Offshore outsourcing - the Obama effect

There are two hot topics in the offshore outsourcing industry today-first, what the likely impact of the recession will be and second, what will be the likely impact of Barack Obama's presidency. While the former has attracted some good intellectual debate, with sound arguments and evidence to support both sides of the story, the latter has received pretty naive coverage, mostly from senior executives of offshore outsourcing or advisory firms desperate to allay their customer's concerns.

One fundamental question that they fail to address is why Obama should care about offshore outsourcing. If it was so simple and so straightforward that offshore outsourcing is good for corporations, good for countries, good for economies, then why would Obama even consider doing anything about it?

The debate began when Obama campaigned, "I will stop giving tax breaks to companies that ship job overseas, and I will start giving them to companies that create good jobs right here in America." This was subsequently detailed in October 2008 as a $3000 tax credit for the next two years to businesses, for each new full-time employee they hire onshore. The general response to this scheme has been that it hardly matters and will not make any difference to companies engaged in offshoring. The credit amount will be made up by just one month due to the wage differentials. Some concerns also arose about whether Obama will cut the current H1B visa cap of 65,000. But this fear is largely unfounded – Obama in fact favors a temporary increase in limit and a permanent reform of the system, as stated in a pre-election interview.

Recently, as if to allay all concerns about potential adverse impact of his stance on outsourcing, Obama filled some of his top White House posts with people who not only support expanding the H-1B visa program, but see offshore outsourcing as a plus for the U.S. economy.

But is offshore outsourcing a plus for the US economy? This is a question being asked increasingly not just by economists, but also by ordinary US citizens hit by the surge in unemployment.

When offshore outsourcing started, it was at a micro level. Companies were happy with this new supply of high-quality, low-cost labour, and no one was complaining. Then companies started offshoring in droves and it became a macro-level phenomenon. McKinsey recognized this trend, built up a consulting practice around it and won many projects in advising governments on how to tap the global labor market using outsourcing, and advising companies on how to get their global sourcing strategies right. Offshore outsourcing works for all was the general perception.

More: http://www.cio.co.uk/article/121523/offshore-outsourcing--the-obama-effect/?intcmp=HPF3

I can't say I didn't expect it, but I was hoping otherwise.

:sarcasm:

The truth is, there are good people worldwide and there are bad people worldwide.

"prepare the workforce for the future (the high-end personal services occupations that cannot be offshored) "

My technical background has prepared me well. :sarcasm:

...servants...I mean services.....so it's full speed ahead with the SERVANT ECONOMY....the SERVICE ECONOMY.....the SERF ECONOMY?

Hey...if you own the media...you can sell them ANYTHING! :patriot:

The writer, Arpit Kaushik, seems to have given up when he stumbles upon this guy Blinder.

"Professor Alan Blinder of Princeton University says off-shoring will force major changes in the industrial economy, in terms of job content, job location, wages, job security, turnover, standard of living and so on. That's an economic reality and many will not like it. Moreover, the societies of the rich countries seem to be completely unprepared for the coming industrial transformation."

Or perhaps the societies of the rich countries are just unprepared for the melting away of the largest consumer market in the history of the world, along with it's tax paying middle class citizens. For outsourcing to work, there has to be a market for huge corporations to sell their bountiful supply of poor quality crap. If you can't sell 1 high quality coffee pot that doesn't catch fire at $20, what makes you think you can sell 2 poor quality fire trap coffee pots for $10? No market, no use trying to whittle down the cost of labor and increase profits through quantity sales, like Wal-Mart does. Every time a job is outsourced in the US, the corporation depletes the market it is trying to sell to. China, Korea, and India together don't buy enough corporate produced crap to equal a quarter of the market in the US. Outsourcing works (or use to work until the consumer lost too many good paying jobs) as long as you don't whittle down too much the Middle Class jobs that are supporting the consumer market. But we have now reached critical mass in lost jobs so that it is now affecting the consumer market which makes up 70% of US GDP.

But unfortunately for logical minded people Blinder goes on....

"In such a scenario, it's tempting to erect barriers against off-shoring, But protectionism is not the answer."

Why, Why isn't protectionism the answer? What is meant by protectionism anyway? Is it tariffs? Is it protectionism to block the ever increasing loss of good paying US jobs, continued decline in purchases by consumers and shriveling of the market? If greed is good for corporate CEOs, then why can't the US use greed to strengthen it's economy by placing barriers on trade like the EU, China and India do.

But no we don't get to hear what protectionism really means, we just get more Blinder.

"Blinder suggests that U.S. transform its social safety net (unemployment insurance, tax credit, health insurance, pensions et al), prepare the workforce for the future (the high-end personal services occupations that cannot be off-shored) and climb up the comparative advantage ladder through innovation."

How can you strengthen a social safety net, when your tax base has no jobs to pay for the safety net? How can you continue to borrow for a safety net when the jobs continue to leak out of the country?

And what exactly are the high-end personal services occupations that cannot be off-shored? Doctors? Well guess what folks, insurance corporations are now outsourcing the sick to places like India and Mexico. Operations such as hip replacements, non emergency surgeries, and reading and interpretation of medical test are being sent out of the US for care and evaluation. There really isn't any job that can't be outsourced or covered by an HB-1 visa worker. Even cleaning toilets can be done by a visa worker.

But the writer wants us to change our mindset and just roll over for this labor arbitrage called outsourcing and HB-1 visas.

Rock and roll song. It doesn't play the same as a current lifestyle description for most Americans.