Democrats & Liberals Archives

Book Review: Outsourcing America

This book by Ron Hira and Anil Hira discusses all aspects of the outsourcing of jobs from America to India, China, Russia, the Philippines and other low-wage countries. The outsourcing phenomenon, they say, is big and growing and if not addressed by Congress, will drastically reduce American wages, then cut the profitability of American business and eventually ruin our economy.

The political and economic elite tell us that there is not much outsourcing of jobs and retraining will improve the welfare of those that are laid off. In any event, those with good educations, need not worry. Not so. Not so. Not so.

Outsourcing is affecting or will affect almost everyone who works for a living. Skilled as well as unskilled jobs are fleeing overseas. White-collar jobs dealing with computers, art, architecture, business, law, life sciences, management, office work and sales are among those that are vanishing from American life and enhancing life in low-wage countries. Many others will follow in the future. The author presents an estimate of 3.4 million American white-collar jobs lost by 2015.

Who's doing the outsourcing? Solid American companies such as IBM, Hewlett Packard, Bank of America, Capital One and Intel. They claim that outsourcing is inevitable and they must do it in order to compete. Why pay an American programmer $70,000 per year when you can get an Indian programmer for $13,580 per year? One is as good as the other, they say.

Multinational corporations treat workers like commodities. If you need a commodity like cotton, you look for the cheapest price. If you need a commodity like a programmer, you pick the cheapest you can find. Corporations have the gall to get workers to train their foreign replacements before they are fired! This is what is called human relations.

We see how outsourcing is hurting workers. After they lose their jobs, 35% don't find new jobs and 40% locate new jobs that pay significantly less than they made before. Competition, indeed:

"Instead of U.S. companies competing with overseas companies, as we had in the 1980s, it is now U.S. workers who are competing head-to-head with foreign workers."

The situation of workers is bad. So the elite suggest retraining. To which the authors ask, Are you going to make a laid-off 58-year old electrical engineer go to nursing school for 4 years? Training is not the answer, at least not the training that has been provided so far.

Some say better education is the answer. Well look at these numbers:

  • Chinese undergraduate engineers per year - 195,354
  • American undergraduate engineers per year - 60,914
As a matter of fact, American engineering schools are getting fewer applicants today because young people realize the competition will be tough.

We keep hearing that America is on the verge of the "next big thing," that will produce lots of high-wage jobs. Yes, this is what has kept America at the economic forefront up to now. But no longer. How can we come up with the "next big thing" if our technical people are not the best, and how can they be the best if corporations downgrade them to commodities? Corporations are outsourcing research jobs too. They are engaged in "knowledge transfer" operations with offshore companies.

Multinational corporations don't worry about their employees, only about their bottom line. The authors state that over the long run their bottom line may suffer too. After dealing a knockout blow to the wage-earner, Americans, who previously comprised their best market, will not be able to buy the products of these corporations. The entire economy will suffer because very little manufacturing or R & D will take place here.

The authors make several recommendations to encourage trade policies that support our national interest. Most fall into 2 categories:

  • REDUCE POWER OF BUSINESS - Big Business has so much power, that they alone decide what sort of trade agreements we make; introduce labor (our agreement with Jordan does this) and environmental issues. Change the tax structure so that outsourcing is not encouraged, but discouraged. Similarly, restrict H1-B and L-1 visas for technical "guest workers."
  • INCREASE POWER OF WORKERS - Workers have no power. At the very least, we must help workers who are displaced with unemployment relief, health care and preparing for another job. We must build institutions to increase the power of workers. We must also change our education system and dwell much more on "learning how to learn."
The authors pull their punches quite a bit. If you read the book, however, you will see that if we continue to allow Big Business to call all the shots without challenge from labor, we will all suffer.

