I agree with his argument but his example of the secretary is rather odd. Who would argue that an Indian university hiring a secretary constituted outsourcing of a job from Columbia University?

Hey Dan, I don't know if you read the comments section, but if you do, could you please recommend some reading on the economics of free trade, outsourcing, etc., that would be appropriate for laypeople? Preferably stuff that's not overly one-sided or dogmatic, as I'm sure the reality is quite nuanced. I'm instinctively inclined to believe that free-trade is a good thing for all, in general, but I'm also instinctively inclined to believe that without certain standards, it can produce an exploitive race to the bottom as well. It seems like the commentary I find on the web basically starts from one or the other position and builds from there rather than starting from a neutral position and examining both sides honestly. If you can recommend some reading that does take the latter approach, I'm sure alot of us here would appreciate it.

Thanks.

James,

I think you aren't fully understanding the point he was making. His basic point is that secretaries have largely been replaced by computers in this country, as a computer is significantly cheaper than a secretary. The converse may be true in India, that a secretary is cheaper than a computer, but its obvious that the hiring of a secretary in India, then does not tell us anything about the market for secretaries in the United States.

Think about it another way. One of the most cited examples of "exporting jobs" has been the movement of call centers overseas. Mr Bhagwati would argue (I think) that the call center is a thing of the past, at least in America. Since call centers, particularly for non-revenue items like customer support, are largely viewed as cost centers, companies will look for ways to reduce those costs. This can be accomplished by either moving them overseas or by replacing them with computers - think of the automated response systems now in place, or the way most companies try to encourage (in some cases not so gently) you to consult their website first for a solution to your problem. Heck, some 7 years ago, I had a bank account at Bank of America that charged me a $1 fee every time I spoke to a real person - it was clear then that they had no interest in operating an expensive call center. Either way, that call center here in the states was going to be closed anyway (at least in Mr. Bhagwati's mind).

Hope that helps.

I actually thought the example of the secretary was a good one...the same bundle of work can be performed in different ways in different places depending on the relative costs of various production factors (in this case, the secretary and the computer). But another one of his arguments was so weak that I couldn't believe he actually published it...talking about moving high-level jobs (especially R&D) overseas, he says "I have taught hundreds of fine foreign students..only a small fraction are at the level of proficiency that Intel looks for in its research programs." Well, only a small fraction of *all* people (including Americans) are at "the level of proficiency that Intel looks for in its research programs." This is a completely null argument.

Also, companies that view call centers as "non-revenue items" are missing the boat. It's usually much cheaper to get your current customers to buy additional products--which involves establishing good relationships with them--then to find & sell entirely new customers.

I agree that many companies are missing the boat by viewing customer service as a cost rather than as a distinguishing asset, but I do believe that the dominant view among corporations is that it is a cost center.

I almost felt bad for Schumer today on This Week...he was trying to express the anxieties of his constituents, and couldn't summon the arguments to compete...he just kept saying, basically, "this ain't right."

Schumer's constituents (and the country as a whole) would be much better if he focused on health care and beefed-up education and job re-training programs.

Dave, my favorite non-technical book on trade theory is:
The Choice: A Fable of Free Trade and Protectionism Updated Edition
by Russell D. Roberts
Prentice Hall; 2nd edition (May 1, 2000)
ISBN: 0130870528

It is one sided in that it is strongly in favor of free trade, but not dogmatic. The one sidedness seems to be more that that is the way the ecomonics works out rather than just blind faith. I've given away many copies of this book, many of which were passed on yet again.

Yes the free traders are right on the macro. However, every politician who is pro free trade must also acknowledge that while free trade is the 'good of the many', that Kerry's solution is the 'good of the few'.

That way the economist will sound like Spocky geeks instead of heartless capitalist apologists.

This is a bunch of lies. I know TONS of qualified engineers who have had their jobs moved offshore. You people are pathetic and ridiculous.

As someone who thinks Bhagwati is generally right, I still have to point out that losing some jobs to technology or even to Wal-Mart does not make losing other jobs to India more palatable, either to the people who are losing them or to the politicians that have to appeal to those people.

Economists who want their point about the benefits of outsourcing to be understood need to describe some actual jobs that the US can "insource" from other countries. Probably Americans can perform healthcare and financial service jobs better than those overseas. Why not say so?

I've posted these questions on several threads on this and on Brad DeLong's blog, but have yet to receive any responses. Any takers?

(1) It has been admitted that even if the country as a whole may be better off with job exporting (which is debatable, but let's pass that over for now), some groups will, if not compensated, be net losers in this game. What programs, if any, would you propose to ease the pain of offshoring and free trade on specific groups of Americans who are negatively affected by it? Please be specific.

(2) What do you think the political feasibility is of the programs (if any) that you would recommend?

(3) How would you respond to a point made in one of Brad's threads that there is no realistic possibility that the losers of offshoring will be compensated in any way, and that therefore it is rational for the individuals in these groups to oppose it even if it results in a theoretical benefit to the country as a whole? Is it your assertion that they should sacrifice the well-being of themselves and their families for the enrichment of others?

The point that I am making is that unfettered free trade is only viable over the long term if most of the American people are reasonably happy with their job situation and prospects. Economic rationalizations saying how things *should* work out only go so far, when they are clearly *not* working out right now, and there is no sign that they will any time in the near future. If you want to fight protectionism and the anti-offshoring movement, you'd better get cracking on the creation of good jobs.

Actually, once the technology is up to it, even my extremely specialized health care job can be outsourced (pathology - digital medical images are not up to scratch at this point and you still need to be boarded in this country). It will happen in time, though. What can my profession do to stay ahead of the curve? I think become channelers of this future flow of info - countries like India would have qualified physicians to do the basics, but we could set ourselves up as the ultimate referral base - have them 'outsource' back to the US. Whatever the challenges, we have to meet them head on and with confidence. Burying our heads in the sand won't stop the process.

Radiologists are reading x-rays from the US overseas. But you can talk to a radiologist in your town, so maybe the value added is someone who can explain things to you and make time for you as a patient?

The defense of outsourcing is astonishing to me for several reasons:

1. The typical mantra of retraining is a smokescreen. Pray tell, what do Americans who have lost jobs to outsourcing and H-1B visas retrain to? Honestly, what positions are permanently impervious to outsourcing? Practically none, when we get honest. You've got doctors in Malaysia operating remotely via robots because they can do it more cheaply than Western docs. Think about it. What would you tell your newborn child to go into when that time comes?

2. Many will respond that new technology fields like nanotech will blossom and replace those jobs in fields now being outsourced. Carly Fiorina of HP made this argument in last Friday's Wall Street Journal. But even a casual analysis will tell you that the same arguments being used to outsource tech jobs now will outsource nanotech, biotech, and any of a million other newly minted job categories. If the argument is always about money, then the American worker will ALWAYS lose.

3. Government-released figures have shown a destruction of 2.3 million jobs since January 2001. That is not jobs simply lost, but completely eliminated from the job rolls. What is scary about this is that The Wall Street Journal reported recently that 80% of companies are considering outsourcing. These companies have not yet done so, but if they follow trends, then we have seen only 20% of the potential job loss that could eventually come about.

4. Some well-respected economists are claiming that the United States is in a post-Information-based economy already. They claim that by 2015 only 2% of current jobs now held by American workers in information-related fields will still be held by Americans at that time. Many are claiming that the US is moving into an Entertainment-based economy instead. It doesn't take a genius to see that not everyone in this country can be an actor, athlete, or author.

5. Our own government continues to sell out American workers via H-1B visa programs. Orrin Hatch is lobbying for an increase (again) in the number handed out while also broadening the scope of jobs covered by the visa. So now even jobs that have been resistant to offshoring are in trouble. Two of the loudest voices are the airline industry and universities. H-1B visaholders are routinely paid 20% less than American counterparts and are also unable to jump the company ship, since the company holds the visa. How this provides a level playing field for American workers is beyond me.

So again, I ask the fine people here: what job do you move into that does not have to compete on an uneven playing field? Even better, what do you tell a programmer with fifteen years experience and a former salary of $80,000 a year to do to provide for his family right now in light of all this?

Thank you.

Patrick says.."I agree that many companies are missing the boat by viewing customer service as a cost rather than as a distinguishing asset, but I do believe that the dominant view among corporations is that it is a cost center."

I think that in business-to-consumer markets this view predominates, but business-to-business companies usually seem to have a better understanding of the importance of customer service in building future business. For one thing, many of the accounts are likely to be large enough that they can call up the sales VP and say, "Hey, do you know what your customer service guys just did to me?"

The most interesting irony is that John Kerry outsourced his phone bank calling in the Wisconsin primary to Canada. If the press were more evenhanded, it would have been a big story that the calls that the Kerry campaign was making to Wisconsin voters came from Ontario.

Of course, there is nothing wrong with outsourcing. But it's a tad disingenuous for Kerry to attack those who are doing what he has done, not in the past, but in the last week.

regarding the Dobbs/Glassman tangle, I found it surreal that neither of them mentioned that a huge chunk of our trade deficit is due to oil imports!!! we are bleeding wealth because we are energy dependent.
"Oil imports account for almost one-third of the total U.S. deficit"
See the Institute for the Analysis of Global Security: The true cost of oil and National Defense Council Foundation: the hidden cost of imported oil

Jeez, Edelen - I don't know; Get Mike Moore to make a Crockumentary about it?

You realize that that was the same crap they were saying about all of the automotive workers that expected full employment for the rest of their lives (well, 20 of them anyhow) when the tech jobs (read : programmers) started making a lot of the assembly line work redundant.

And you and all of your buddies were offering such sage advise and platitudes such as 'retraining', right? Feel for you, my man.

That said, I know where a programmer can make 80K soon enough. Get a commission and join the service. All of us are hiring (you may have heard, its a growth market) You should be able to make 0-3 in about 5 years and the beauty is, while your pay and allowances come to about $75K a year, you only get taxed on your base pay.

I can get you the hook-up, too. Try goarmy.com

No, don't thank me, I'm happy to have helped.

Nikita, my friend, I can help you too.

Get you a Toyota Prius, the '04. 60MPG, runs on - get this - actual gas, and it actually functions as a well-built sedan (Room for that family, Edelen).

Here's how it works:

Since your typical tree-hugger that's trying to economize - Take Dan Edelen, above, for instance - would normally be priced out of the "Green-Car" market, You get...

"What's that?" you say? "How?" Oh, well..Here:

"Green Mobile" @60mpg = $30K (ex. Honda Insight)
"Crappy Econobox" @30mpg = $9K (ex. Ford Aspire)

Even though you are doing the right thing by the gum'mint by reducing the national fuel average, you're taking it in the shorts, since you are never gonna make up that extra $21K at $1.50 a gallon. Anyways, where was I? Oh, yeah...

...the Gum'mint to offer incentives since it's in their best interest that as many people as possible drive vehicles that get really good mileage (reduced foreign dependency and all that). Which, by the way, they have.

Great consumer products company (and big-time employer)figures out how to knock $10k off their asking price, the Feds give you a $2K tax break and Dan Edelen's programming buddies can move to a state (free-trade) that offers a match. MO, to name one, offers a $2500 ULEV break.

That and the $100 a month you save on gas and now Dan can sleep soundly in Iraq, knowing that that his family can now afford to eat, and you and I are happy because smart people in the administration are seeing to it that there are market incentives for helping to reduce our need for Foreign Oil.

Man, that's two for two - I'm hot tonight.

CEOs who "outsource" labor are traitors according to John Kerry. Has anyone asked Mr. Kerry to comment on the obvious impropriety of H.J. Heinz Company, an American company, employing people in 22 separate companies?

Was money gained from the outsourcing of American jobs used to obtain the home that Kerry mortgaged in order to pay for his campaign?

Hmm...

If I were Kerry, I'd avoid references to Benedict Arnold.

The worry about outsourcing is astonishing to me. 75 years ago, nearly all clothing sold in the US was made in the US. Now it's a tiny percentage, and the factories in New England and the southeast closed. So, how are we better off? Well, those low-skill jobs are done by cheaper workers in other countries, and every single person in the US saves money on clothing purchases. For the many: a net gain. For the few (US textile workers): a net loss (usually transitory, since most workers found other jobs).

The $80,000 per year programmer who was replaced when his company outsourced his work to a cheaper foreign programmer has three choices: look harder for programming jobs, move up be a manager of programming teams, or find a new profession. Meanwhile, the rest of us benefit from the lower cost of software or from a business that can invest money saved on programming costs into other worthwhile ventures. Again, for the many: a net gain. For the one: a disruption and a (hopefully temporary) loss. By the way, the Veterans Health Administration needs programmers, too.

I find it amazing that no one has been able to answer my questions yet, despite the fact that they have been posted several times to threads in two different economically oriented weblogs. More and more it seems that the 'case' for outsourcing consists of casting aspersions at anyone who dares to question it. We hear trash talk from the likes of Tommy G and Dr. T about how this is life and we just have to take it - and no one seems to understand that if the gutting of the American middle class continues, all the trash talk of economists will mean nothing because the people will not allow it to continue.

Tommy G - just fyi - neither of those orgs i mentioned are greenies. NDCF, in fact, has Orrin Hatch, Trent Lott, and (when he was a Congressman also had) Dick Cheney as advisors. Depending for our oil on regimes that hate us is bad for our security and sending trillions of dollars overseas to feed our oil addiction is bad for our economy.

By the way, Motor Trend's Car of the Year for 2004, was the Toyota Prius, a hybrid vehicle that delivers 60 mpg.

