Jobs going overseas

I know it's been mentioned in a few threads, but I don't think it's been addressed by itself. Many US companies are shipping job overseas in an attempt to save money. Manufacturing jobs have disappeard in the past, but now we're seeing mainly white-collar jobs go, especially programming and support jobs.
Personally, I think most companies are going to see this come back to haunt them, as the short term savings in salaries are going to be outweighed by having to fix sub-standard cose, not to mention the customer backlash from bad support. However, I see no legislative way to keep companies from doing it.
I'm generally in favor of the government keeping out of telling companies how to run their business, with a few exceptions (anti-trust, securities fraud, that sort of thing).
This is largely an economic issue, and I think has to be dealt with as such. If we oppose this sort of thing, don't buy that companies products. Don't buy stock in that company. Creating more laws doesn't really help.

Any thoughts?

I''d agree on the boycott, but anymore that would mean we pretty much can''t buy anything. We''d have to only buy foreign products which don''t support American corporations.

Sadly, this is the new reality we''re stuck with, at least until our own consumer economy implodes due to an overabundance of low-paying low-skill jobs and a lack of middle- and upper-class jobs available.

As I posted on this thread,I think it is a mistake for companies to move tech jobs overseas. Also, as there is a certain national defense interest here, some governmental control might be in order.

I love you guys, but you really know nothing about the way economies work. Jobs are just like any other commodity in a free market. Sure, it''s easy to point at someone that lost a job and say ''we have to do something'', but that is exactly the wrong thing to happen. That is the reaction of being able to see a person suffer, but not being able to ''see'' the benefits of letting a free market work.

The current study that people are in an uproar about says that the US will outsource 3.3M jobs by 2015. 500,000 of them will be in the IT sector. ""Eek! Let''s close our borders and hide our heads in the sand! What can we do to save ourselves from the evil corporations?"" Is that about right?

Here''s reality. Just like trade in goods, trade in services forces painful redistributions of employment. However, the truth is that outsourcing is less of a threat than US workers understand, and there are enormous benefits to the US economy.

There isn''t a one-for-one relationship between jobs lost in the US and those gained overseas. For example, outsourcing of IT services typically leads to domestic job losses of less than 20 percent. To say that more clearly: for every 100 jobs sent overseas, only 20 US jobs are actually lost.

In addition, a recent report on offshoring from McKinsey estimates that every dollar of costs the United States moves offshore brings America a net benefit of $1.12 to $1.14 (the additional benefit to the country receiving the investment comes on top). Part of this arises because, as low value-added jobs go abroad, labor and investment can switch to jobs that generate more economic value. This is what has happened with manufacturing: employment has dwindled, but workers have moved into educational and health services where pay is higher (and conditions often more agreeable).

The increases in efficiency that corporations will be able to enjoy will also have ancilliary benefits. For example, the globalization of computer hardware manufacturing led to a 10 percent to 30 percent decline in prices. This made computer equipment more affordable and led to a far greater increase in jobs in the long run than were lost initially when production went abroad.

In another thread, someone mentioned the fear of shipping technical expertise overseas. I assume that reference was a fear that US innovation would suffer. Perhaps all those bright young Chinese and Indians will steal not just jobs but the rich world''s most precious skills.

To such fears there are two answers. First, some innovation will undoubtedly move abroad: the relocation of research and design, and the enormous increase in the numbers of highly trained graduates, will ensure that happens. But the transfer may be slower and more modest than the isolationists fear. Innovation needs the right culture to flourish. Chinese and Indians in California generate more new ideas than they do in their homelands. I say with some confidence that America''s long tradition of embracing new ideas and new ways of doing things, combined with a willingness to question authority, ensures that we will continue to foster innovation more effectively than most industrializing countries can do.

Second, innovation abroad makes everyone richer. Remember, the British once feared the rise of America''s industrial might: today, both nations are vastly wealthier than they were. In services, as in goods, trade brings benefits too great to refuse.

If we oppose this sort of thing, don''t buy that companies products. Don''t buy stock in that company.

Interesting position. So to keep these companies from laying off their American workers, you want to boycott these companies, causing them to go out of business and lay offalltheir workers, presumably including the American ones? Are you just trying to add insult to injury?

I will never understand the theory that it is better for millions of people to pay higher prices, than for a few to lose their jobs. You know that these people can get other jobs, right? Or do you just long for the days when personal computers were all over $5,000 (and that was in 1980 dollars) and cars got 15 miles to the gallon?