Posted by Paul Siegel at July 22, 2006 10:13 PM
Comments
Comment #169952

I agree completely with this article because I am living this nightmare. Having “lost” a $70,000/year paying job - I have been unemployed for 18 months. The Texas Workforce commission says that I have “too much experience” to qualify for “re-training”…. but I’m expected to get a job - the last job I interviewed for pays $40,000 a year - that would barely cover my monthly expenses - and that is with NO credit card debt. Such a great way to treat Americans who have worked their entire lives, paid their taxes, reared their children - and by the way are sending them to college. I like many others are very worried about this country and where it is headed.

Posted by: Tonya Monger at July 23, 2006 2:00 PM
Comment #169968

I took a job making less money than I was making when the parent company closed us down. It took me 5yrs to get to what I was making then. I had to cut back on things I struggled. But to turn down a job because it pays less is pure stupidity. It’s the greed of the American people that are forcing companies to either leave or to close down. I don’t care if you are democrat or republican, liberal or conservative WE HAVE BEEN A VERY GREEDY NATION and now we are paying for it.

Posted by: RAK at July 23, 2006 2:39 PM
Comment #170000

This article appeared in today’s Houston Chronicle. I guess outsourcing is now headed for China, because the Mexicans won’t even do work that cheap.

Posted by: gergle at July 23, 2006 4:36 PM
Comment #170002

This is why the workers need to own the companies where they work.

Posted by: B at July 23, 2006 4:41 PM
Comment #170003

Tony, as a personel note, I too, would take the 40,000 per year job. Some income is better than none and try to reduce your lifestyle costs. Most Americans live on an income of around $45,000 for a family of four.

In today’s world you cannot take any job for granted and must keep your nose to the wind regarding what and who is hiring.

Manufacturing jobs that pay in that range are rare today. We are moving toward a professional and service type economy. Either you’re degreed, or highly technical, or you’re cheap labor.

Posted by: gergle at July 23, 2006 4:44 PM
Comment #170007

B, that’s a great deal if you can get it. Sadly most can’t. It will take riots like we had in the thirties to get back to a labor market that is rising rather than falling. The rich will not divest themselves of their greed, the proletariat must rise up and wrest their wealth from them. As Ben Stein recently said, “The rich should pay more in taxes for the benefit of society enforcing laws that prevent the poor from scaling the walls, killing them and taking their money.” (I paraphrased that somewhat).

Posted by: gergle at July 23, 2006 4:52 PM
Comment #170030

Just a note to consider:

A friend of mine’s father lost his job with one of the big US auto companies. He received a sizable payout and still (after two years) receives over 50% of his former salary in return for going to a displaced worker center and sitting around for a few hours a couple of times a week.

What other benefits should be distributed to our greedy workforce, a monthly RX for Xanax to reduce the stress of not being overpaid for semi-skilled labor?

Posted by: goodkingned at July 23, 2006 6:16 PM
Comment #170065

>>

We have been a very greedy nation, agreed, but business and the rich continue their greed, witness, most notably Big Oil, and is putting the screws to the very people they are expecting to purchase their products and services. With Big Oil getting ready to announce yet another record quarter of profits (profiteering, the more fitting word), the common man is sliding backwards at a fast pace. The cost of oil is a factor businesses can no longer “eat”. The cost is being reflected in the price of goods, and increases daily.

Having read this book, I can say with certainty, it is, indeed, very enlightening. There are points pursued which would go unnoticed by most, excepting those personally affected. Many highly educated, well placed Americans, are now decrying the fact that they may be the only employee left in their work area who is not in the country on a work visa.

Companies are offshoring at a big rate, but, more critically, they are importing the cheaper labor to sit side by side with their American counterpart. Make a fuss, American employee, and we will import your replacement or export your job quicker than you can say “unemployed”.

Companies are training professionals and technicians at a fantastic rate in India, etc. and giving them American-sounding nicknames to “blend in” with the American society’s expectations.

The authors, however, see this big business plan and execution, as something which will ultimately come back to bite them in the butt and hard. Eventually, these underpaid foreign profs and techs will form their own companies and hire their countrymen at greater salaries, and force their their benefactors out.

The trite, but true expression, “What goes around comes around” will probably come as quite a shock to the business intellectuals who thought they had the disgruntled and persistent high-expectation American employee problem solved.