Federal tax incentives for hybrid purchase

State tax incentives

oh, and Tommy G - the MSRP for the hybrid Prius is $20,510.

if outsourcing were a real menace, then why is unemployment LOW!

YUP... unemployment is as low now as in 1995, when the dems and the left WERE NOT BELLY-ACHING ABOUT IT!

Ditto their crocodile tears on the DEFICIT. It was this big (as percentage of GDP)when Clinton was in his second term. And the democrats weren't cryiong about it then, were they?!?!?!?

SO.... the first thing to remember is this: DON'T BELIVE THE POLITCAL BS!

Okay. Now, the REAL question is, "why is the charge on out-sourcing resonating?" BECAUSE THE DEMOCRATS ARE TRYING TO EXPLOIT EVERYONE'S FEAR OF LOSING THEIR JOB. If the democrats weren't out there VERYDAY TWICE A DAY telling people the economy sucked, then poeeple might realize how good things are. But the democrats always demagogue the issues and try to exploit people's fears. They always demagogue Medicare and Medicaid and Social Security. And Global Warming. It's all a lot of left-wing fear-mongering BS!

OKAY... the real issue is this: why has the end of the latetst recession - which started under Cklinton - not brought with it a quicker surge in hiring?

Well... the upswing in hiring after recessions has been steadily slowing sionce the 1960's. Companies find that they can do the same with less people; it's called PRODUCTIVITY. And it's good.

If anybody advocates more regulation and protectionism and wage controls and great-big unemployment benefits, well then... they're just advocating the system they use in continental OLD Europe, and there - as a result - THEY HAVE TWICE THE UNEMPLOYMENT AND HIGHER COSTS AND COMPANIES MAKE LESS PROFIT!
That's what the leftist policies bring: stagnation to the workplace, the economy, and eventualy extinction to the protected (and therby ineffecient) companies.

Which is why Europeans MOVE HERE!
AND... why foreign companies move here too. YUP: more Americans works for foreign companies here, then are hired by American companies overseas!

Just think of the auto-industry: remember the OIL CRISIS, and the JAPANESE INVASION of small cars?!?!? And Chrysler in trouble, nearly going bust!?!?!

WELL... therre are MORE auto-workers working on assembly lines today then in 1970. MORE. And plenty work here for foreign companies in NEW PLANTS!

So... stop belly-aching and stop listening to the belly-achers. PUHLEEEEEEEEEEEEZE!

What we have here is a hype-inflicted wound on the American worker.

Many of those 60-90 grand a year jobs are not really worth that money, and everyone knew that during the dot-com era and predicted that something would have to give. That rate of pay was never going to be sustainable for common tasks like database front-ends and custom reports and such. With everyone and their mother graduating college with a CS degree, H1b visas and immigrants aside, the labor market was always dangerously off balance.

I think the pink elephant here that nobody acknowledges is the "New Economy" that we heard so much about 5 or 6 years ago. Next time there is an irrational boom in an industry and people mention a New Economy, try to remember that this is where it leads to.

Firebug -
Here's a hint why nobody is answering your question: What the hell kind of answer do you want? We don't know the actual qualifications of your engineer friends who have lost their jobs, but they are the same as everyone else. Why don't you post a resume snippet or at least a description of last job held and rate of pay, and location, and maybe someone can direct them to a job to apply for, or suggest a career change that they might like.

That "Green" Toyota Prius does NOTHING to save the burning of fossil fuels when compared to a comparable econobox.

The difference in cost of the 52mpg (true mileage measurment of the new '04 model) Prius and a 35mpg Corolla is around $6000.

That cost difference is almost entirely due to the cost of the Lithium ion batteries which enable the hybrid function of the car. The batteries last about 125,000 miles.

Now for some math:

52MPG Prius for 125,000 miles burns 2400 gallons of gasoline.

35MPG Corolla for 125,000 miles burns 3570 gallons.

So the Prius "Saved" 1170 gallons of gas.

Energy cost of Lithium ion batteries is approximately 50% of the retail price, or $6000 *.5 = $3000

For batteries, the energy needed to produce them is the vast contributor to the price, this estimate of energy cost is relatively accurate.

So...

You spent $3000 of energy to save 1170 gallons of gas... See where I'm going with this?

The Toyoty Lithium Ion batteries are produced in Japan, which uses FOSSIL FUEL to create most of its electricity, the main energy needed to make the batteries.

At a price of $1.50 per gallon of gasoline (pre-tax) that $3000 buys 2000 gallons of gasoline.

Finally, I conclude that the Prius actually "Burned" 2400 gallons plus 2000 derived gallons of gas to go the 125,000.

Actual Prius gas mileage is equal to 2400+2000gal divided by 125,000 miles, or 28 miles per gallon.

The Prius WASTED SEVEN MILES PER GALLON.

But it sure make the irrational Greens happy!

Government subsidies of hybrid vehicles = Environmental NIGHTMARE!

j. pickens - its not "fossil fuels" that are the issue, it's imported oil. the US has for instance a lot of coal - a "fossil fuel" to use your term - energy we generate from coal and use to displace imported oil is a net benefit for us in terms of reducing our trade deficit and increasing our national security (less money to the Saudis and other Persian Gulf oil ticks.) So its not the overall energy consumption that is the issue - it is the oil we (and other countries) are dependent upon, and the fact that 75% of oil reserves are in the hands of Muslim countries.

Where the oil is

What the oil ticks do with it

What we can do about it

Nikita,
So, how does WASTING seven miles per gallon in a hyped-up pseudoenvironmental tax-abated vehicle help the situation?

Q. When will academicians decide that there is something wrong with outsourcing jobs?

A. When perfessers' jobs start being outsourced.

Firebug,

Dan posted something on this two days ago:

http://www.danieldrezner.com/archives/001098.html

o'danny boy and j.pickens,

When I see a post full of capitalized words, I pass it by. I suspect many other people do too.

Nikita darling,

If it were economic to synthesize petroleum fuels from coal, then we'd have synthetic fuels made from coal.

Understand? Synthesizing petroleum from coal only makes dollars and sense if the price of oil is quite high, approaching $50 per barrel or so.

"So again, I ask the fine people here: what job do you move into that does not have to compete on an uneven playing field? Even better, what do you tell a programmer with fifteen years experience and a former salary of $80,000 a year to do to provide for his family right now in light of all this?"

Well, I suppose you should tell him he had rotten parenting, if he never learned that "life aint fair" and that the "level playing field" is based on the same pathological ideology that led to the Ukrainian famine.

When I trained in commercial art, it was just before the dawn of computerization in the graphic arts industry. We learned nothing about computers. Nada.

I imagine I'm a member of the last generation to master the age old skill of sign writing. It's a trade skill no longer required - for most things.

But it is required still for highly specialized work, and that's where I've found my niche. Those traditional skills are also valuable for correcting the errors made in computer rendered fonts, letter spacing. And in some cases, the manual method is still more efficient and faster than computerized work.

I also learned how to use computer graphics programs, where I could, and I use vinyl letters where the traditional methods would be too time consuming or too inconsistant.

Just like my friends in the IT industry are also adapting to new realities, diversifying and using a little creativity to broaden their job prospects. Not all of them are back to their pre-boom income levels - but honestly - one geek I know who resides in San Francisco bragged incessantly about his 6 figure income, with his 6th grade!! education, dissing the value of higher learning at every opportunity.

When he was laid off, it was hard to summon much sympathy. And he's now working again. A little more humbly, I might add.

These cycles have repeated themselves over and over, for centuries. The turnaround is a little faster in this day in age....everything old is new again, as they say.

David Davenport: i'm not talking about synthesizing petroleoum from coal - you're right, that is very expensive.
However, electricity from coal is very economical, and electricity can be used as a transportation fuel (and no, i'm not talking about the all electric vehicles. -- see this article about DaimlerChrysler's new plug-in hybrid sprinter vans, that run most on electricity (you charge them at night) but can also run on fuel. For more on this technology, see here.
Also possible and economical is generating methanol from coal (methanol is the fuel indy500 cars run on, and a fuel mixture of 85% methanol 15% gasoline can be used in flexible fuel vehicles (FedEx did this).

So Kate,

The bottom line of your rather prolix and sententious post is that this computer geek had to take a pay cut to get another job, right?

As in, wage disinflation. As in, levelling wages down to a lower global average. As in, hard times.

“(1) It has been admitted that even if the country as a whole may be better off with job exporting (which is debatable, but let's pass that over for now), some groups will, if not compensated, be net losers in this game.”

Any time you have trade between countries, or competition between companies for that matter, you will have some individuals that are at a comparative disadvantage with respect to a particular activity that will need to find something better to do. That’s been true in the US since the first European immigrants arrived. If that is what you mean by “net losers” then we will continue to have them. Why they need to be compensated I don’t understand.

Basically, in a dynamic economy you have to keep increasing you skills and abilities or you get left behind.

“What programs, if any, would you propose to ease the pain of offshoring and free trade on specific groups of Americans who are negatively affected by it? Please be specific.”

President Bush recently spoke at Mesa Community College in Arizona about the success of Mesa’s retraining programs. He has proposed additional federal funding for the community colleges for retraining programs.

http://www.whitehouse.gov/news/releases/2004/01/20040121-7.html

“(2) What do you think the political feasibility is of the programs (if any) that you would recommend?”

A number of the community colleges have been doing it for years so it’s obviously feasible. I suspect that additional federal funding is also feasible.

(In the interest of full disclosure, I teach economics at the community college. A number of my students are in the 35-50 age group and are getting further education so that they can increase their earning potential.)

“(3) How would you respond to a point made in one of Brad's threads that there is no realistic possibility that the losers of offshoring will be compensated in any way, and that therefore it is rational for the individuals in these groups to oppose it even if it results in a theoretical benefit to the country as a whole? Is it your assertion that they should sacrifice the well-being of themselves and their families for the enrichment of others?”

Interest groups will always agitate for protection, and if they can get it, government subsidies. Certain portions of the agricultural industry are great examples. In the short run it is rational for certain groups to oppose free trade. In the long run it is not – lower prices for consumers always win in the end.

To rephrase the question, is it your assertion that consumers should to be expected to sacrifice the well being of themselves and their families for the enrichment of someone that needs to find something more productive to do?

[ However, electricity from coal is very economical, ...]

?

Oh, How I long for Establishment economics professors to undergo career transitions which compel them to increase their skills in a dynamic global economy.

[ Basically, in a dynamic economy you have to keep increasing you skills and abilities or you get left behind.

“What programs, if any, would you propose to ease the pain of offshoring and free trade on specific groups of Americans who are negatively affected by it? Please be specific.”

President Bush recently spoke at Mesa Community College in Arizona about the success of Mesa’s retraining programs. He has proposed additional federal funding for the community colleges for retraining programs.]

[ Interest groups will always agitate for protection, and if they can get it, government subsidies. ]

Scott, I assume you agree that Americans should be able to purchase prescription drugs from Canada via mail order?

Firebug!

Easy questions.

Number one is based on the implicit premise that workers are unthinking, unreacting economic cutouts that are incapable of moving, going back to school, starting a business or performing other jobs. This premise is false. If it weren't, then Rust Belt cities would no longer exist as anything other than literal ruins complete with the skeletal remains of workers laying in piles in the streets.

Question number two, as asked, is impossible to answer factually as it requires predictions about the future. It also begs questions that are actually more meaningful, such as whether or not "relief"-type programs are necessary, and I think they are mostly not. Most layoffs, especially from high-skill/high-earning positions, usually come with decent and substantial severance, many including benefits and even head-hunter services.

Number three: Brad's right. First, the losses experienced by the unlucky few aren't permanent for the vast majority of those who experience it. Two, the process that makes the rest of us better off as a result of outsourcing isn't the deliberate, linear trade-off of a single articulated system, but rather as an organic outcome of a highly complex spontaneous and self-organizing system of systems of systems. Directing the outcome of such a complex system or even mitigating its undesirable outcomes isn't one of our options; we can't know the system well enough to know what to mitigate.

I don't mean to imply however that we've somehow reached the end of economic history; there are lots of structural changes that could be made that would make our economic evolution less disruptive and painful.

We could eliminate all business and corporate taxes for example. These taxes are politically predicated on the fallacy that businesses and corporations actually pay taxes, as opposed to what they really do, which is to pass the costs of these taxes on to their customers hidden in the price of their products, just and they do with every other cost of doing business. Such a change would go far toward eliminating corporate flight to other countries.

Another thing we could do is develop a modern alternative to unions based on modern economic realities instead of a 19th century economy that no longer exists. I envision something like a temp agency with a majority of the company's stock permanently owned by the temps. These worker/shareholders would be better off because such a corporate vehicle would allow them to use the payola that a traditional union would give to politicians for retraining of it's members as the need arises.

Other major economic reforms such as the conversion of all taxes into mitigatable sales taxes, competing private currencies, etc., could go a very long way toward smoothing out a business cycle whose current peaks and valleys whip-snake some of us pretty hard. But the inescapable, unalterable truth is that constant change is here to stay, including economic change. The statist/interventionist models of the past are demonstrated failures; they've never managed even in theory (much less in practice) to overcome Hayek's knowledge problem.

Yours/
jackson.

Just echoing Roger: the yelling isn't effective. Most people here who express concern about outsourcing are here to listen and maybe learn something -- we're not yelling at Dan or others who are posting things, and we don't need to be yelled *at*.

For what it's worth, I am seeing other perspectives by coming here but I'd sure like to see some of the bloggers like Dan either write or recommend some posts for the "average voter" folks like me. I see radiologist jobs going overseas and hear Mankiw say, "well, we'll just make more doctors" and think "Wha-? Not everyone can be a doctor." I think of people in poverty making Wal-Mart clothes for miniscule wages in terrible conditions and I look for the union label.