From Walter Williams

I don''t know about you, but I always try to get the lowest prices for what I buy and the highest prices for what I sell, and that includes my labor services. Is such a practice immoral? Nobody is forced to sell me anything at my preferred price, nor are they forced to buy from me at my preferred price. If we indeed transact, the only thing a third party could conclude is that we both saw ourselves as being better off than our next best alternative, or why would we have voluntarily transacted?

You say: ""OK, Williams, you''re right. But where are you going? How many times have we heard the accusation that a corporation moved overseas to take advantage of lower-priced labor or hired cheaper-priced Indians with HB-1 visas to replace higher-priced American high-tech workers? You''d think that a desire for lower prices is somehow immoral. Why should a preference for low prices be OK for you and me, and not so for CEOs?

It''s a good question. Here''s another one: Why is buying from a company shipping jobs overseas any worse than buying products from foreign companies? Are those of you opposed to this practice only buying American for your cars, stereos, televisions, food and clothing?

In another thread, someone mentioned the fear of shipping technical expertise overseas. I assume that reference was a fear that US innovation would suffer.

There was an additional caveat to that statement. I was asserting that an emergency situation such as a war or widespread computer problem would find America lacking in skilled technical people if this trend continues. I''m not saying there won''t be any tech jobs at all for people in America anymore, but I suspect there will be a geographic consolidation of tech jobs much like there has been with manufacture; meaning most of these jobs will be in a few tech-heavy areas.

Furthermore China is probably one of the worst countries to entrust with either technology or tech job dependence. I like free trade as a general rule, but not with governments who are openly at odds with my country.

I''m hoping that this is still on-topic...

Question for JMJ or any other economics buff here:

What is or will be the economic impact of ""importing"" low wage (lower than minimum wage) workers into the US. Specifically, I''m talking about illegal immigration and the jobs that these people are hired to do. There are millions of illegal immigrants here in California that many companies take advantage of or even count on to turn a profit. Outside of the human element is this positively or negatively affecting our economy, taking into account taxes paid/not paid, burden on infrastructure (healthcare, food stamps, etc.), crime, etc. Much of this ends up getting paid for by the taxpaying citizen.

I know this may not be an answerable question because we really don''t have enough data.

"ralcydan" wrote:
If we oppose this sort of thing, don''t buy that companies products. Don''t buy stock in that company.

Interesting position. So to keep these companies from laying off their American workers, you want to boycott these companies, causing them to go out of business and lay offalltheir workers, presumably including the American ones? Are you just trying to add insult to injury?

I will never understand the theory that it is better for millions of people to pay higher prices, than for a few to lose their jobs. You know that these people can get other jobs, right? Or do you just long for the days when personal computers were all over $5,000 (and that was in 1980 dollars) and cars got 15 miles to the gallon?

That''s not quite what I meant, although I do see your point. The example I was thinking of was with Dell''s tech support. They sent quite a bit of it to India, but brought the corporate support back over because to many of their customers were complaining of bad service.

They sent quite a bit of it to India, but brought the corporate support back over because to many of their customers were complaining of bad service.

This is why I don''t get all starry-eyed about capitalism at work when companies do stuff like this. Trying to claim workers are a commodity doesn''t work if you ignore the quality of that commodity. You can switch to using cheap, substandard steel as a construction company, but don''t whine when people don''t want you building for them. If your customer support people barely speak the language of their primary customer base, the customers aren''t going to be happy. Don''t whine that those darn needy customers are putting you out of business by insisting on the customer support you promised when they purchased from you.

A good breakdown of the issue of jobs going overseas:

From Alan Reynolds

Those afflicted with an irrational phobia about international trade used to confine their raving to manufactured goods, not services. But the United States is now said to be exporting high-paying service jobs to India, particularly in information technology.

Worrying about U.S. companies importing services from India is a classic example of the journalistic inclination to ignore the forest and focus on a few twigs. The United States is by far the world''s biggest exporter of services, just as the United States is by far the leading exporter of goods.

The United States accounted for 18.1 percent of worldwide service exports in 2001, according to the WTO, up from 17 percent in 1990. India accounts for only 1.4 percent of world service exports. India is in 21st place among world exporters of services and in 30th place for goods. India is running a trade deficit of about $8 billion, and that country''s imports rose 20 percent in 2003. China ranks fifth among world exporters of goods (although China accounts for 11 percent of U.S. imported goods), and it has a small and dwindling trade surplus. China''s imports rose 40 percent in 2003. Hong Kong is a significant exporter of services, but it has a trade deficit with the United States.

