Political Salon: Outsourcing
Submitted by James on Sun, 02/17/2008 - 9:20pm
Every month my wonderful wife hosts a political salon in our home. Tonight's guest speaker is Art Benavie.
(Just to be clear, this is my report, not my opinion)
Overview of outsourcing
Yes, outsourcing does lead to jobs being eliminated. BUT ... let's say a firm needs to cut costs. Outsources ten jobs, but preserves 80 others. In economists terms, that's a net increase.
Some jobs get stimulated when companies cut costs. Outsource a call center, cut the price of the product. Sell more. Hire more sales people. Yada yada.
When firms outsource and they cut their costs, their profits go up. They invest those profits in innovation, technology, equipment, training services, etc. When they're buying this stuff, other industry sectors grow ... even though the company may have outsourced.
Outsourcing motivates in-sourcing (architectural services, consulting, entertainment, etc.) This is stuff other companies buy from us.
Bottom line: Impact on jobs of outsourcing is uncertain. You can't use the practice of outsourcing (either way) to influence employment policy.
How many people leave their jobs every week in this country: One million. This number is called "job churn." Forty percent of them are fired. That adds up to about 1.5 million people will be laid off every month (for all reasons). Studies show that the number laid off because of outsourcing is 30,000 at the absolute highest. In other words, 2% (maximum) of those who are laid off every month.
What's the relationship between outsourcing and the overall labor market. Art reports four studies which say that it's basically a wash. Sometimes outsourcing increases employment, sometimes decreases, but net-net it's a wash.
How many people leave their jobs every week in this country: One million. This number is called "job churn." Forty percent of them are fired. That adds up to about 1.5 million people will be laid off every month (for all reasons). Studies show that the number laid off because of outsourcing is 30,000 at the absolute highest. In other words, 2% (maximum) of those who are laid off every month.
What happens to people who get laid off as a result of outsourcing? Study from 1977 to 1995, within the space of a year 70% got job. One third got higher pay. One quarter ended up with lower incomes. The rest earned less or didn't find a job at all.
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What to do about it?
Trying to restrict outsourcing is not a good policy. Better to focus on helping those affected. But we basically suck at that. We currently do not do enough, and what we do ... we do badly. For example, we have the highest drop-out rate of any industrialized nation.
We should expand job training services to include everyone, not just those who are affected by layoffs. Firms will invest inadequately given the "free markets." We need a training investment tax credit to encourage training and retraining.
When you put $1 into helping someone get a job, they become taxpayers instead of tax-eaters. Also better to focus on broader kinds of training.
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Trade adjustment assistance
New bill in Congress is aiming to cover training for service workers - up until now the training has covered only manufacturing workers. There's also a health care tax credit, which currently stands at 65%. The goal is to increase that to 100%.
Tolerance ends
Reading
Bad Samaritans
by Ha-Joon Chang
Some of the ideas in it might even help this struggling nation.
Interesting. Looks like a good read.
Tolerance ends
Wachovia Corp in Winston Salem is offshoring local jobs
Employees in the down town center in Winston Salem have had to spend weeks training employees from Gentec to do the jobs.
The goal of Wachovia is to offshore about 80% of all US jobs, many of them purely clerical.
After a few weeks, Gentec and Wachovia management evaluate how many of these jobs can actually be sent over to India, given to Gentec Corporation to do.
One area is ACH. Some parts of loans were sent.
I'm not talking about IT jobs, I mean handling personal and corporate accounts, and more.
Wachovia (and other big bank corporations) will keep enough US people so that they can claim you are getting help from an American citizen.
Now, I'm not against the poor folks in India, but my friends have to eat too.
The employees are mostly women who depend on these jobs, and there aren't many new jobs to go to.
More and more jobs are being offshored, its much worse than the perceived problem of people coming to this country to pick apples or work at fast food.
So is the N&O
A bunch of ad design jobs went to India and the Philippines.
Nice.
When the manufacturing base in Moore and surrounding counties
disappeared, there was a lot of help for people to get retrained for new careers. The trouble is - the manufacturing jobs paid between 10 and 13 dollars an hour. The jobs that they have been retrained for: child care teacher, CNA pay just a little over minimum wage and usually don't have benefits such as health care or sick days. It's a shame.
Be the change you wish to see in the world. --Gandhi
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"My darling girl, when will you understand that 'normal' is not necessarily a virtue. It rather denotes a lack of courage." - Alice Hoffma
Married into a family of former mill workers
and even worked in a mill for a while too. The mills paid pretty good wages so too many didn't finish high school or further their education because they already (in their mind) were in a job where they could make the most of their lives. NAFTA/CAFTA taught many of them a hard lesson.