If you ridicule folks like me for our naivete or gullibility, you aren't helping your cause. It seems to me that it's to the free-traders' advantage to listen and understand our concerns and address them in terms we can understand. The more people "converted," the more pro-free-trade pols elected, the better off for everyone -- isn't that how you feel?

jackson's post is an example of what I was asking for. He has a position, but he hears the concerns and says "even though I think this is here to stay, you're right in seeing this period as a roller coaster of sorts." Then he gives some ideas for smoothing things out. Agree or disagree, his post is part of a dialogue, not a monologue.

Thanks, jackson.

My son just started engineering school, but he works part time for a company called 1-800 GOT JUNK, hauling trash from people's homes. I tell young people to choose a job that can't be outsourced. When a toilet is overflowing the fact that plumbers work cheaply in India becomes irrelevant if you live in Los Angeles. The building trades are probably more secure, long term, than anything high tech. Someone's got to take out the garbage and someone's got to build houses and snake out drains.

David Davenport - i meant electricity from coal is affordable (see here and here for some details.)
Also: "Fuel costs for conventional vehicles stand on 6 cents per mile while for plug-ins the cost is only 3 cents per mile including the cost of electricity." See here.

also see:
New Study Results from EPRI: Electric-Drive Vehicle Costs Can Soon be Competitive with Conventional Cars Over Life of Vehicle

Anyway, coal is just one of several domestic energy resources we have. Biomass and municipal waste are also energy resources (and no i'm not refering to running cars on ethanol -- see here.) Scroll down to the cost part on that page.

"A new report from the National Association of Manufacturers and the Manufacturing Alliance (MAPI) found that much of the manufacturing sector's problems are not due to unfair actions by our trading partners, but are self-imposed. It notes that we have higher corporate taxes, higher pollution abatement costs, and higher tort liability costs than our key competitors. Overall manufacturing costs are 22.4 percent higher in the U.S. as a result of such self-imposed costs, reducing our competitiveness and contributing to the trade deficit.

In terms of tort liability, a new report from Tillinghast-Towers Perrin estimates this cost at $233 billion last year, up $27 billion from 2001. The report estimates tort costs at 2.33 percent of GDP, or $809 per person in the U.S. Of this amount, only 22 cents on the dollar goes to compensate victims for actual economic loss. The rest is for lawyers and additional payments for punitive damages and "pain and suffering."

---

Until we get the lawyers under control, review and possibly revise some environmental laws (NOT making feng shui manditory in CA gov't. bldgs) and revamp UC and corp taxes, we aren't going anywhere.

Also, NYC and SF could get rid of rent control which should start a mini-boom in their areas.

Of course, we could drill in the moonscape portion of ANWR and create over 300K jobs, too....but that's just me. And build another plant which makes ammo for our soldiers.

Just for starters.

But look at the bright side, our gas tax will be going up another 5 cents and the unemployed could rebuild our roads.

Scott, if engineers and computer scientists w/Ph.D's are being outsourced, how do you think an associate's degree from a community college is going to keep someone effective? If radiologist and financial analysts who have had years, and years of training are moving over seas, what is a 1 year retraining-programm going to really do? Why won't your retraining program be outsourced, and hte jobs created in India instead? Cheaper labor costs right?

So, there seem to me to be two positions

(1) Globalization and outsourcing has been good for the country in the past. Current outsourcing is just like the past, stop worrying about it.

(2) The rules have fundamentally changed. Advances in IT and communication make location irrelevant. Any job where location doesn't matter is basically at threat from cheaper labor costs.

So although Brad and Dan might mock (2), There are enough respectable economists (i.e. at JP Morgan, Goldman Sachs, etc.) that believe in (2) and think its a threat to the US economy.

People who hold (1) aren't considering the fact that the type of jobs that were moved over seas before were very LOW SKILL. These types of jobs could disappear, and the people who had them could be quickly retrained for other jobs that would arise. These new jobs were mostly created by a creative white-collar workforce.

Jobs leaving today are very high-skill and advanced. People who keep saying that only low-skill "programming jobs" are leaving are deluding themselves. Dan, GO to the CS or EE department at your school and talk to someone, PLEASE! I know way too many PhD's and MS's in very technical fields who can't find jack shit.

By decimating highly-skilled jobs, who is going to create the new class of highly-skilled jobs? It will nto happen in America. This is why ENC, Oracle, etc. are not just moving "low-level" programmers to India, but moving R&D Labs to india.

So, I think as many others have pointed out, the important questions what should people retrain to? Why can't that job be moved over seas? Is location still relevant?

For those folks who are crying wolf about outsourcing: do you live on Earth? I suggest you take a look around. The lower middle class in the United States is filthy rich, both by standards of time and place.

The dogs and cats of Middle America have better health care than 95% of the people on this planet.

If you can't make a buck in the USA, you are either lazy or suffer from severe mental illness. This is the land of milk and honey.

The US is the most squared away, can do place ever. If you are lucky enough to be born here you get to go to schools that are the envy of the world. As kids, you get the opportunity to operate complicated machinery, build things and tear things apart.

No other place on the planet, not even Europe, has such a breeding ground for learning how to get shit done.

“Level playing field”; that’s a joke, right? It is an indisputable fact that the economic odds are heavily stacked in our favor by several orders of magnitude. I don’t know, maybe I’m missing something or, perhaps I’m delusional and am really living in oppressive squalor drinking water from the sewer.

What is the big advantage to living and working in India and/or China? Are they taking advantage of us? Oh, I see, their standard of living has begun to creep up from being 100-times to 10-times below ours.

Give me a break! Sending high paying jobs overseas is bad. That's right, the new-new-age pinko is pissed because some folks in the third world are doing jobs that don't break their bodies. Imagine the gall of those arrogant peons thinking they can do work on par with a college educated American.

This whole debate is really telling. The left has revealed themselves to be a group of greedy, sniveling racists jealous of anyone else in the world who might have opportunities for economic advancement.

All the while complaining how hard it is to make a living in the United States. Why don't you complain to folks who live in a third world country, I'm sure you will find lots of sympathy there.

I admit that I am a greedy prick. I want to see other countries advance economically and socially so that more and more of the world will be blessed like we are here in the US. I want this because it is our best long-term national security strategy.

How’s that for addressing “root causes”.

Sandy P - I know it is not the answer you are looking for, but rather than trying to lower our costs, why don't we ask our trading partners to raise their standards (and thus costs).

The term "fair trade" has become associated with some radical (and I think stupid) anti-globalization arguments, but I think a real look at the concept could help the American economy. We are good at some things, and these are things that are hard to protect from reproduction. We should make sure that China and India are sincere in protecting American copyrights and patents.

We also might want to start to think about globalizing the rights of workers along with capital. I am not talking about free movement of workers, but why can't minimum labor conditions be pegged to a nation's per capita income?

I don't want to see too much interference with the ability of American companies' ability to be competitive, but I do want think there are legitimate questions to ask and new policies that we can think about. I have a lot of thoughts on this, and you can read about it on my blog.

Of course, we could drill in the moonscape portion of ANWR and create over 300K jobs, too....but that's just me. And build another plant which makes ammo for our soldiers.

Yes, it is just you.

posted by: Horst Graben on 02.15.04 at 11:14 PM

Yeah, baby, you are so correct!
America, land where for $75 you can register an LLC and go into business for yourself. While these whiners complain about "lost jobs" millions of Americans are fueling an unprecedented move to small business. Sink or swim, take the risks, and reap the reward or failure.
Guess what? Nothing ventured, nothing gained.

Nikita,
You still have not answered my question about Hybrid vehicles being net energy-wasters.

Oh, and by the way, that 3c per mile for electric cars goes away big time when you correct for vehicle horsepower.
If you run an internal combustion engine vehicle or comparable power to an electric car, it is FAR more economical to use the gas powered vehicle.

praktike,

How right you are. Raising the government imposed costs of doing business will keep jobs in America.

Proof:

http://www.actionamerica.org/taxecon/ticktick.html

or as I like to say: You can't eat the rich if they won't stay at the table.

That's right, guys, keep up the empty chorus. Go on telling the average American that they're stupid and lazy and that if they wind up with no job that it's their own damn fault. Go on, while meanwhile the serious individuals use theories as a tool rather than a mantra, and set them aside when they're clearly not working.

Who knows? Maybe if you keep it up long enough, you could even make Pat Buchanan a viable candidate again.

I begin to wonder how long people are going to keep preaching the "outsourcing os good" screed.

It's nothing more than a generalized rationale for GREED.

When manufacturing jobs left, it was assumed I.T was thge replacement.
Now I.T. is leaving, and the average outsourcing proponent can't even come up with a clue as to what the alternative will be.

Go ahead, keep bleating out jobs away.
Iv'e watched mine go away, and 35,000 of my co-workers, and 3+ million of my countrymen's.

And spare me the "my how BITTER you are" rhetoric.

A simple lesson in economics:

Everbody's output is some one elses input.

Raising the relative cost of inputs lowers total outputs.

The simpler version: the lower the cost of production the cheaper the goods.

Forcing the inputs (labor, materials, capital, knowledge) to the higher cost solution reduces net wealth.

BTW why complain about India? Israel does 80% of the world's biotech research and all the design for the new Intel processor going into portable equipment. Why no beef with the Israelis?

To Steve Ramsey,

I'll bet you are just as greedy as the rest. When given the choice of two products of equal quality I'll bet you choose the lower cost product.

Take another example. You are not a professional carpenter. Your need for a hammer is only occasional. Do you choose the $35 American hammer or the $5 Chinese one? Are you greedy or economical?

I say you are greedy to buy the Chinese hammer when the quality American Estwing hammer (made in my town) is there for the purchase.

Of course the choice for you may be the Chinese hammer or no hammer. I say avoid greed and do without. Or hire a real carpenter when you need stuff hammered.

David Davenport - I guess I’m not an establishment econ prof since I’ve gone through multiple career transitions. Being an econ prof is merely the latest.

On importing drugs from Canada or where ever, I don’t see a problem – as long as we’re willing to enforce contracts signed by suppliers and retailers.

Nadeem – IT jobs were recently impacted by reduced corporate expenditures on equipment and software. That’s starting to come back now. It’s been on the rise for the last three quarters if I remember correctly.

However, some programming and IT jobs continue to move to lower cost locations. It’s been going on for at least 15 years. The huge increases in US IT spending masked its effects until the 2001 recession. The displaced US IT folks need to move from writing code to working with the users on what needs to be developed. Those people have to be located locally and provide the interface to the development staff. Also, the hard part of the implementation work is all done locally – another area to switch to.

A community college can’t do much for a PhD or MS computer science grad unless they’re clueless about working with end users. However, it can do a lot for other displaced workers.

As for importing educational services from lower cost countries, we’ll do that as soon as people no longer want education to be a face to face encounter. It’s starting to happen with Internet based courses. (BTW, I’m currently learning how to teach internet based courses.)

Rich,

You have the right idea. Let us get our competitors to price themselves out of the market.

You have hit the nail on the head. So few realize how easy it is to get people to act against their own self interest. For the greater good of course.

The USSR is proof positive of the success of this approach. The booming economies of Germany and France are the wave of the future. If only American business would stop focusing on lowering costs we could be as successful as the French.

Think of it. French fries are sold every where in America.

You bet wrong Mr. Simon.
I buy the best I can afford on my unemployment check.
And i'm not hiring anybody right now.
Not paying any income tax either.
In fact, I'm assisting with the deficit.
Don't like it?
Neither do I.
I'd rather be working for something better than hand to mouth wages.
But at your behest, Boeing is outsourcing most of it's new 7e7.

It's so easy to be high and mighty when your future is secure, isn't it?

"It's so easy to be high and mighty when your future is secure, isn't it?"

Whine to the Hand!

The only secure future is the grave, my friend. Sorry that here in Disneyland that you are temporarily out of E tickets and cannot afford whipped cream for your milkshake.

Maybe you should commiserate with the folks in Chiapas, I'm sure they can relate to your "suffering"... although I don't think they have any gov't cheese to complain about, lucky for them!

Most of the arguments made in favor of
outsourcing simply do not map to the
real world. There is a repeated jab
at the unemployed that they should
"get training". Well, I have a BS
in Computer Science and an MS in
Applied Physics, and I can't get a job.
(My thesis project was amorphous
silicon solar cells, meaning
plasma deposition.)

The harsh fact is that corporations
prefer to hire non-US citizens under
the H1-B and L-1 visa programs because
they can pay them less and because the
people who are working under these
programs are effectively in slavery.

Dozens of people with similar
qualification to me are out of work
in Northern California, and we do not
expect to ever work in high tech again.
(If you want to sell a house in
Sonoma county, call me. I got my
Real Estate license a few months ago
and can always use some more business.)

About 80% of the posts here are false,
because they rely on "facts" which are
simply not true.

The idea that free trade will eventually
create new, better jobs is called
"faith-based economics", because there
is no evidence supporting it.

-dave chapman

Ah Horst, the put down from an almighty covetor of cheap labor that I knew was certain to come.
Yes the whipped cream is gone, and the milkshake is as well.
The cup will be collected any time now.

And yes, I am secure in the knowledge that no matter how well YOU are doing in this fetid arrangement we call an economy, no matter how much you ignore what your fellow americans will have to put up with so that you may be enriched, that yessir, they will come for you, the same as me, with a gurny and a big zipper bag.

I have watched as twenty years of toil have gone down the tubes, but I'll get by somehow.

But don't tell your story to today's youth, who are being robbed blind of a future by corporate america and cheap labor capitalists.