The United States had a $64.8 billion trade BEG ITAL) surplus in services in 2002, despite economic stagnation in Europe and Japan. Services accounted for 30 percent of all U.S. exports and 43 percent ($3.1 billion) of U.S. exports to India.

Worrying about job changes among computer professionals is yet another example of the journalistic inclination to totally ignore any facts about the big picture and instead generalize from small and local anecdotes.

The Bureau of Labor Statistics categorizes these allegedly vanishing jobs among ""computer and mathematical science occupations"" -- i.e., computer programmers, software engineers, systems analysts, support specialists, network administrators, etc. These jobs exploded with the tech boom, rising 11.9 percent in 2000 alone, but such panicky hoarding of computer geeks was no more sustainable than 5,000 on NASDAQ. Even in 2002, however, employment in these computer-related occupations was nonetheless higher than in 1999, and so were salaries.

In 1999, there were 2,620,080 jobs in these computer-related professions at an average wage of $26.41. In 2002, there were 2,772,620 such jobs at $29.63 an hour ($61,630 a year). Figures on that specific job group are not available for 2003, but professional business service payrolls were up 2.3 percent by November, when compared with the year 2000, and jobs in information industries were up 4.9 percent. Jobs in the subgroup of ""computer systems design and related services"" are down slightly from last year but have risen steadily for the past three months.

The notion that service jobs are being lost to India is paradoxical because similar complaints about China or Japan invariably involved disparaging U.S. service jobs as ""McJobs"" -- inferior to working with a sewing machine or wrench. In the case of India, however, even the most menial computer service chores -- such as tech support and handling health insurance claims -- are now being glorified as ""high-wage"" jobs.

Past stories about ""exporting jobs"" also assumed those jobs had moved to countries with trade surpluses, such as Japan and Germany. But India has a sizable trade deficit, and it even had a deficit in services until 2002. This is not to suggest, however, that previous stories about trade surpluses being a sign of economic strength made sense. On the contrary, from 1990 to 2001, employment grew by 1.2 percent a year in the United States, but by only 0.3 percent in Japan and 0.1 percent in Germany.

Trade phobia has lost any sense of direction. The United States is now said to lose jobs to countries with trade deficits as well as to countries with trade surpluses, and to lose jobs in services as well as manufacturing. Some even suggest the United States will lose most service jobs to India and most manufacturing jobs to China. But without jobs, how could Americans keep buying all those imports?

A New York Times report claimed India is attracting a lot of direct investment from multinational corporations. Yet Morgan Stanley reports: ""Private corporate investment (in India) is estimated to have declined to 4.7 percent of GDP in 2003 from 9.6 percent in 1996. ... In April to September 2003, FDI investments have declined by 63 percent compared to the same period last year.""

The United States has always imported and exported services as well as goods. So what? Even if we ignore this country''s huge and growing dominance of world service exports, it would still be delusional to speak of importing services as equivalent to exporting jobs. The notion that ""exports create jobs"" (every commerce secretary''s favorite slogan) is neither more nor less true than the idea that imports create jobs. Work is involved in all creation and marketing of goods, services and financial assets. Work is also involved with the extra investment resulting from a net inflow of foreign capital, otherwise known as a ""current account deficit."" Growth of employment is related to growth of the economy, not to imports or exports or the gap between them.

If the United States was really losing more jobs than it was gaining, then employment would be falling. But employment is rising. There were 138.6 million civilians with jobs in November, up from 136.5 million a year earlier. The number of U.S. jobs doubled in fewer than 40 years. If the rapidly expanding number of jobs were inferior to the ones that preceded them, then incomes would be falling. But incomes, too, are rising. Real hourly compensation kept rising even in the recent recession and is now up more than 26 percent since 1980. Real disposable income (which excludes stock market gains) rose at a brisk 3.9 percent annual rate cent from April to November.

The media blitz about imported goods or services resulting in the best jobs being relocated to some variable list of countries -- first Japan and Germany, now India and China -- has never been anything more than unadulterated hogwash.

I can accept that net US jobs go up as the economy improves. Also I have probably fallen a bit victim to my own emotions in this discussion. I have never argued in favor of any kind of protectionism before, so my arguments probably aren''t very well refined. With all that said, I still have a few concerns related to this (but not exactly on topic) that I will probably work together and put into a future thread.