The threat of future backlash is very real as described in this book, and the argument so well presented it leaves little room for doubt. America is being sold out at an extremely fast pace, and unless the middle class stands up and demands redress, there will eventually be no middle class, upper or lower.

I’m sure my boycotts do little harm to the mega-moguls, but I get personal satisfaction from them. My internet provider offshored their technical assistance to India. I fired my provider and found one who swore they were all-American and had no intentions of offshoring their operations any time soon, if ever. I purchased an economy car, parked my V-8 truck, and only drive it when I must. And that item made in India, China, Japan, etc. had better be a necessity that I can’t find American made anywhere else.

Unfortunately, most Americans are too lazy or too selfish to boycott, and only protest, weakly, if it personally affects their bottom line. We’re going to be so complacent that America will cease to exist as anything but a “service worker” economy, and we know who’s doing those jobs.

Posted by: Kathy at July 23, 2006 9:27 PM
Comment #170145

Higher-wage jobs create more income, which leads to more spending. Lower-wage jobs tend to create just enough income for a household to live without creating extra spending money. Consumer spending is the key driver of the U.S. economy, accounting for more than two-thirds of all U.S. economic activity.

Problem is higher-wage jobs (with benefits) continue to be scrapped in favour of less lower-wage jobs.

Basically, it’s our own fault. We want everything: BIG houses, BIG SUVs, BIG TVs etc. as marketed to us on BIG networks and BIG billboards.

In order to keep inflation curtailed and still see the standard of living (as measured against the ideal promoted on the BIG billboards) go up we simply must source our goods from “cheaper” nations.

As long as Big Biz is co-running the legislative show and Ordinary Joe insists of having everything BIG you can bet TINA on it: There Is No Alternative.

Posted by: Josh Grant at July 24, 2006 4:39 AM
Comment #170146

Kathy wrote: “Eventually, these underpaid foreign profs and techs will form their own companies and hire their countrymen at greater salaries, and force their their benefactors out.”

—-

A grand solution could be helping “cheaper” countries raise their standards of living, taking incentives away for companies to move East (or South, or…).

Problem is…

- We are brain draining those countries by taking away their most valuable HR resources.

- Hell would have to freeze over before an effective “Coalition of the Willing against Poverty and for Global Workers Rights” could be put together.


Posted by: Josh Grant at July 24, 2006 4:44 AM
Comment #170163

Globalization and outsourcing can also have a positive effect as well. I was hired out of college in 2000 by a Chinese manufacturer to represent their products and set up a small warehouse in the USA.

Our products are not produced domestically in the USA, as the work is too hard for us. If produced domestically, the selling price to the consumer would be so high that only the very rich could afford it. In fact, the industry wouldn’t even exist in the USA. Our products conservatively keep about 5,000 small workshops in business and provide many times more jobs in the USA.

As I write this post now, I am in Spain setting up our 3rd international distribution center. I am paid a good salary, I own a house back home, and get to travel the world selling our products. All of this thanks to outsourcing, globalization and free trade. Our Chinese owner employees many “Westerners” around the world that enjoy well paid jobs in comfortable working conditions as well.

Incidentally, most low wage countries earn a relatively small margin on their sales compared to the profits made on such products in the USA. And sometimes, American companies make money on both the backend and on the front end.

For example, Intel sells a microprocessor to China for $250. Microsoft sells Windows XP to China for $50. China puts it together in a notebook computer and sells back to the USA for $1000. A $700 trade deficit! How horrible! But wait, the Chinese company maid $50 profit on the transaction, Microsoft made $49.50 and Intel $200. So, who would you rather be? The USA with $249.50 in margin or China with $50 in margin? Who has the deficit now? There’s still more margin to come on that notebook once it actually gets to the end user. All of it in the USA. This also translates into a lot of tax money for the government coffers as well.

Yes, the USA has a massive trade imbalance with China. Lucky for us, the Chinese are kind enough to spend their surplus dough on US Government Bonds. Supporting our massive debt and keeping mortgage rates low for all of us. This in turn, has allowed our economy to continue growing. Why doesn’t anyone ever mention this?