Don't tell all the folks your ilk already snookerd into persuing I.T. careers.

Go ahead. Define for me what these people will do now?

Dear O'danny'boy,

The reason why the nominal unemployment rate is so low (~5.7%) is that the unemployment rate typically counts unemployment claims. If a recession has gone on for a long time, and people run out of unemployment benefit eligibility then the rate can drop without people being employed. This is why even though the unemployment rate is supposedly low, the last unemployment report stated that the average time of unemployed persons actually rose.

At this point, the recession is actually worse than the 90's "jobless recovery" by quite a bit. In addition if money supply keeps on contracting, we should expect to see a double dip recession come this summer.

Dear Firebug,

Your questions go unanswered is because as far as I can tell despite having looked into it quite carefully, many free trade proponents are guilty of dishonest arguments. They gloss over the holes in their argument because as of yet, I have yet to see a single strong response to the contrary.

Dear Mr. Edelen,

You are absolutely right. The current argument is based upon a premise. Technological change whether from lap-tops to computer animation do not represent a correct analogy to "offshoring". Buying a new lap-top instead of a secretary only consititutes a form of "offshoring" if you happen to buy it from a overseas producer or a vendor that had it and its parts made overseas.

If one switched from an American secretary to an American computer, then this would be merely technological change. If you switch from an American secretary to a Sony VIAO, or an IBM computer made overseas, then this is then comparable to "offshoring".

The commentators here regarding general competition for all jobs are correct. What we are seeing is not just a limited manufacturing competition, but a broadbased competition for ALL American jobs. Simply because of population differences, we could offshore every single American job and there would not be equilibrium or parity reached between the populations of China, India, and America. I'm afraid the models cited are generally over-idealistic or misapplied. Recently for instance the Hicks-Kaldor test was brought up to justify the case of free trade. Unforunately Kaldor's own growth model insists that a persistent systematic trade deficit cannot be maintained if you also want economic growth. It is curious then that free trade proponents would appropriate his model to justify their case in the face of long term, growing, and systematic trade deficits.

Three comments: this arguement ignores the other part of the problem--illegal aliens. Free trade is great until companies start to have to pay higher wages. Then they'd prefer to have someone come in illegally, so that wages can be kept down. This has something to do with why wages in this country have been losing ground since the 70s.

Next, we are going to have an increasing number of older workers in the job market (especially those of us who had to use our 401k funds to stay afloat during that year plus of unemployment). Since companies are already reluctant to hire older workers, please let us know exactly what fields we should be training in. I would really like to know where someone in their 60s and 70s is going to be expected to work. Experience is not going to help a bit here.

Finally, this has a large impact on the security of our country. That depends on taxes. I paid a lot more in taxes when I made 50k a year, than I do making $10 an hour now. This has something to do with the current deficeits. We lost a lot of good paying jobs this recession. If they aren't coming back, then government better get pretty damn serious about making do on less. See comment above on older workers. Should we expect the Social Security retirement age to be bumped up to 70, with no companies willing to hire those workers?

I have nothing against the people in India and China having a better lifestyle. I don't like to see it coming at the expense to MY country.

Scott writes:
"I’m not an establishment econ prof since I’ve gone through multiple career transitions. Being an econ prof is merely the latest.

On importing drugs from Canada or where ever, I don’t see a problem – as long as we’re willing to enforce contracts signed by suppliers and retailers."

Ever heard of gray markets, Mr non-establishment econ professor?
If a company, say Lucent, prices its wares in China way below prices in US, you can legally re-import Lucent stuff. US goverment doesn't care, correctly so. Chinese distributor may violate his contract with Lucent, but why US gov should care? It is a civil matter between Chinese and Lucent in China.

Why do you think that US gov should inforce contracts between Pfizer and Canadian gov? Or Pfizer and a canadian pharmacy? Why people are denied the free trade?

Answer is easy. Big Pharma wants US elderly folks to pay for the world R&D in pharmacuticals. Who cares if grandma has to chose between food and meds. It is survival of the fittest. Beside young Mr. Drezner as well prof Scott have theyr medical insurance all paid or subsidized by taxpayers.

(1) The problem is, people act as if jobs are fixed, as if hiring an Indian means firing an American. But of course that's empirically wrong. "Exporting jobs" is politicianspeak, not economics.

And if wages were all that determined employment, then all those programming jobs in San Francisco, all those financial service jobs in New York, all those pharmaceutical research jobs in New Jersey? They'd all have been outsourced years ago... to Mississippi. Of course, the ratio of NY:Mississippi is much lower than the ratio of NY:India (but on the other hand, other transaction costs are lower for Mississippi than for India), but that would just change the speed, not the overall effect. But we don't.

(2) Two centuries ago, three-quarters of the country's population worked in agriculture. Okay, that's a really long time ago; skip that. A century ago, 37% of the population worked in agriculture. That's 30 million people. Now, 2% of the population works in agriculture. That's about 6 million people.

Can you imagine trying to explain to a farmer in 1900 that the country would lose 80% of its farm workers over the next century? He'd ask you where all those people -- not to mention the 225 million new Americans -- could possibly find jobs. Could you explain to him what these people would be doing? Working on "computers"? Huh? Radiologists? Biotech? Aerospace engineers? Wha? Building cars? How many people could afford those? Working in television? What's that? If you were a time-traveler who knew the answers, he wouldn't have the vocabulary to understand; if you were a contemporary of his, you wouldn't even be able to conceive of the answers yourself.

Milk: even though this is only tangentially involved, the important line you wrote is that American consumers are subsidizing biomed R&D for the rest of the planet. If America adopted price controls, the price would basically go up everywhere else in the developed world (We shouldn't be subsidizing England, Germany, etc.) to counteract for lost revenue or we'd just see fewer medicines being developed. Personally, I don't mind if (1) happens.

“That's right, guys, keep up the empty chorus. Go on telling the average American that they're stupid and lazy and that if they wind up with no job that it's their own damn fault.”

They are often not stupid and lazy---just in the wrong place at the wrong time. The gods of creative destruction are ruthless bastards. Every single increase in productivity will threaten somebody’s job. I have no magic answers to offer. However, I can emphatically assert that the overall economy will benefit. In many ways, even the so-called losers benefit from the resulting lower prices. The dairy farmers, for instance, who wake up one morning to find that they can no longer compete still pay less for most of their other food stuff. Their children will likely live wealthier and healthier lives.

“This whole debate is really telling. The left has revealed themselves to be a group of greedy, sniveling racists jealous of anyone else in the world who might have opportunities for economic advancement.”

Amen. I couldn’t say it any better myself. It makes me want to puke when these liberals pretend to be acting out of altruistic motives.

DT,

I agree with you that the creative-destructive cycle of capitalism knows no mercy and has no favorites. How can you therefore unilaterally assert that Americans are benefiting/winning then? Could not like many a great company that falls to cut costs, competitively market their products and services, and successfully protect their core brands, patents, and trademarks that America could itself founder in the global marketplace? Considering that we know that no company is immune to marketplace competition, and that no corporation has an assured place as a benificiary of market outcomes, how can you so blithely assume that America's success is assured? The very forces of marketplace competition would seem to indicate the exact opposite, namely that America must always watch out for its number one spot or else fall under the capitalistic destruction as another nation rises up to take our preminent place.

I guess i am a little confused about the confusion so many "IT" folks are in over the
outsourcing and "millions of jobs gone" mantra. I am a web developer and my company in
1998 was High Tech company of th year. 1999 - same thing. We grew 48,000%. We hired html
'programmers' for 55k, DB guys - 75K. programmers near 6 figures. Everything was done by hand.
Need to hook up a simple DB to a web front end... took weeks. Cost a fortune.

Remember the companies like March First? Billions of dollars for the design of web sites.
Billions. Why? Cause it was new. It was cutting edge. We told ourselves that we were the new
rich. We charged boatloads for simple programming chores. And... it blew up in our face.

Dreamweaver MX does the job that 5 people did. I can produce a website with DB, bells and whistles
and content management in a few weeks. My partner is doing a lot of .Net now and the savings of
reusable code is immense. We are competitive and we drive a tight ship. What was twenty people
in early 2000 is the two of us now - plus some talented feeelancers. We are making nearly
the same dollars... but our office is - uh - a bit more modest, our cars are not new and we
struggle everyday with changes in our business and competition.

Outsourcing? No. Technology - yes. Techonology uprooted the 55k year html guys. Technology displaced
the 75k year DB guys.

I know I am only touching a few areas of 'IT' and there are other areas like Telecom that I am not
in firsthand knowledge of.

However, when we crashed in 2001 - 2002 (and believe me when I say that 9/11 hurt everyone.
Our phones stopped ringing and never did fully recover - ever notice when folks compain about
the 'Bush econonmy' they simply don't mention that event.... hmmmmm) we layed off the final 8 people.

1 Traffic Manager now owns 7 rental properties is very happy.
2 VP of Technology works for major health Service company. Doing well.
3 Lead Designer owns his own shop and is getting ready to be 'acquired' by one of his biggest clients. he is very excited.
4 Associate Designer started her own business and now does design and photography. Dong very well.
5 Senior Programmer kept on programming and developed a great freelance business and is now working full time for a company that he loves.
6 Associate Developer became my partner in our new ventures... we make software solutions that we can sell instead of doing 'project work'
(BTW... our software will displace some work from some designers somewhere)
7 Secretary and her husband started an office restoration firm (hi end office cleaning / plants etc... She now makes more than we paid her.

Personally I have been a musician, Art director, Commercial Photographer, Web Designer, Graphic Designer and software designer...
and hell - I'm only 54. God knows what I'll be in two years. But wherever it is, I will not be whining about how someone else,
somewhere else is at fault for my current position in life.

[ ... I tell young people to choose a job that can't be outsourced.

Such as a government job?

[ When a toilet is overflowing the fact that plumbers work cheaply in India becomes irrelevant if you live in Los Angeles. ]

Where there are Latino plumbers, not all of them legal residents, who will work for cheap pay.

[The building trades are probably more secure, long term, than anything high tech. Someone's got to take out the garbage and someone's got to build houses and snake out drains.]

That's what Mexicans are for. You wanna compete for construction jobs paying wages los illegales will accept?

//////////////////////////////

[ Now, 2% of the population works in agriculture. That's about 6 million people. ]

2% of the population of which countries? Farm work is another labor sector where the number of non-US ciotizen Hispanic workers is undercounted.

[ Now, 2% of the population works in agriculture. That's about 6 million people.

Let's plow a new row, shall we? I'm struck by Mr. Bhagwati's selection (as selected by Mr. Drezner) of Mr. Kerry's "Benedict Arnold CEOs" slam. Obviously, the esteemed economists are standing in one corner rhetorically, wagging fingers at the politician for invoking the name of our earliest, best-reviled traitor. But who is right?

In the age of Jack Welch and "Chainsaw Al", can we not accept as a given that CEOs (and the whole upper-management class in general) in this country perceive themselves as global titans rather than simply American businessmen (where's the glory in THAT?)? And yet, these same ultra-globalizers feel quite entitled to call on the might of the federal government in all sorts of ways--to enforce copyright laws, guarantee international loans and investments, rejigger visa and green card rules, etc. In other words, for a steady stream of fat campaign checks we expect you to work on our behalf, while we owe little if anything to the country as a whole. We will offshore as many jobs and factories as we like, reduce our tax burden to nothing and write books about what swell leadership skills we have. Have I forgotten anything? Oh yeah, commit (on occasion) massive fraud as well as sins of bad taste (2 million buck company-paid orgies on remote European islands? Bring it on!!)

If Kerry (or Edwards) can come up with a plausible scheme for promoting private sector job growth in THIS country, I will back them. If that involves hectoring and nudging CEOs and other corporate leaders to play fair with their US workers and stockholders, all the better. As for right now, from what I have seen, the Benedict Arnold label is right on. No one has to scream America First, Last and Always, but there has to be consideration for your friends neighbors and countrymen.

Oldman – The unemployment rate is not determined by counting the number of unemployment claims. It is determined by the household survey – a survey of approximately 60,000 household nationwide. The survey determines how many people are working age (16 and up), how many are employed and how many are looking for work. The survey is unaffected by the number of people receiving unemployment compensation.

The payroll jobs number comes from the establishment survey – a survey of about 150,000 businesses with 400,000 locations. It asks how many people are on the payroll.

The two surveys have always had different results for the number of people employed. Historically, the household survey number has been 9-10 million higher than the establishment number. During the late 1990’s the difference fell to about 4 million. It has been climbing again and is now about 8 million.

Those that say we have lost jobs since the recession are looking at the establishment number. The household survey number shows an increase in the number of people employed since the recession.

The difference between the surveys apparently comes from the fact that the establishment survey doesn’t count new small businesses and startups very well. That’s also the source of most job growth in the US.

Pickens!

For the love of God, Nikita and I are not talking Macro-economics. We are talking about addressing the specific concerns of Edelman and his ilk who only sit and whine about what should be.

Nikita's been 'target-up' this whole post, and while it would seem that he, you and I are coming from the same place, you simply are not tracking.

It reduces our dependency on FOreign OIl to have a higher fleet average. End of meme. Who give's a flip if another independant variable spends X in fossil fuel to generate the battery. That's the old anti-solar farm argument. It's correct, your're right about the MAcro side, and it doesn't matter a hill of beans to the consumer.

Edelman and his ilk are only looking at their end-of-month balances.

Well said, Mr. Giannatti.
But I guess you're just one of those evil 'shouters' that 'Opus' talks about, who's not answering anyone's question.

