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Why Outsourcing is a loss for American Citizens

Charles Hickman
Ranch Hand

Joined: May 20, 2003
Posts: 33
Employees in the US pay taxes and creating consumptions and investment within the country.
Off-shore outsourcing deprives the country of such economic benefits.
Accordingly, the answer appears to be crystal clear: Hiring workers
in the foreign countries who would not contribute to this country's
employment and economy.
Arjun Shastry
Ranch Hand

Joined: Mar 13, 2003
Posts: 1874
This is what Prof. Matloff,C.S.Professor at UC Davis and immigration expert says:
{
I am often asked about the related issue of offshoring, i.e. shipping software development work abroad. In spite of all the recent press coverage, offshoring only comprises about 1% of U.S. software development work (other offshoring work, such as call centers, is beyond the scope of my expertise and interest), and I do not believe it will ever become more than, say, 5% or so. It is simply too difficult to do software development by remote control, no matter how good one's communications technology is. This, for example, is why U.S. employers bring the H-1Bs here, rather than simply offshoring the work. Note, by the way, that offshored projects typically include an H-1B/L-1 component as well.
}


MH
Manav Mitra
Ranch Hand

Joined: Jun 01, 2003
Posts: 44
Originally posted by Charles Hickman:
Employees in the US pay taxes and creating consumptions and investment within the country.
Off-shore outsourcing deprives the country of such economic benefits.
Accordingly, the answer appears to be crystal clear: Hiring workers
in the foreign countries who would not contribute to this country's
employment and economy.

Though it is true that outsourcing might affect US economy upto a certain extent, as Capablanca Kepler already pointed out, it will be only a small percentage.
Besides, economy of nations is far more complex than that. No country in today's world can stay isolated. No country can be completely self-sufficient, so you need to import and export.
If you consider that the paper US uses is mostly made from the forests in third world countries, ecause it is much cheaper and convenient to get it done there, if you have to use forests from US itself, you'd probably think 10 times before using toilet paper. This is how MNCs work, they only know one thing - "value for money" (some put it as exploitation), but that's the smart way. If they can dump their outdated technology in India coz there's a market there, they'll do that. If they can buy cheap raw material and hire cheap labour in India and produce finished goods in US and europe, they'll do that. That't how it works...
Let's look at this in this way - if an american comapny (say Ford) gets its work done from India (or any other cheaper country), they pay amount X-Y instead of X that they would have paid in US. So they save the amount 'Y'. Now that saved amount might result in decreased car price or increased profit! Got it?
I can foresee an argument - that 'X' would have stayed in US itself.... But in globalization the money circulates globally and not locally. And this can get into a recursive argument -- likewise would you like if OIL stays only in the middle east countries producing oil? (OPEC stuff)
And if you don't have enough oil (remember it's a limited resoucrce), you won't be probably driving those cars coz OPEC desides not to give oil to other countries. This is not how it works...
India realized that knowledge is indeed its power and the Indian IT sector is giving good value for money to the clients (not only US, but also europe and Japan -- but frankly it is US centric, again mainly due to language problems), so there will be MNCs who will outsource the projects. If one state bans outsourcing, they'll have their registered office in another state and process orders from there!
And like most economic experts are saying, it won't affect your economy much.
SJ Adnams
Ranch Hand

Joined: Sep 28, 2001
Posts: 925
an economist would say outsourcing benefits the economy. in the short term, the unemployed workers must find jobs that have a 'comparative advantage' over the other country.
e.g. if californians are better at producing wine than indians & indians are better (read more efficient) at producing software than californians - then californians should produce wine & indians software.
This works out better (greater consumption of wine + software) for everyone in the long term.
Rufus BugleWeed
Ranch Hand

Joined: Feb 22, 2002
Posts: 1551
What would an economic predict about the long term implications of over population in the wine and software scenario?
Because there is going to be a long term savings, how do you feel about a temporary tax to aid those feeling the short term truama?
SJ Adnams
Ranch Hand

Joined: Sep 28, 2001
Posts: 925
Because there is going to be a long term savings, how do you feel about a temporary tax to aid those feeling the short term truama?

A keynsian would say that the gov should run a deficit rather than raise taxes. Maybe spend money on retraining programs etc.
Trouble is, (government) intervention is generally mistimed & misdirected. 'Market forces' do a much better job at coming up with the optimal number of wine producers & software engineers.
 
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