For those of you who lost a job due to outsourcing, I recommend you visit the Canton Fair held twice a year in Guangzhou, China. Bring a stack of business cards and offer to work as an independent sales representative for strait commission. Target companies operating in industries that you feel comfortable with. They have nothing to loose by giving you a shot, and they would love to add an “American Face” to their products, and have some boots on the ground in the USA. Their marketing and sales is generally poor, and even if you don’t have any experience in sales, you would be a huge improvement to whatever strategy they are currently employing.

If you can get off the couch back home and be a little proactive, there is tons of money to be made. The laid off engineer who wrote a post previously, would be especially desired for high end technical products that require such a background. The Chinese are usually impressed with American engineers as well. You just need to be a little flexible.

It is a lot easier to sit around complaining about how you lost your job to outsourcing, than to get your butt in gear and turn a negative into a positive.

Posted by: Brent at July 24, 2006 7:49 AM
Comment #170166

Pretty sad when you get a phone call from someplace and they can’t even speak English without the accent and can barely be understood. For the most part the only people that I know that have BIG anything are the Drs., attorneys, etc, at least where I live. Most in the middle to low income bracket have the normal 3 bedroom, living room kitchen and bathroom(s). Still it doesn’t change the fact that with the cost of everything here to expect a wage that can be lived on. Yes if I had a 70,000 dollar job, lost it, and was offered one for 40,000 I would not turn it down. But why should I feel bad that I lost that 70,000 job and my previous employer decided he could save money by giving my job to someone who would do that for less thereby giving him more money in his pocket for labor off of someone else’s back. It’s about time for these boards of these big companies to cut back on the salaries of the management people instead of taking it out on the ones that actually bring the money in or make the product for sale. These CEO’s make so much money and have so many perks, cut those out and you would have more money in your pocket. If you fire one don’t give them a severance package that the normal worker could live on for years. If they were fired they were fired for a reason, don’t compensate them for doing a piss poor job. The normal employee when they get fired is lucky to walk out of there with their last paycheck, and if they are lucky with whatever benifits that they might have, and if they have them they might only get to keep them for a limited time, and for sure they won’t walk out of there with stock options, etc, that would in itself support someone for a few years if they were sold. They go on to another company do the same piss poor job, gets fired from that one gets another huge compensation package and so on. Meanwhile the normal employee gets layed off or fired and has to take a job that pays less orif they get fired might not be able to get another one. It’s time that the playing field was leveled and corporations quit playing with Americans lives. I haven’t looked into this but do Canadians have this problem with their government letting the companies give their citizens jobs away? Would anyother country stand for it? Hell no. So why should we.

Posted by: Sherri at July 24, 2006 7:51 AM
Comment #170171

Brent wrote:

“Yes, the USA has a massive trade imbalance with China. Lucky for us, the Chinese are kind enough to spend their surplus dough on US Government Bonds. Supporting our massive debt and keeping mortgage rates low for all of us. This in turn, has allowed our economy to continue growing. Why doesn’t anyone ever mention this?”

——————————————————————

Because at some point no greater fool can be found to support our “massive debt and keep mortgage rates low for all of us.”

You are right to point out that, thanks to China, most of us have a better standard-of-living thanks to the low-cost goods they produce. That has kept inflation at bay for consumers while netting huge profits for middleman U.S. corporations. But as they say the sword cuts both ways:

1. As China’s standard of living - as well as natural resources take-up - improves through their lucrative trade yielding billions of $ their cost of producing does too, as does the U.S. consumer selling price as a result… hence creating inflation… hence forcing the Fed to raise rates to battle inflation.

2. As China is holding more and more boatloads of our longer-term debt we will need to provide more and more in terms of sufficient return (i.e. higher rates) to persuade them to hold on to it in the face of higher risks of non-payback/inflation (or both).

Either we lower our expected standard of living and cut down our debt, or we eventually have to face the consequences. After all, there is no such thing as a free luch.