Hey, Opus - your father was suppossed to tell you about how to be a man in this unfair world. If he didn't, I'm truly sorry - because it really does put you at a comparable disadvantage.

I think it would bring much more light into everyone's arguements if they included their current profession and employment status in their part of the discussion.

I'm currently an employed software/db engineer/architect, but am worried about tech as a continuing career. Perhaps all the software engineers should consider entering the careers paths of the more outspoken proponents of outsourcing; perhaps flood that market as well. Ya know, fair is fair! :)

TommyG:
Hey, last time I checked people were still allowed to ask questions about trends we can see in the world around us. How the hell is wanting to know why outsourcing is a good thing evidence that you were never told how to be a man?

If you aren't an economist you might not know all the reasons and rationales behind one of the most significant economic shifts of our time. So asking someone who's job it is to try and understand the economy, both national and global, would seem to be a good idea.

“How can you therefore unilaterally assert that Americans are benefiting/winning then?”

“The very forces of marketplace competition would seem to indicate the exact opposite, namely that America must always watch out for its number one spot or else fall under the capitalistic destruction as another nation rises up to take our preminent place.”

Gee whiz, you must be some sort of American imperialist. You are obviously afraid of competition. It matters little if the United States retains its preeminence as long as it remains competitive. Switzerland is not a preeminent power, but it still is an affluent country. I got a little secret for you: a level playing field means we can sometimes lose the contest. I find nothing wrong with this result whatsoever. Were the cards suppose to be always stacked in our favor? A growing world economy raises all boats.

Let me slightly revise your above quotes:

“How can you therefore unilaterally assert that Californians are benefiting/winning then? Those sneaky folks in Nevada might be catching up!”

“The very forces of marketplace competition would seem to indicate the exact opposite, namely that California must always watch out for its number one spot or else fall under the capitalistic destruction as another nation rises up to take our preeminent place. Damn those scum bags in the other forty nine states!”

As a conservatve (as that term is defined today) and a successful businessman, I am disturbed by the hostility shown by some here toward those who have lost their jobs and/or are concerned about their futures. Individual initiative and hard work are very important, but never underrate the role of what Frederick the Great called "his majesty, Chance."

RE: Global: Offshoring Backlash - Stephen Roach nekkid_put

NEW 2/16/2004 7:29:56 AM


"Like most economists, I worship at the high altar of free-market competition and the trade liberalization that drives it."

I wonder how devout he would be if it were his head were on the corporate chopping block.

RE: Global: Offshoring Backlash - Stephen Roach bluebear

NEW 2/16/2004 9:57:23 AM


There are plenty of Indian economists who can do his job. Actully considering the record of the typical Economist, I just don't see that they produce any value at all, other than as flacks for their political masters. In America when a company moves from one State to another, the workers are offered jobs in the new location. A friend of mine, Chin Chin, was offered a job in China by Nestle, when her job was moved there, and she has been working there for two years. Why cannot US workers be guarenteed the right to live and work in these off-shore countries, since its their jobs which are being exported, and these same countries are effectively being treated as part of the US by our so-called 'free-traders'. ( Answer is obvious:
Asian firms intend to hire only their own kind. That's part of the Asian version of free free free trade. )

It would be easy enough to do, since more and more workers in India are being directly employed by US Companies anyway. Another thing that would improve matters is to get rid of the vendor cartels that infest American Government and businesses, like giving the Federal Government PC contract to one Company, Microsoft, and bring free trade into the US for a change. The current set-up is more like a high-tech International feudal system, than free-trade. In any event, the process will dry up of its own accord, when there won't be enough highly paid US workers to keep the game going. This is analogous to the problem of the 'commons', where its OK only if everyone doesn't take advantage of the free benefits.

http://www.prudentbear.com/bearschat/bbs_list.asp?fid=1

In reference to Dan Edelen's question way back, "Honestly, what positions are permanently impervious to outsourcing? Maybe I have an answer of sorts. Mine. I hand build one of a kind Ornamental Ironwork for high end homes. Perhaps the reasons I believe this specific industry is immune to outsourcing is illustrative of more general principals. Maybe not. I report, you decide. In no particular order.

1. The nature of custom design demands that it must be done at the site with the customer so they can be steered towards a single product they want rather than away from the infinite number of items they don't want.

2. The final design is much more a matter of persuasion and personal relationship than practicalities of function.

3. The final product must at some point make a physical appearence.

4. The customers I have had seem to me to believe that my work is too vague and expensive to ever trust it to pixels on a screen - or maybe I just convinced them of that.

5. I'm sure there are more but ...

I believe an industry such as mine that sells dreams and "statements", and not just products (handrails) will always survive outsourcing. People want a human presence to share those dreams. That just does'nt seem like something that transfers to the digital.

I don't have a clue whether this has any application or not to more general applications but since reading Virginia Postrel's book, "The Substance of Style" it looks to me to have some bearing on the discussion at hand.

ROFLAMO! HAHAHAHAHA!

Frankly I've been down this road before and I've found it's not worth my time to argue against outsourcing here. Fact is that people who are pro-outsourcing simply won't face reality.

But here's a taste. Nine months into the "recovery", where the nation's GDP grew at a rate of 4%, the number of jobs created during that time is?

....

Pretty much nothing. A rebounding economy is supposed to be creating at least 200k jobs per month, yet nine months into the recovery this economy isn't doing 1/10th of that. Personally I think we'll see the true state of affairs by June. If the economy is creating 400k jobs/month by then I'll stand corrected. But I think the chances of that are pretty much nil. IMHO year we'll actually see a net job loss and not a gain. With the Republicans in control of both houses of Congress and the Presidency this will end up destroying much of the credibility of Republicans.

Think I'm wrong? Go ahead, I couldn't care less. You can drop names of prominent economists, reference this or that article and gin up all the numbers you like. The number to watch is the number of jobs created per month.

ed

Competition.
The mantra of the blowhard right.
I hear it all the time, because I'm a republican.
The fact is, americans aren't even allowed to compete. They are in no position to compete.

We, as a society, have decided that it is unnacceptable for our people to live in poverty.
Yet big business and the suppoedly free market have been pushing them that direction for years.

Anyone care to argue wage deflation?
Anyone want to debate wealth concentration?
Would anybody care to go over the intricacies of just what the actual, real world unemployment rate is, vs the sterile dept of labor numbers?

Compete?
Corporate america are the ones who refuse to compete.
My state just gave 3.2 billion dollars in tax breaks to aerospace giant Boeing, in exchange for a mere 1200 jobs, after it has laid of over 35,000.
60% of the new 7e7 jetliner will be built in japan.
Is japanese labor cheaper than American labor? Hardly.
But the japanese government is willing to pay the blood money.
Parts will be built in Italy, and australia.
Is their labor cheaper? No.
What about Airbus? How are they kicking Boeing's ass, Airbus now number one in commercial aircraft production with expensive german, French, and British labor?
Don't mention subsidy, Boeing had ample opprutunity to file for countervailing duties, and refused.
Don't preach competition and the free market to me.
Don't tell me how I will be able to afford cheap chinese trinkets at Wal Mart on the minimum wage paycheck I'll be getting. Especially when the SAME cheap labor capitalists oppose the minimum wage at every turn.

I'll bet every single person here trying to tell me that outsourcing is good for the "macro economy" has a fairly secure position with a nice fat paycheck.

You got yours. Screw the rest of us right?

Hey, Opus - your father was suppossed to tell you about how to be a man in this unfair world. If he didn't, I'm truly sorry - because it really does put you at a comparable disadvantage.

1. supposed
2. My father would be surprised to hear that he was supposed to teach his daughter to be a man.
3. "comparative disadvantage"

As a Democrat, I hope that the GOP leadership continues to follow the counsel of Greg Mankiw and commenters here such as "Horst" "Tommy G" and "David Thompson" and that they continue to ignore the wiser thoughts of folks like David Foster.

Snark aside, the aforementioned trio of commenters seem too dense to notice that politics is an entirely different field from macroeconomics. If the GOP's answer to a jobless recovery is "Suck it up, girlyman," then the Democrats are going to mop the floor with you, even if you're right about the overall advantages of free trade.

Which, by the way, I think you are.

DT,

You write:
"Switzerland is not a preeminent power, but it still is an affluent country."

Dave, you must have been smoking pure ignorance when you wrote that sentence. First of all Switzerland has a current account surplus and not deficit in trade ... like say the half trillion or so US current account deficit (as reported by the BBC). Second of all, Dan Drezner just got done posting that Switzerland is by far the worst per % GDP offender in agricultural subsidies. Not exactly poster boys for "free trade" success that includes running trade deficits, fiscal deficits, and cutting protectionist barriers. In addition, their welfare state is still more advanced than the United States of America, meeting the redistribution requirement of social welfare for free trade political viability. In other words your economic facts just plain stink and it actually goes against the laissez-faire "creative-destructive" Capitalism that you're always ranting about.

In fact, if you want to look at European models of capitalistic success look at Sweden that has a extensive welfare state and yet a trade surplus achieved through growth in trade. This is an example where trade and redistribution worked hand in hand to achieve maximal public benefit. So yes, if you're proposing European models of trade (increased domestical and social investment in addition to trade surpluses) as examples of the benefits of free trade - then I agree. However we aren't doing what they're doing and in fact what we're doing the models say will lead to disaster!!!

You're a complete idiot without any apparent knowledge of actual economic facts. It's not about America being #1 all the time, but at the rate we're going at we may not be competitive at all. In the history of nations, there are darker examples of fates that could befall us - Japan, Argentina, the early 20th Century US domestic crunch, etc. Unfortunately we're headed there because of nincompoops like yourself or Glassman who can't make simple numbers in trade add up or tell when you're deviating from the models!!!

Short question for pickens:

If internal combustion engines are so all-fired economical, why do railroad engines use a diesel engine to turn a generator to make electricity to drive the electric motor that drives the train?

“You're a complete idiot without any apparent knowledge of actual economic facts. It's not about America being #1 all the time, but at the rate we're going at we may not be competitive at all. In the history of nations, there are darker examples of fates that could befall us - Japan, Argentina, the early 20th Century US domestic crunch, etc.”

Did you mention Sweden? There are some who claim that this nation’s economy is falling behind that of Mississippi’s. It’s high illegitimacy rates and falling birth rate will probably doom it in the next few decades. Also, we paid for much of their military defense. Who do you think kept the Soviets from invading the Swedes?

A capitalist economy essential tells its citizens, “Either get it together, or you are toast!” The socialists assert, “Worry? We’ve got it made. Let’s chill out and take another vacation.” Not lying to yourself is the very first step required in remaining an affluent country.

You also place far too much emphasis on the trade deficit. It is a matter of secondary importance. We merely need to embrace free market economic policies---and everything else will take care of itself. Argentina? That country’s decline is primarily due to Juan and Evita Peron and their fellow ideological cohorts. The “cry for me Argentina” female nut case socialized the national economy. Do you wish to prevent this from occurring in the United States? In that case, vote for the lesser of evils in the next election: President George W. Bush. The Democrat candidate will inevitably push policies which will aid the few, and hurt the majority.

[ If internal combustion engines are so all-fired economical, why do railroad engines use a diesel engine to turn a generator to make electricity to drive the electric motor that drives the train? ]

Answer: Because (a) electric wires conveniently take the place of rotating mechanical driveshafts and because (b) varying both the electrical voltage as well as the current input to an electric motor helps the electric motor's output shaft obtain effects similar to those of the gears in a mechanical transmisswion.

Mechanical drive shafts and transmissions would be
awkward to locate on in locomotives with multiple powered final drive axles. Having one or more electric motors to turn each final drive axle or wheel is a better design.

A Diesel-electric locomotive is not more energy efficient than a hypothetical all Diesel locomotive.

Re your custom ironwork business -- it may need an in-person sales person and/or aesthetic design consultant, but it sure seems like the manufacturing of the ironwork could be outsorced to a another country such as Mexico where iron artisans work cheaper.

Compare your business to the automobile business:

[ 1. The nature of custom design demands that it must be done at the site with the customer so they can be steered towards a single product they want rather than away from the infinite number of items they don't want. ]

Cars made overseas need live, on site salespeople here in the US.

[2. The final design is much more a matter of persuasion and personal relationship than practicalities of function. ]

The same goes for cars, heh heh.

[3. The final product must at some point make a physical appearence.]

As do imported automobiles.

[4. The customers I have had seem to me to believe that my work is too vague and expensive to ever trust it to pixels on a screen - or maybe I just convinced them of that. ]

Like I said, imported cars need live, in person American salesmen.

...

My larger point? Unless you've gtot a gu'ment hjob or a tenure track academic job, you're not safe from foreign competition. Don't kid yourself. The saoftware people used to think that their jobs were safe from the demonic foreign peril.

[ A capitalist economy essential tells its citizens, “Either get it together, or you are toast!” ... ]

"its citizens"?

So it's the capitalist economy that rules the American people?

Because credentials seem to be oft mentioned as a way to dismiss the arguments of someone’s position in this debate, I’ll state first off that I am a professional Software Developer. And I’m in favor of outsourcing.

One of the legacies of the .com era is the expectation of a high salary for IT work. This made sense then, because the supply of IT professionals was extremely tight. This is no longer the case.

As a result, software developers need to make a decision: are they only interested in hacking code? Well then you are going to get less compensation today due to competition. Are you interested in increasing your value to your employer by doing the harder work of understanding their business and THEN creating an IT solution? Then you’ll get more income.

As I look around the landscape I see tons of potential for IT work. Ever looked at the state for Inter-department communications in a hospital? Hoe about RFID tagging? Wireless order-entry systems? Or how about data sharing between auto-dealership departments? What about real-time inventory tracking at the mom and pop retail?