Perhaps we should follow the lead of European countries and provide a technical path in schools (not requiring them to go on another 2 to 4 years)so they'll be ready to either apprentice or go to work right out of high school.
Some people don't want high-paying, high-pressure jobs, they just want enough to be comfortable.
The Republican's Capitalistic/free market society had it's time and will continue for a while, but won't the pendulum eventually swing the other way?
No matter that patriotism is too often the refuge of scoundrels. Dissent, rebellion, and all-around hell-raising remain the true duty of patriots.
Progressive Discussions
There was a time in my life I would have disagreed with that.
But not now. Everyone has potential, but those potentials are different, and everyone should be allowed to make the most of the potentials they have, not forced into boxes.
Be the change you wish to see in the world. --Gandhi
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"My darling girl, when will you understand that 'normal' is not necessarily a virtue. It rather denotes a lack of courage." - Alice Hoffma
The trouble with this statistic:
is the fact that most of those 30,000 jobs won't be replaced. They're not churned, they're gone.
I've been watching these trends since the early 1990's, and things seem to constantly even out until you look at the growing percentage of people who are under-employed.
Sorry, I ain't buying it, and this argument is beginning to sound similar to Global Warming denialism. Outsourcing is a huge problem, that (more often than not) impacts the middle class, and no amount of rationalization can change that.
More bullshit!
I've been around for a while, and I can remember the 'free enterprise' crap being spewed by 'big steel' back in the 1960s. We were the top steel producer anywhere, but our execs of US Steel, Bethlehem, etc. decided not to put much back into their mills to upgrade. Meanwhile the Japanese gov't got behind their industry to build the biggest rolling mills in the world at the time. We were told it would still even out because of 'free markets'. The rest is history, as we all probably know someone who lost their jobs and pensions, etc. So, now we've been fed this free market theme again, to justify outsourcing. The problem being, there is no free market, and never was. These corporations bought out congress and get tax breaks to operate overseas, and even more breaks to get those places set up and running. And just try going to those countries and do your 'free market' without payoffs. You'll find yourself in some medieval dungeons that everyone thought disappeared with the modern age. This is all about the top execs getting big kickbacks by pitting sweatshop labor against a living wage. It has already been established that this generation is the first to earn less than previous generations. And we still think that borrowing big money to put our kids through college will guarantee their future. Well IBM is the latest to decide to invest ten billion in India, because they believe in THEIR future. When you outsource all these technical jobs, at first it looks like a winner. Then you realize that now the engineering and science jobs are following the overseas route. If we all think this out a little, we wouldn't be led by these phony ideologies.
Wipro
And now the giant Indian firms are going on a buying spree. Which major US companies do you think are already in their sites?
Tolerance ends
You are so right, denno.
I don't like to be anti-global, or run the risk of being called xenophobic again, but we've got to take a long view and learn from past mistakes. We lost manufacturing because we let the "free market" take care of it self. We will lose everything else if we don't invest in ourselves and our industries.
Be the change you wish to see in the world. --Gandhi
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"My darling girl, when will you understand that 'normal' is not necessarily a virtue. It rather denotes a lack of courage." - Alice Hoffma
I'm not defending this
or even vouching for it. I'm reporting what an economist said in a meeting. And I'm really looking forward to reading the book Kirk referenced above, which is the first I've seen that looks critically at the so-called global economy.
Tolerance ends
It is a subject that should be
vigorously debated, because there are inconsistencies and irrelevancies on both sides of this issue.
I also believe that Globalization is inevitable, but it is more likely than not that the U.S. (as a whole) will suffer for it. How much we suffer is the question that needs to be faced, and what steps we can take to mitigate the problems.
Yes, globalization is inevitable.
But in order to see how we might fit in, we have to have honest brokers doing the bargaining. This country really came onto the world trading stage in the nineteenth century. Our businesses up and down the east coast had a reputation as hard bargainers who fought for their US companies. Now we have these phony trade reps giving every thing away, without any of the trade laws written into agreements, or any enforcement. It's hard to compete when your broker is selling you out every chance they get. The Japs learned a while ago that this country will sell itself out for the right price, and the rest are just following their blueprint. Sorry if I come off as being pessimistic, but I came from a time when we were at the top of the mountain, and have watched powerlessly, as the parasites have squandered all our promise.