seen in a long time.
First off, both of the major categories cited are part of an overall pool that is decreasing according to the BLS There were
2.933 Million workers in "Computer and Mathematical Occupations" according the BLS in 2000 [bls.gov]
2.827 Million workers in "Computer and Mathematical Occupations" in 2003 [bls.gov]
Secondly, this job category has been affect massively by immigration polices that IT companies paid congressmen handsomely to get:
In this period, we had 300K new H-1b visas issued inside the cap to folks that went to work in IT.
Probably about - 80K visa holder went home at the end of their visas(about 50% get permanet residency)
80K The US pool of IT workers expanded by about 80K (natural increase--this is probably way too low because the retiree pool is small and the academic programs expanded dramatically)
20K visa holders "went illegal"(Which they can do now that they have friends in the USA). This proportion is a guess. This number may be quite a bit larger due to the tendency of folks to use business visas this way.
100K IT workers that came in outside the cap to folks in IT (this is an estimate)
100K IT workers that came in under L-1 (this was lower then and is just now getting ramped up(this is an estimate)
100K IT workers that came by other means(married a US citizen or chain migration)
The estimates are necessary because the figures the government keeps are so bad.
If we had the above up, we get around 640K. So we are looking at about a 21% displacement rate of US tech workers overall during this period-and this is probably much higher in some categories like DBA's and programmers-and much less among statisticians and actuaries from looking at the BLS category.
The issue here is that in many cases there is an active bias towards hiring foreigners for these jobs. Businesses like Enron like having a workforce that they can control (due to the illegal nature of their business). Managers at places like Hewlett Packard see as part of their personal "bottom line" the ability to get friend and family "green cards"(which would be worth upwards of $100,000 if they could be purchased on the open market). It is quite simply worth considerable investment and organization to obtain those immigration rights. Acting like simple "education" of US workers will solve the problem is sadistic in this context.
Re:Chewbacca Economic Theory (Score:3, Informative)
- The companies who save money outsourcing buy other things - increasing jobs for those companies who sell those other things
- The companies put the money into the bank - increasinng the money supply, causing interest rates to lower, resulting in more loans. More loans means people use that money to buy stuff that they want - increasing jobs for those companies who sell the stuff people want.
- The companies put that money into increased profits for the owners of the company, who then turn around and do one of the two things above - resulting in increased jobs for whereever that money gets spent.
Outsourcing transfers jobs from those who are overpriced (for the available market) to those who are underpriced (i.e. to where there's demand - increasing the price of those jobs). Yes, it stinks for those who lose their jobs, but in the long run even they benefit by the overall economic increase in efficiency.$.02
Re:CEOs (Score:3, Informative)
True story: Once upon a time I worked at a large energy trading company. Not Enron, but a competitor that got hit hard when Enron screwed the market. Not that my company did not have its share of problems!
I was one of 500 people that were laid off in a single day (I think the layoffs eventually totalled about 1000). The execs announced that the layoffs were necessary to save $25 Million. Three weeks earlier the top five execs in the company awarded themselves an additional $25 Million bonus. In addition to their existing salary, and on top of the 'normal' bonus they had already awarded themselves. This was just extra money being distributed among only five people.
Re:Chewbacca Economic Theory (Score:3, Informative)
I agree that there's still a need for your (and my) skills. Just not at your (and my) wages.
So don't. Figure out a way to take advantage of the new efficiency. Maybe you don't program everything yourself. Instead, with the cheap labor for programming, you build that great big project that you've been wanting to build and sell it yourself. You should be able to do this much more economically now since the cost of programming has gone down. Or you could try and translate your programming skills into something else. IT audit is in high demand as a result of Sarbanes-Oxley. This requires programming skills and is very difficult to outsource.Unfortunately, I hear you advocating that we stop the flow of outsourcing. The ONLY way to do that is through some form of government intervention (i.e. legislation). This is not substantially different than the government forcing americans to buy Hondas made in the US for twice the price of the same car produced in Japan (e.g. by banning the import of the cheaper japanese model). It's the exact same car, but one is produced less expensively. This will certainly save the jobs of the Honda plant in America. But it will cost jobs of someone else somewhere else. American citizens can't buy the things that they would have bought with the extra money that they would have saved. The people that produce those things will have to cut back jobs in order to support the Honda plant jobs.
The better scenario is to let people decide how they want to spend their money. By doing that, we will produce what society really wants. The things that are really wanted by society will be funded. Other things that are wanted by society will be funded less expensively, and everything else (the things that aren't wanted by society) won't be funded.
The alternative is to fund the things that society doesn't want at the expense of not funding the things that society does want. Legislate job protection and get the latter. Allow everyone (even corporations who outsource) to purchase the things they want based on their own criteria, and you get the former.