What is the greatest deterrent to getting this work done? The cost of IT. For big business, the answer to this dilemma is cheaper workers. To the guy running a book store down the street that answer does not exist.

Finally, where are these people who can’t find work looking? Manhattan? Or Cheyenne?

There are parts of the country where IT is doing booming again (Denver metro is doing better than national average, for example). So perhaps the unemployed people need to look farther afield?

I don’t know what the ‘best case’ answer is. I’m not an economist after all. Nevertheless, I can say that there is a ton of potential work out there. As an IT professional, you simply have to sell yourself in such a way that you get the work. Perhaps a reasonable way to do that is to lower your price point – not because of outsourcing, but because the .com era established unreasonable expectations among people in IT.

So at the end of all of this, why do I support outsourcing? Because it increases competition. Because it diversifies the market. Because it increases the standard of living in India, Eastern Europe, Russia, and on and on. There is a ton of work in the IT field. You simply have to prove that you are worth more than ‘cheaper’ Indian IT.

(And none of this begins to address the fact that the chance for project failure increases significantly when you introduce 12 hour lag times and cultural problems in the mix – another reason why I think outsourcing is in part a fad that will die down one the real costs become apparent. Everyone seems to forget that the hardest part of IT is understanding the task, NOT hacking code).

I don’t know. Perhaps I’d change my tune if I suddenly couldn’t find any work. But the fact that I’m turning away contracts tells me that maybe, just maybe there is an element of protectionist FUD in the outsourcing debate.

Competition Pfft.
Lower prices. Pfft pfft.
Look at the cpi lately?
Up.
Food prices? Up.
Durables? Up.
And opec controlled oil? Up, up, up.

Profits are up. But so are prices.
So who's pocket is that money going in?
Not the american consumers.

Nobody is benefitting from corporate profiteering except big investors, and corporate CEO's.

Are the free trade outsourcing advocates here pushing for deflation? Or simply low inflation?

Those profits certainly aren't produceing the requisite number of jobs to put us in any kind of a solid recovery.
They aren't sure what they are pushing, but I am.
Economic smack talk that the well off and unwary can get high on.

Especially those that believe our economic policy should be oriented towards increasing the standard of living in "India, Eastern Europe, Russia, and on and on."

Re: but it sure seems like the manufacturing of the ironwork could be outsorced to a another country such as Mexico where iron artisans work cheaper.

True but that doesn't make them artisans that makes them factory workers. What I do is combine everything from the imaginative possibilities to the final product in one package.

The saleman problem doesn't come up because of that word custom. I started to think you had a point here since it has occured to me to just design and sell and then farm the work out. But this is not an off the shelf item that lends itself to any sort of mass production. As the product is made by me I make decisions with every swing of the hammer that are what gives my work distinction, desireability and most of all makes it unique. Maybe I'm wrong but I don't think one can outsource that.

The software analogy is close but I think falls apart when you realise that software engineers were always up against the problem that other than their peers most people don't care how elegant the code behind their version of say Quickbooks is as long as it does the number crunching correctly.

Perhaps this all is getting so specific to my particular nitch that it has no general application . But I don't know ....

"There is a ton of work in the IT field. You simply have to prove that you are worth more than ‘cheaper’ Indian IT."

Well, that kinda falls down when the Bank of India (America) decides to outsource its ENTIRE IT and Accounting departments to India. Lets say I've been working at Bank of India for 10 years and I'm one of the best programmers / architects they have. That doesn't matter when they shift their entire department overseas. I still have to find another job with thousands of other applicants.

I totally agree with the underqualifications of the Indian IT industry. With 30% churn, you can't get a project completed, no matter how qualified a PM you are. Unfortunately the powers that be don't understand that. They aren't so much interested in the numbers crunching properly, but the number crunching mechanism being produced cheaply. They won't know their mistake until the 3 year scoped project isn't even 1/4 of the way done. Then it is too late. Perhaps they will throw good money after bad, but that just perpetuates the failure of the project.

Hey, Opus

3. No, Comparable. No methodology, we're talking about your upbringing. Just testing your 'snark'-ability. You failed.

2. Fair enough, but I'm sure he would also be surprised at your gender issues, "Opus". Unless you're thinking of another Opus.

1. Right you are. Tell you what - you can continue to pretend to be anyone you want and pretend it's clever and I'll continue to not worry about spel-checking my posts.

In a related note, the dealership currently has a 3 month wait-list (weight-list) on the Prius.

JKC Says:
"Snark aside, the aforementioned trio of commenters seem too dense to notice that politics is an entirely different field from macroeconomics."

Sorry, I didn't get the memo that we were playing "spin doctors".

"If the GOP's answer to a jobless recovery is "Suck it up, girlyman,""

The demo's have been using "suck up all the free stuff" since FDR. Unfortunately, this has left the left with the suckers and their chin stroking enablers. Blue collar middle America is investing in the stock market and has little sympathy for pale, died black-hair, gothic-lite affecting out of work computer geeks.

Maybe thats why the President was at Daytona yesterday and not celebrating diversity at the SF city hall.

"then the Democrats are going to mop the floor with you"

Sorry, demos gave up on working folks long ago... no one to push the mop for them... out of work IT-types would rather suck gov't cheese than get a real job.

"even if you're right about the overall advantages of free trade."

Keep telling yourself that it's the spin that counts, not the underlying message.

Hey, If I'm dense, I must have gravitas, no?

"If internal combustion engines are so all-fired economical, why do railroad engines use a diesel engine to turn a generator to make electricity to drive the electric motor that drives the train?" Actually, diesel engines *are* internal combustion engines (distinguished from external combustion engines like steam turbines and conventional steam engines). They are more efficient that gas engines, but heavier in proportion to power. Some of the recent innovations in gas engine technology (variable valve operation to replace throttling) promise to partly close the gap.

Horst Graben, ordinarily I wouldn't dignify this type of trolling diatribe with a response, but unfortunately, some people such as you will undoubtedly make this a partisan issue when it truly is not.

"The demo's have been using "suck up all the free stuff" since FDR."

I'm a Republican. I don't like excessive social programs, but what is happening is people who ordinarily work hard and pay an abundance of taxes are finding themselves out of a job. It’s not because they are under qualified; it’s not because they aren’t hard workers; it’s because they can’t work that cheaply. Foreign countries are giving massive subsidies to their back office outsourcing industry undercut Americans. Furthermore; the United States Federal and State governments charge such high taxes for American workers. Among these financial burdens are social security, unemployment tax, and workman’s compensation, and that is just Federal taxation. If you consider “working in America,” you have to tack on benefits such as paid vacation, holidays, partial health insurance and the like. With this alone, it costs an extra 35% – 40%, to the salary. That would bring it to roughly $42,000 a year for a $30,000 employee. That’s a bunch. As if that weren’t enough, corporations must keep a slew of lawyers on hand and readily available to defend against lawsuits directly related to employment of a United States worker: age discrimination, sex discrimination, race discrimination, wrongful termination, etc. If you remove even half of that from the picture, an American employee would be a lot cheaper compared to an overseas worker, and we all know, Americans work harder than anyone.

“Unfortunately, this has left the left with the suckers and their chin stroking enablers. Blue collar middle America is investing in the stock market and has little sympathy for pale, died black-hair, gothic-lite affecting out of work computer geeks."

I’m almost sorry to be condescending to you, but my friend, back office outsourcing affects you too. The “gothic-lite computer geeks,” a group of which I can’t be further from, will need to find a job in order to pay the bills. If your job is even in the proximity of being immune from outsourcing, they are going to compete with you for it and they have a lot to bring to the table. You will be competing with workers who are exceptional at mathematics, have an understanding of strategic business maneuvers, cutting costs while retaining quality, negotiations, selling themselves, and other skills that are learned in the white collar world. This isn’t a white collar / blue collar issue. This isn’t a Democrat or Republican issue. With a substantial amount of back office jobs overseas and with no better paying skills to learn, there will be a shift downward of social class in Middle Class America. Don’t think that this issue won’t affect everyone who works for a living, because it will.

"The typical mantra of retraining is a smokescreen. Pray tell, what do Americans who have lost jobs to outsourcing and H-1B visas retrain to? Honestly, what positions are permanently impervious to outsourcing? "

Nothing. But, given the fact that it took the foreigners this long to pick up IT, when we go on to our next big thing, they're hardly going to jump on it the next day.

"Practically none, when we get honest. You've got doctors in Malaysia operating remotely via robots because they can do it more cheaply than Western docs. Think about it. What would you tell your newborn child to go into when that time comes?"

Hopefully, I don't have the foggiest notion what jobs he'll have to pick from when he grows up. If there's only the same crap then that there is now, that's an awful lot of stagnation.

"Are the free trade outsourcing advocates here pushing for deflation? Or simply low inflation?"

Well, one thing that would help is if we deregulated housing, medicine, and education and allowed the prices of those items to follow those of other goods and services downward.

"Well, one thing that would help is if we deregulated housing, medicine, and education and allowed the prices of those items to follow those of other goods and services downward."

Deregulated housing... so we should scrap building codes, and if houses and other buildings collapse during earthquakes... it's the Invisible Hand of the Marketplace.

Deregulated medicine... so what if the guy who did your surgery got his training out of a coloring book? It's the Invisible Hand of the Marketplace.

And we can deregulate education, too. Who really cares about standards...the Invisible Hand of the Marketplace will take care of us.

Look, I'm all for free trade, too, but some of you guys have stripped an intellectual gear or two.

Now wait just a minute, Tom (Dyess), where are you getting that Horst is the one 'trolling'? You appear to be a 'zero-summer' on jobs - fine. Your belief, regardless of your politics.

Which, buy the way, (Yeah, Opus, that's for you)you make a point of interjecting *as you scold Horst for it*.

But how do you not see that Horst is responding to the (political) attack most recently directed at him? You do understand that the posts scroll up in reverse chronological order, right?

Yes. that must be it. Just a simple misunderstanding on your part, right? You *do* see the sequence correctly now right? Surely you have also divined "JKC"'s weird reference to my (well, our) arguing the Macro, when I have gone out of my way to assert *exactly the opposite* in my back and forth about Edelen's Prius?

Tom? Oh TAh-ommm? You see where I'm going here? I think you understand everything exactly, and chose to scold Horst anyhow, feigning ignorance, so you could post *your* diatribe -you disingenious cad.

"Deregulated housing... so we should scrap building codes, and if houses and other buildings collapse during earthquakes... it's the Invisible Hand of the Marketplace."

There's a hell of a big difference between allowing too-fragile buildings and allowing developers to build enough frigging houses to keep up with demand. And I'm sure people will be lining up to buy matchstick houses in an earthquake zone.

"Deregulated medicine... so what if the guy who did your surgery got his training out of a coloring book? It's the Invisible Hand of the Marketplace."

How many people do you think would willingly go to such a doctor?

"And we can deregulate education, too. Who really cares about standards...the Invisible Hand of the Marketplace will take care of us."

Well, for one thing, the customers will care an awful lot about standards - unless they only want that diploma for its decorative value.

The lightly regulated electronics industry puts out products that work, and work damned well, and keep going down in price with no end in sight. All your claims about how unregulated industries produce nothing but crap are nonsense, and a look at any currently operating, lightly regulated industry will tell you this. You might get away with screwing your customers once, but few of them will hold still for you to do it again and again when anybody can pop up out of nowhere anytime he feels like it without asking permission and steal those customers away.

"You might get away with screwing your customers once, but few of them will hold still for you to do it again and again..."

Except that in medicine and construction, your customer can end up dead. You don't have any way of knowing the phony doctor faked his diploma until he hurts or kills you or a loved one, and unless you're a structural engineer you don't know if there are construction problems until the roof crashes down on your head.

Tammy G, exactly how is "pale, died black-hair, gothic-lite" not trolling? When one's argument deteriorates into not much more than personal attacks and demeaning rhetoric, it typically means one has discovered one's arguments don't hold much water.

“But how do you not see that Horst is responding to the (political) attack most recently directed at him? You do understand that the posts scroll up in reverse chronological order, right?”

Condescending rhetoric. Case in point.

“Yes. that must be it. Just a simple misunderstanding on your part, right? You *do* see the sequence correctly now right? Surely you have also divined "JKC"'s weird reference to my (well, our) arguing the Macro, when I have gone out of my way to assert *exactly the opposite* in my back and forth about Edelen's Prius?”

More condescending rhetoric. It’s a new paragraph, you should change it up a little. Case in point.

“Tom? Oh TAh-ommm? You see where I'm going here? I think you understand everything exactly, and chose to scold Horst anyhow, feigning ignorance, so you could post *your* diatribe -you disingenious cad.”

Ahh more dreadfully boring rhetoric, exactly the same. I don’t see how this helps your argument what so ever. Case in point.

I don't mind debating the facts and socioeconomic theory. In fact, I would love to hear your refutations on my points, but you can leave the advocate rants and single dimensional rhetoric in the schoolyard.

PS: My dad can beat up your dad, eh?

Tom D, a Fisking:

" ordinarily I wouldn't dignify this type of trolling diatribe with a response"

So, you are admitting that you are a worthless POS, just like me. Your clever reverse psychology has thus boosted my self esteem, thx.

", but unfortunately, some people such as you will undoubtedly make this a partisan issue when it truly is not."

We live in a 2-party democratic republic... every issue that is "non-partisan" means look out for your wallet or rights cause it's time to be shorn.

"I'm a Republican."

Great. I'm not.

"I don't like excessive social programs, but what is happening is people who ordinarily work hard and pay an abundance of taxes are finding themselves out of a job."