Posted by: Josh at July 24, 2006 8:13 AM
Comment #170270

“What other benefits should be distributed to our greedy workforce, a monthly RX for Xanax to reduce the stress of not being overpaid for semi-skilled labor?”

Good King Ned - fine with me. That’s what I do now on a daily basis. Give me more job security! The population of this country is aging very rapidly - look into the healthcare industry people even if you’re not a healthcare worker by trade. I have many friends who are computer programmers and work for the hospital system. Also, if you’re in sales, look at becoming a drug rep. With a bachelor’s degree in anything from communications to computers, you can get a drug rep job paying about $70,000.00 per year. We all know the pharmaceutical industry is growing by leaps and bounds. Medical centers are always looking for good workers and they’re very hard to find.

Posted by: Lisa C. at July 24, 2006 3:21 PM
Comment #170316

It’s not a global village.
It’s global pillage.
Corrupt incumbent politicians carry the water for their vastly rich and powerful puppeteers.

  • Our government is FOR SALE. 83% of all $2.4 billion in federal campaign donations in 2000 were from a mere 1% of the U.S. population. What does that tell you? How can the remaining 99% of the population compete with that? 90% of all elections are won by the candidate that spends them most money. Corruption in government is increasing. Too many bought-and-paid-for politicians are controlled by big-money-donors (corporations). Pork-barrel, graft, corporate welfare, and money in politics is rampant. Incumbents (who always outnumber newcomers) refuse many badly-needed, common-sense reforms.
  • Incumbent politicians refuse campaign finance reform, and many common-sense, no-brainer reforms that might reduce their power or the security of their cu$hy, coveted seats of abused power
  • Incumbent politicians refuse to reform the unfair tax system (they like it just they way they have perverted it; who do you think gains most from all those loop holes and deductions)
  • Goverment abuses the eminent domain laws so that corporations can legally plunder peoples’ homes and properties (and supported by the Supreme Court); perversion of the laws to do the very thing they were supposed to prevent
  • Incumbent politicians are above the law. Our presidents abuse the presidential pardon, which guarantees immunity for crooked politicians, like the 140 felons pardoned by Bill Clinton (many who even pled guilty)
  • Government is replacing (stealing) surpluses from Social Security with worthless government bonds (it’s a ponzi-scheme). #12.8 trillion of Social Security debt is not included with the $8.4 trillion of National Debt. Talk about cookin’ the books.
  • Incumbent politicians continuously promise (e.g. “read my lips”) things it can not make good on (i.e. prescription drug plan, Medicare and looming shortages in the tens of trillions), and selfish Americans have grown too dependent and lazy, and a disgusting sense of entitlement.
  • Government continues to grow and grow ever larger to nightmare proporation (do we need all of this?)
  • Incumbent politicians pass tax cuts that benefit the rich mostly, when the corrupt tax system already unfairly benefits those that can abuse it and all the loop holes the most; also, remember, there have been record level corporate profits;
  • The federal government is forcing net losses of over $70 billion per year onto American citizens due to illegal aliens. That does not even include the untold cost of crime, disease, and 2.3 million displaced American workers.
  • Public education is declining in quality and increasing in cost due to mismanagement, too many administrators, not enough teachers, and forcing schools to accommodate millions of illegal aliens
  • Governmnet thinks we can immigrate our way out of our problems, but using an under-paid, under-class; Republicans want cheap labor, and Democrats want votes; Institutionalized illegal immigration is a prime example of outsourcing.
  • Irresponsible incumbent politicians fuel the petty partisan warfare to distract and fool voters; just today I got a letter from Senator Bill Frist telling me to “fight back against the Democrats and elect Republicans or live with the consequences of a Democrat Majority in Congress”. I am so sick and disgusted with incumbent politicians that fuel this type of petty partisan warfare. And, I used to be a Republican.
  • 62% of Americans believe the nation is not moving in the right direction, but those Americans keep re-electing the same incumbent politicians that use and abuse them. Go figure.
  • Our government started an unnecessary war, based on irresponsible (possibly criminally negligent) and flawed intelligence. That’s a fact, but will anyone ever be held accountable for it? What about the thousands of Americans and tens of thousands of Iraqis that have died because of a war that was based primarily on non-existent Weapons of Mass Destruction. Sad indeed.
  • Pandering incumbent politicians continually strive to increase dependency on government, and bribing voters with their own money
  • Skyrocketing property taxes are driving some people from their homes. Another form of legal plunder.
  • Our legal system is dysfunctional and corrupt, where some are above the law (like Rep (LA) William J. Jefferson (hiding $90K of bribes in his freezer), and the 140 felons pardoned by Clinton, etc., etc., etc.)
  • Corporatism, corpocrisy and exploitation of other nations; trapping them in a cycle of debt (like ourselves); a form of oppression.
  • Gerrymandering; dishonest and perpetual redrawing of district lines to shift votes
  • Election fraud. When this gets too out of control (if it hasn’t already), we will no longer have anything resembling a democracy. With elections as close as they have been (e.g. year 2000), every vote counts. So, why do we let illegal aliens vote in our elecitons?
  • The main parties have created barriers to prevent third party and independent candidates from getting on election ballots, limiting candidates and our voting choices.
  • Our health care crisis is a product of irresponsible government and greedy insurance corporations. Healthcare is increasingly unaffordable and unreliable because of those two middlemen. Healthcare solutions are needed, but that is unlikely as long as middlemen (government and insurance corporations) are plundering and gouging everyone.
  • The government has no energy plan. Our energy vulnerability is a result of insufficient planning (actually, extremely irresponsible and lacking in vision) to implement alternate fuel and power sources; the government has failed miserably to encourage alternative energy sources (big oil corporations (puppeteers) influence politicians (puppets)); not to mention exacerbation of global warming and tensions in foreign oil-producing nations.
  • Our government has alienated our allies. Not smart.
  • Median incomes have been falling for 6 consecutive years while corporations have record high profits, while government perpetuates ever-present and destabilizing inflation, a fiscally irresponsible monetary system, printing too much money, and out-of-control government borrowing and spending.
  • Government is allowing our infrastructures to deteriorate, which will cost more in the long run by not being properly maintained, not to mention being unsafe.
  • Poor urban planning and urban sprawl and the lack of foresight to plan urban environments better has doomed Americans to 500 hours inside their vehicles per year (i.e. 41.7 hours per month); a massive waste of time and fuel, not to mention the frustration and impact on health.
  • corrupt government, pork-barrel, waste, fraud, graft, etc., etc., etc., etc., etc.

