by Mike Masnick

Actual Numbers On Who Benefits From Offshoring

from the maybe-it's-not-so-bad... dept

One of the more controversial topics around here over the last couple of months has been the issue of tech companies sending jobs overseas. During this debate, I've maintained two main points: (1) companies that are doing this without thinking are going to realize that there are unexpected costs to offshoring - and those who rushed into it will regret some of the decision to do so and (2) on the whole, though, offshoring in many situations is a good thing for the US economy, even if it sucks for those directly impacted. It's that second part that seems to be controversial, and many people seem to be in favor of protectionist policies that are only likely to cause more problems. If we force jobs to remain in the US, they'll still be created overseas, but run by non-American companies, making American companies less competitive. Now, McKinsey has done some research and provided some numbers suggesting how the US benefits from offshoring that answers many of the questions people have brought up. The end result shows, that the overall benefit for the US is definitely there, as each dollar of spending that goes overseas, will bring back at least a $1.12 into the US. They go through a pretty complete explanation of how they come up with this number which is worth reading, showing how profits come back to the US creating new jobs, more equipment spending comes back to the US to support jobs overseas and redeployed labor within the US economy, which often boosts the economy. They also point out with baby boomers reaching retirement age, it's looking like the US economy is going to need more workers in the very near future, not fewer. The article also addresses historical issues of workers who were displaced by previous offshoring trends, showing that the majority of them find new jobs at similar rates of pay in a fairly short period of time - and they expect the average time to be even shorter with service workers, where the people are more highly trained, and the skills more applicable to a wider array of jobs. Clearly, some people do get left behind, and it is not (at all) a fun process to go through. So, those who are impacted directly by offshoring have every reason not to be happy with the practice, but so far, all of the solutions they seem to come up with create a situation that makes things worse for the US, rather than better. Creating better incentives for companies to hire and train these displaced workers is the most sensible plan I've heard so far.

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  • identicon
    dorpus, 27 Oct 2003 @ 3:04am

    Beyond Borders

    I saw the new movie Beyond Borders over the weekend, which detailed refugee camps in all the gory detail, down to the bandits/rebels who attack camps and slaughter bunches of people.

    The protagonists spent much of their time desperately scrambling for money. (In the end, the heroine steps on a land mine and gets blown to smithereens.) It occurs to me in the 21st century, couldn't the refugees at the camp be put to work cyber-begging on the internet? Hook up starving children to satellite connections and have them telemarket U.S. households. At the same time, I imagine programmers with ribs showing, getting butchered with machine guns by bandits -- how layoffs are done in Ethiopia.

    reply to this | link to this | view in chronology ]

  • identicon
    Thomas Jones, 27 Oct 2003 @ 8:11am

    Offshore services are identical to those they repl

    "Offshore services are identical to those they replace--and at times better because offshore workers, enjoying higher-than-usual wages, tend to be motivated."

    Wow! Did that comment just slip by everyone without notice? I'm not sure what a find more suprising, the hopeful delusion that "any warm body will do" or the hypocritical statement that high wages make for more productive and motivated overseas employees...but Americans just get fat and lazy.

    It is no accident that the weathiest and most influential citizens of these countries send their kids to get their education in the USA.

    Where are the "actual numbers" (laughable marketing speak) that support the assumption that "Offshore services are identical to those they replace"?

    Did you find the your last experience with overseas tech support...identical to what you received in the past.

    reply to this | link to this | view in chronology ]

  • identicon
    Bryan Price, 27 Oct 2003 @ 8:42am

    I don't believe it

    For starters, let's not even bring up possible US protectionism. Let's bring up the very real and already in place protectionism that already exists in India and other countries. If I lose my job to India, I think I should be able to move to India, and do my job there, at their job scale pay. This is impossible right now.

    Things are truly not equal. If protectionism is bad for the US, why isn't it also just as bad for India? The article talks about comparisons, but they are not comparing apples to apples.

    The talk about economic restructuring is nice, but just what are the people that are loosing these jobs (good paying jobs I might add) replacing them with? Retail sales at the latest electronics superstore? Does the people looking at this report realize that means a pay cut of around 75%? Put on top of the pay cut irregular hours and working Saturday and Sunday, and a real wrench can be thrown into that workers family life.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous, 27 Oct 2003 @ 1:11pm

      Re: I don't believe it

      The thing that's fitting in this scenario:
      The towelheads are losing their jobs to Croatians.
      The towelheads are bitching about this as well.
      Pot? Kettle? Black.

      reply to this | link to this | view in chronology ]

  • identicon
    Chris Hanson, 27 Oct 2003 @ 12:48pm

    That $1.12, where does it really go?

    Does that $1.12 for every $1 spent overseas really come back to us in the form of new jobs?

    Or does it go to things like bonuses for upper management personnel, who then make a trickle-down argument that by having more money they'll stimulate the economy more? ("This time for sure!")

    reply to this | link to this | view in chronology ]

  • identicon
    FreeWine, 27 Oct 2003 @ 2:18pm

    More 'Actual Numbers' McKinsey-style

    I estimate that for every dollar of savings Sr. Management claims, at least $.12 of costs are overlooked, ignored or covered-up to prop up their bonus schemes.

    reply to this | link to this | view in chronology ]

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