Yeah. I know, it has happened to me several times, it's the nature of my profession (geology).

"It’s not because they are under qualified; it’s not because they aren’t hard workers; it’s because they can’t work that cheaply."

I hear ya. I remember going through a big boom-bust in my current career. You start out cutting a fat hog, raking in the cash hand over fist. Pretty soon, other mo fo's see what you are doing and start horning in on the action. Thats OK 'cause there is plenty to go around. Just when you think your poop is chocolate ice cream, the customers start getting smart. You know the drill, some of your compatriates went to work for clients, now they know the score and prices start dropping.

Do I need to go on, or do you need more castor oil to clear your mind.

"Foreign countries are giving massive subsidies to their back office outsourcing industry undercut Americans. "

Those damn feriners, helping there own kind. Shocking. I'm so glad that the morally superior, fair playing Americans would never ever do something like this.

"Furthermore; the United States Federal and State governments charge such high taxes for American workers. Among these financial burdens are social security, unemployment tax, and workman’s compensation, and that is just Federal taxation."

It sucks, but it is the cards we deal to ourselves. Workers comp and unemployment are state taxes, btw. Also, every industry in US has this burden, yet business goes on. It must be magic.

"If you consider “working in America,” you have to tack on benefits such as paid vacation, holidays, partial health insurance and the like. With this alone, it costs an extra 35% – 40%, to the salary. That would bring it to roughly $42,000 a year for a $30,000 employee. That’s a bunch."

Those greedy workers, it's their fault! Good point, Tom.

"As if that weren’t enough, corporations must keep a slew of lawyers on hand and readily available to defend against lawsuits directly related to employment of a United States worker: age discrimination, sex discrimination, race discrimination, wrongful termination, etc."

Lets not get partisan Tom. You are making a direct attack on the democrat's #1 source of campaign cash. How dare you bring such slander into such a dignified discussion.

"If you remove even half of that from the picture, an American employee would be a lot cheaper compared to an overseas worker, and we all know, Americans work harder than anyone."

Wish in one hand and poop in the other, see which one fills up first. Also, Americans don't work harder than anyone else. That is racist xenophobic crap. American workers are the most productive due to many factors.

"I’m almost sorry to be condescending to you, but my friend, back office outsourcing affects you too."

Yeah, I know. As a self employed blue/white collar technician/professional, I feel it. It makes my overhead go down and I make more money.

"The “gothic-lite computer geeks,” a group of which I can’t be further from, will need to find a job in order to pay the bills. If your job is even in the proximity of being immune from outsourcing, they are going to compete with you for it and they have a lot to bring to the table."

Bring it on. I'm on career #3 now and it will likely only last another 10-years at most. It is scut work that not too many folks would like to do 'cause it's boring, frustrating, and occasionally dangerous, hard and dirty. The pay is pretty low (based on IT standards) as well.

"You will be competing with workers who are exceptional at mathematics, have an understanding of strategic business maneuvers, cutting costs while retaining quality, negotiations, selling themselves, and other skills that are learned in the white collar world."

That and a Jackson will get you coffee and donuts for the crew in my biz. Most of my clients want shit to get done in the ground and approved by gov't slugs. How exactly does a dungeons and dragons pipe dream fit in?

"This isn’t a white collar / blue collar issue."

Spot on, Tom. Since it is now no longer an exclusively blue collar issue, the white collar entitlement whiners are coming out of the woodwork.

" This isn’t a Democrat or Republican issue. With a substantial amount of back office jobs overseas and with no better paying skills to learn, there will be a shift downward of social class in Middle Class America."

That prediction is based on a static model and has been made several times in my lifetime. Excuse me if I don't buy into doom and gloom, it's so un-American.

Your philosophy sounds like you want everyone to mortgage our future to maintain museum quality make-work jobs.

" Don’t think that this issue won’t affect everyone who works for a living, because it will."

Bingo! The cost of doing business will continue to go down making new businesses easier to start and my profits will keep going up. Also, the new cheap services in future will make it even easier for me when I transition into career #4.

There is a ton of intertwined quotes, so please bear with me.

So, you are admitting that you are a worthless POS, just like me. Your clever reverse psychology has thus boosted my self esteem, thx.

[TomD] Bravo! Much better than Tammy G’s response. Hey, I have to entertain myself.

", but unfortunately, some people such as you will undoubtedly make this a partisan issue when it truly is not."

"I don't like excessive social programs, but what is happening is people who ordinarily work hard and pay an abundance of taxes are finding themselves out of a job."

Yeah. I know, it has happened to me several times, it's the nature of my profession (geology).

[TomD] Neat… rocks. :)

"It’s not because they are under qualified; it’s not because they aren’t hard workers; it’s because they can’t work that cheaply."

I hear ya. I remember going through a big boom-bust in my current career. You start out cutting a fat hog, raking in the cash hand over fist. Pretty soon, other mo fo's see what you are doing and start horning in on the action. Thats OK 'cause there is plenty to go around. Just when you think your poop is chocolate ice cream, the customers start getting smart. You know the drill, some of your compatriates went to work for clients, now they know the score and prices start dropping.

Do I need to go on, or do you need more castor oil to clear your mind.

[TomD] Guinness please. . . Well, better make that Hamms.

"Foreign countries are giving massive subsidies to their back office outsourcing industry undercut Americans. "

Those damn feriners, helping there own kind. Shocking. I'm so glad that the morally superior, fair playing Americans would never ever do something like this.

[TomD] I wish they would, but Congress was, up until this year, jacking up H1-B visas during the bust. The sad thing is the U.S. government gives foreign countries massive subsidies that come from our tax dollars. India is a bad example currently because of our distain concerning their secret nuclear weapon program, but China and Russia still apply. If you look at it from that perspective, we are inadvertently paying to send our jobs overseas.

"Furthermore; the United States Federal and State governments charge such high taxes for American workers. Among these financial burdens are social security, unemployment tax, and workman’s compensation, and that is just Federal taxation."

It sucks, but it is the cards we deal to ourselves. Workers comp and unemployment are state taxes, btw. Also, every industry in US has this burden, yet business goes on. It must be magic.

[TomD] Some Business go on, some can’t afford the socioeconomic labor costs and hire fewer people. Seems now the large companies can’t afford the socioeconomic labor costs and stay competitive, thus the outsourcing trend.

"If you consider “working in America,” you have to tack on benefits such as paid vacation, holidays, partial health insurance and the like. With this alone, it costs an extra 35% – 40%, to the salary. That would bring it to roughly $42,000 a year for a $30,000 employee. That’s a bunch."

Those greedy workers, it's their fault! Good point, Tom.

[TomD] It is what it is. It costs businesses much more to hire an American worker due to these conditions that helps make foreign outsourcing all the more attractive. That’s a fact Jack, err Horst. I’d rather have a job without company provided health care, but that doesn’t seem to be an option.

"As if that weren’t enough, corporations must keep a slew of lawyers on hand and readily available to defend against lawsuits directly related to employment of a United States worker: age discrimination, sex discrimination, race discrimination, wrongful termination, etc."

Lets not get partisan Tom. You are making a direct attack on the democrat's #1 source of campaign cash. How dare you bring such slander into such a dignified discussion.

[TomD] Haha. Cut and paste response to last point here.

"If you remove even half of that from the picture, an American employee would be a lot cheaper compared to an overseas worker, and we all know, Americans work harder than anyone."
Wish in one hand and poop in the other, see which one fills up first. Also, Americans don't work harder than anyone else. That is racist xenophobic crap. American workers are the most productive due to many factors.

[TomD] Since America is a melting pot, it’s actually patriotic xenophobic crap. I’m not really sure xenophobic applies though. The crap part doesn’t really apply in software development teams either, but I can’t honestly comment on Accounting, HR or Finance which are also being shipped across the Pacific/Atlantic since those aren’t my immediate field.

"I’m almost sorry to be condescending to you, but my friend, back office outsourcing affects you too."

Yeah, I know. As a self employed blue/white collar technician/professional, I feel it. It makes my overhead go down and I make more money.

[TomD] Are you better off now than before NAFTA?

"The “gothic-lite computer geeks,” a group of which I can’t be further from, will need to find a job in order to pay the bills. If your job is even in the proximity of being immune from outsourcing, they are going to compete with you for it and they have a lot to bring to the table."

Bring it on. I'm on career #3 now and it will likely only last another 10-years at most. It is scut work that not too many folks would like to do 'cause it's boring, frustrating, and occasionally dangerous, hard and dirty. The pay is pretty low (based on IT standards) as well.

[TomD] I’ve been in similar trenches before. That’s why I (wrongly?) invested in a degree. It was very costly and painful. It seems like it was a bunk bag of goods. If I can’t find a job in IT, Accounting, Project Management, Finance, or any business related degree, I’ll check it out.

"You will be competing with workers who are exceptional at mathematics, have an understanding of strategic business maneuvers, cutting costs while retaining quality, negotiations, selling themselves, and other skills that are learned in the white collar world."

That and a Jackson will get you coffee and donuts for the crew in my biz. Most of my clients want shit to get done in the ground and approved by gov't slugs. How exactly does a dungeons and dragons pipe dream fit in?

[TomD] Your stereotypical imagery is just brilliant. I’ve really never heard that one before. Brilliant! Did you come up with that one yourself? I actually try to get a game in between watching my entire Star Trek collection and building a robot to take to the prom. . A girl robot (commercial) . . All jokes aside, the issue is your industry will have much more competition, so perhaps you can move to career number four in three or four years instead of ten. Until there are more jobs that pay better, people will take what they can get.

"This isn’t a white collar / blue collar issue."
Spot on, Tom. Since it is now no longer an exclusively blue collar issue, the white collar entitlement whiners are coming out of the woodwork.

[TomD] I whined about NAFTA too. I’ll be whining about naturalization of 16,000,000 illegals as well shortly. If someone breaks into my car, I’ll whine about being mistreated as well. Actually no, I think I’ll pull out my light saber and attempt to prevent it from happening. Point being, what you call whining, I call trying to protect my livelihood. I guess your point of view is along the lines of misery loves company.

" This isn’t a Democrat or Republican issue. With a substantial amount of back office jobs overseas and with no better paying skills to learn, there will be a shift downward of social class in Middle Class America."

That prediction is based on a static model and has been made several times in my lifetime. Excuse me if I don't buy into doom and gloom, it's so un-American.

[TomD] I think Unpatriotic is the buzzword you are looking for. Anyway, you said yourself you are on your third career and I’m assuming you make less than when you started with Geology. Are you calling that roses?

Your philosophy sounds like you want everyone to mortgage our future to maintain museum quality make-work jobs.

[TomD] No, my philosophy is more inline with the Bob Hope “Buy American” campaign. American workers can’t live very well on $16,000 but if the government wouldn’t burden businesses so much, perhaps it would be closer to $25,000 to perhaps $30,000. Maybe even $40,000 if the companies appreciate the fact that Americans are more in tuned with American business culture than citizens of other countries. The vast majority of IT people don’t make $100,000 a year, even during the boom.

" Don’t think that this issue won’t affect everyone who works for a living, because it will."

Bingo! The cost of doing business will continue to go down making new businesses easier to start and my profits will keep going up. Also, the new cheap services in future will make it even easier for me when I transition into career #4.

[TomD] To summarize, until there are new jobs for these displaced workers to move into, I would think there would be many more people competing with you for your customers in career number three and career number four would already be saturated by the time you’ve discovered it. This may sound overly simplistic, but I think it holds value. Seems to me that if you have the same amount of demand but with much more competition your net sales will drop unless you have a real competitive advantage. The only advantage I can think of is established reputation that is pretty volatile with many players in the market. The new guys always have something to prove.

[TomD] Anyway, it’s getting late and I have to go to work tomorrow (thank God for small favors). I’ll check back tomorrow for more interesting and humorous discussion.

It looks like I found this post after the comments have already degenerated into a flamewar, but it looks like there are (or were) several people with honest questions. FWIW I've written two essays intended to directly respond to the concerns of those worried about globalization/outsourcing/offshoring: 1 2

Except that in medicine and construction, your customer can end up dead. You don't have any way of knowing the phony doctor faked his diploma until he hurts or kills you or a loved one, and unless you're a structural engineer you don't know if there are construction problems until the roof crashes down on your head.

Uh, what does that have to do with regulation? You don't have any way of knowing whether the phony doctor faked his diploma in the regulated system, either.

Clinton's dot.com bubble meant that IT workers were widely overpaid. Outsourcing is addressing that imbalance; lower IT salaries would help, too. I'm pretty sure there are few IT professionals unable to get work at the USA average wage (of about $30 000/year?). A big drop after $80k, but maybe they need to sell their house (or walk away from an excessive mortgage), and live much more simply.

It's great, GREAT, that India and China are growing, and their dirt-poor, disgustingly-poor, obscenely-poor people are, finally, having more opportunites. If 40 Indians take the place of a 10 person USA call center, that's mostly good.

But the 10 Americans have to change. Sell used cars? Not so easy, but easy to start trying. For 40 years or so, especially as the Rust Belt manufacturing jobs were disappearing, Hi-Tek was the coming thing. Now, hi-tek is the outsourcing thing, and the future good jobs don't seem so clear. They're not; and not obvious; but that doesn't mean they're not there. But an average US job is good job; even if half the money of a prior job.

Something like 5-6% unemloyment is the natural, long term, full employment number. Wanting a lower rate is pretty unsustainable.

Oh, on the trade deficit, there is no real problem. Foreign companies/ countries have 3 choices of what to do with dollars: 1) buy American products, 2) invest in America (creating US jobs), 3) put the money in a bank (which has to invest in something American, bonds, etc.)

The trade+investment sum is always moving towards balance -- that balance is pushing the dollar down.

It is also pushing US mortgage interest rates down. Since that's one of the easy things for banks to do with dollars.

Limiting the deductibility of mortgage interest payments, maybe to a lifetime maximum of $500 000, would reduce this tax subsidy to the super rich, without hurting the middle class (=world rich).

US middle class ARE rich, in the world. And trade protection is designed, like most gov't regulations, to hurt the poor (in India) and help the rich. (And/or the super-rich.)
(From Slovakia -- willing to do great programming outsourcing at half US rates, or maybe now 80%)

Dan writes: "The most interesting part is Bhagwati's point that while many blame trade for job losses, it has far more to do with technological change:"

But this is where Bhagwati is talking out his ass.

Software developers are not being replaced by laptops. If technology alone were replacing software developers, then India's IT industry wouldn't be booming. People wouldn't be needed, anywhere. The lack of such silver-bullet technology is a big reason *why* offshoring is attractive - the combination of cheap technology and cheap people.

Nor is the scenario he describes about secretaries representative of what offshoring means. A more accurate analogy would be a situation where Bhagwati's secretary were replaced by one in India, with whom Bhagwati communicated via email and Internet telephony. The person in India would be cheaper, and while being unable to provide services like making coffee, could still take dictation and could additionally act as a human spam filter.

Bhagwati conveniently leaves out most software development work from his argument, which makes it much easier to argue that offshoring isn't significant. He claims that there's two kinds of offshoring: call-center jobs and research (which, he says, isn't commonly offshored).

This leaves out a huge, gaping excluded middle.

Most software development isn't cutting-edge research of the type Bhagwati seems to be referring to. It's not pushing the boundaries of the field. It's "just" coding to meet the unique needs of a given business. Not actually research at all. But that doesn't mean it's simple, or mechanical, or the software equivalent of work on an assembly line. It's still complex and difficult. (Revamping the IRS's computer systems isn't pushing the boundaries of computer science, yet it has stymied a number of contractors.)

And while they may not be doing 'research', there's still room for ingenuity and elegant design. And sometimes, after completing a project, the people who developed, say, a mundane payroll system for a hospital may realize they came up with something that actually does advance the state of the art a little. A design pattern, perhaps. Or a refactoring strategy.

Not exactly "cutting edge" to the standards of Intel's 'scratching at the door of quantum-level effects' research, but important nonetheless.

These jobs *are* being sent offshore, in significant numbers. I'm not sure if Bhagwati left these out due to sheer ignorance, or intentionally in order to make his case look stronger and to muddy the waters of the offshoring debate. In either case, it doesn't look good.

Another logical error Bhagwati commits is when he mentions the small number of tip-top people coming over from India. The beauty of offshoring is that companies can hire the not-so-tip-top people, in large numbers yet at massive savings. The number of highly skilled students Bhagwati encounters in classes is irrelevant.

Why do people who don't know jack shit about the IT industry feel compelled to comment on offshoring? It is a puzzlement.

"The harsh fact is that corporations
prefer to hire non-US citizens under
the H1-B and L-1 visa programs because
they can pay them less and because the
people who are working under these
programs are effectively in slavery."

My husband just recently hired three H1-B visa holders from India. He didn't hire them because they were cheaper--with the cost a small firm like his has to go through to keep them legal and get them green cards they cost the same. He hired them because they were * * * BETTER * * *

He had so many interviews with American programmers who only thought they knew their stuff. The self delusion was tragic.

Incidently, in my small business I work with Americans who are GREAT. They've established their own businesses and have used superior English abilities to shoot out alone. And they get offers all the time, but they've become quite attached to their freelance lifestyles.

"My husband just recently hired three H1-B visa holders from India. He didn't hire them because they were cheaper--with the cost a small firm like his has to go through to keep them legal and get them green cards they cost the same. He hired them because they were * * * BETTER * * *"

Carolyn, how do you know they are *** BETTER *** if he just hired them? Shouldn't the expertise of a programmer be his/her ability to ***FINISH*** the project instead of just ***BULLSHIT*** through an interview?

DT,

You write quite inanely:
"There are some who claim that this (Sweden)nation’s economy is falling behind that of Mississippi’s. It’s high illegitimacy rates and falling birth rate will probably doom it in the next few decades."

Who are these "some who claim" Dave? Would it be that they haven't realized that Sweden's GDP growth is better than the EU-15, better than Germany's, and comparable to the USA's GDP growth? Would you and these "some who claim" actually like to make your arguments based on facts?

So what if Sweden's illegitimate or out of wedlock birth rate is up? Maybe more people are shacking up than marrying. It doesn't matter economically so long as they all have jobs and the economy is growing.

As for you remarks blaming Argentina's situation on the Perons as somehow an advertisement for GW Bush then you're insane. Yes, the Argentina government couldn't control their fiscal spending, their social spending, and their debt accumulation just like GW Bush. In fact, GW Bush's economic policies remind me quite allot of the Peron's attempt to buy the electorate and play populist while catering to elitist interests. The debt crisis and currency devaluation are also eerily reminescent.

Someone asked for readings, on free trade, that are accessible. By far the best is Russell D. Roberts, THE CHOICE, 2nd ed., (Prentice Hall, 2001).

Another is Frederic Bastiat, ECONOMIC SOPHISMS.

Don Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA

These jobs *are* being sent offshore, in significant numbers.

Where is the evidence for this? Not anecdotes, not chicken little stories about what will happen, but actual evidence?

Let me tell you a story. My wife is an IT consultant. She's often away from home -- but it doesn't cost us a thing. Why? Because her customers pay for her to fly out to where they are, stay in a hotel, and work for them. Not only is her salary many times higher than an Indian's, but she costs them even more than that, because of the travel expenses. Could it be that there's often a significant advantage to being face-to-face -- more significant than the labor cost differential?

Why do people who don't know jack shit about the IT industry feel compelled to comment on offshoring? It is a puzzlement.

I don't know; maybe it's the same reason people who don't know jack shit about economics feel compelled to comment on offshoring. Re-read the entire thread, and explain that phenomenon.

David,

Just how many IT projects does your wife single-handedly develop?

Just wondering.

Of course it is technology that is responsible for the unemployment and lower unskilled wages. But anyone interested in continued economic growth should keep that fact to himself. The Gephardts of the world are blaming outsourcing now, and trying to eliminate that practice. Is it wholly unreasonable to believe they will attack and attempt to sabotage technological progress once more Americans realize that's the real explanation for the job and wages numbers?

John L,

"Of course it is technology that is responsible for the unemployment and lower unskilled wages. "

Do you mean technology used to replace work a person used to do, or lack of investment in technology. Please be more specific.

Hmm.

1. "These jobs *are* being sent offshore, in significant numbers.

Where is the evidence for this? Not anecdotes, not chicken little stories about what will happen, but actual evidence?"

That's a ridiculous question.

http://www.seocorp.com/sutherland/index.htm

http://www.globalsavvy.com/clients.html

http://story.news.yahoo.com/news?tmpl=story&u=/ap/20040209/ap_on_bi_ge/reuters_india_1

http://story.news.yahoo.com/news?tmpl=story&u=/afp/20040122/tc_afp/indian_it_satyam_results_040122123026

Got any more ridiculous questions? Did you want to know if the sky is blue perhaps? I'd suggest perhaps watching the evening TV news or perhaps reading a newspaper. There are announcements about every week.

2. "Let me tell you a story. My wife is an IT consultant. She's often away from home -- but it doesn't cost us a thing. "

And your point is?

First off so what if she's a contractor. I've done the same thing and so have thousands of other people. I'd suggest that, after a certain point in a developer's career, that it almost becomes a rather standard career path alternative.

But how does that answer "Jon H"'s point? His point is that basic every day kind of IT jobs are being offshored.

I'd suggest that if your wife is being hired as an outside contractor that it's rather unlikely that she's being hired to pump out yet another set of reports, charts or something as trivial as a small departmental application in Access.

"I don't know; maybe it's the same reason people who don't know jack shit about economics feel compelled to comment on offshoring. Re-read the entire thread, and explain that phenomenon."

Ok then why don't you explain it? Why don't you explain why the Bush administration is scurrying away from their original projection of 2.6 million jobs created this year? Hmm?

Perhaps you could give the Whitehouse some advice yes?

http://www.computerworld.com/managementtopics/outsourcing/story/0,10801,90267,00.html?nas=FIN-90267

Bank of America Corp. is setting up a wholly owned subsidiary in Hyderabad, India, that will process some of its back-office operations.

The Continuum Solutions Pvt. Ltd. subsidiary will have about 500 staffers by the end of this year, with up to 1,000 employees by the middle of next year, the Charlotte, N.C.-based bank announced.

Bank of America is the latest multinational bank to outsource back-office operations to India. The bank already outsources software development work to Indian software companies such as Infosys Technologies Ltd. in Bangalore and Tata Consultancy Services in Mumbai.

U.S. banks, brokerage firms, insurance companies, mutual fund and other financial services firms are planning to relocate more than 500,000 jobs offshore, representing 8% of their workforces, over the next five years, according to a study conducted last year by the management consultancy A.T. Kearney Inc. in Plano, Texas.

Oldman writes: "If you switch from an American secretary to a Sony VIAO, or an IBM computer made overseas, then this is then comparable to "offshoring"."

I disagree.

Offshoring implies that you maintain the same basic service. A laptop doesn't really serve as a substitute for a secretary. It implies that the professor would be doing work that his secretary would have been doing before. So it's a net loss, even if he can now do things previously impossible, like fiddling with desktop images and playing MP3s.

Replacing a US-made laptop with a foreign-made laptop would be an example of offshoring, because you keep the same level of service, but the production activity is done offshore.

In order for the secretary scenario to be a case of offshoring, he would have to replace his secretary with one overseas, with whom he communicated via email, IM, and internet telephony (or Apple iChat video chatting). He'd only experience a small drop in functionality. The secretary could still take dictation, draft letters, clip interesting articles, etc.

Did anyone look at that link for Reuters? That newswire is setting up a news group specifically to handle news about American companies operating in India. If that doesn't curdle your cheese, what will?

ROFLMAO!

http://www.newsmax.com/archives/articles/2004/2/22/170121.shtml

Now they're outsourcing **preparing tax returns**!! Goodbye accountants. Hello unemployment.

So. Where is everyone? As the last person posting did I win the debate? Or the prize for the most dedicated?

Or perhaps wierd eh? :)

"((less money to the Saudis and other Persian Gulf oil ticks.) So its not the overall energy consumption that is the issue - it is the oil we (and other countries) are dependent upon, and the fact that 75% of oil reserves are in the hands of Muslim countries.
)" - Nikita

Nikita,

Looks like you have a problem with 75% of oil reserves being in the hands of Muslim countries. Or is it Muslims you have a problem with? It is, unfortunely, this attitude that I witness regularly (on both sides) that causes the many conflicts in our modern world. You should be proud of being an 'instrument' for world conflicts - NOT!!

FYI - it was probably God's intention to give them oil as their only resource and give us the many other resources we should be thankful for. This balance maybe what keeps this world running the way it does.

Yes, next time you travel around the country, look around at all the things you take for granted everyday. You want all the oil too?? What will they be left with? You wish to doom whole nations into poverty? So see, you come across to me as greedy as well in that comment.

You earn someone's true respect when you truley respect them. May God's peace be upon you.

Hey Dan..

With all the counter viewpoints and URL's posted here, are you FINALLY getting an education on the subject of outsourcing sitting there at the university? One would certainly hope so..

Have YOU yourself personally experienced your job being outsourced? Well, no you haven't, imagine that! "When I came to my university 25 years ago, I got a secretary." This would imply that you're in your late 50's early 60's and close to retirement – what do you personally care at this point about outsourcing, it will never happen to you. In any event, to say the least on a secretary example, that's an extremely limited perspective on the subject and certainly NOT worthy of ANYONE at ANY university.

Like most of academia, you're in your own little microcosm completely shielded beyond the realities of the world today. THIS is [yet] another classic example. However perhaps, just perhaps, with all these numerous comments from many that are directly affected may be an awakening call to a bit of the reality that going on out in the streets of America where 200,000+ companies have participated in downsizing and offshoring. Dan, get out there once in a while, talk to working America first hand – anyplace and anywhere, it doesn't matter. Perhaps then, you'll actually achieve the wisdom of a different perspective that more closely relates to reality beyond a small university office.

Incidentally, I think it's safe to say that the technology sector within the US has been progressing MUCH slower in the last few years than previously. IF you're implying that OTHER countries are ramping up their technological base – you need to ask yourself why AND whose funding those tremendously growing markets. Hint: it's NOT all the consumers, Dan. Take a look at what Trilogy has done amongst many, many others.

ALSO REFERENCE:
http://www.keepmedia.com/pubs/RD/2004/07/01/515893?extID=10032&oliID=213
R&D outsourcing to grow in India
by Staff | Jul 01 '04

"The R&D outsourcing market for information technology (IT) in India is forecast to grow from $1.3 billion in 2003 to more than $9 billion in 2010 (32% CAGR), according to a recent report by Frost & Sullivan, an international market research and consulting company headquartered in San Jose, Calif. Similarly, R&D outsourcing for telecom in India is anticipated to grow from $0.7 billion in 2003 to more than $4 billion in 2010 (29% CAGR).

IT growth opportunities, according to the report, are in computing architectures, encryption and network security, human computer interfaces, programming languages, and software engineering..."

It's time to wake up old man and succumb to the notion that an extremely high amount of offshoring is a reality in America today.