Out sourcing is a symptom of a much more serious problem.
Think it can’t get worse?
Think again.
We may have finally engineered our own demise.
If so, we only have ourselves to thank for it.
It will all go down the tubes while we all wallow in partisan warfare.

This and numerous other reforms are very unlikely until voters remember what it is they were supposed to be doing all along …

  • Stop Repeat Offenders.
  • Don’t Re-Elect Them !
Posted by: d.a.n at July 24, 2006 5:47 PM
Comment #170407

I know this isn’t the place for this but I have to say it anyway. One of the headlines in the USA Today states that Senator Spector is drafting a bill to sue the president over his signing statements, saying they overstep his authority. All I can say is, it’s about damn time someone did something about him and the best part is, it’s one of his own party. The American Bar Association is also saying that he is sidestepping his duties.http://news.yahoo.com/s/ap/20060724/ap_on_go_co/signing_statements_1. I don’t know how far he will get with this, but anything is worth a try.

Posted by: Sherri at July 25, 2006 12:11 AM
Comment #176678

Bottom line folks, the more jobs that disappear, the less money that is put back into our economy. This is not a hard thing to comprehend. If you don’t have a job, you can’t spend any money to buy the products of the companies that outsourced your job to begin with. Not to mention the that if these companies are saving so much money by outsourcing, why aren’t we, the consumers, seeing the savings? It doesn’t make much sense to me.
Another thing to remember, this society values youth. An unemployed 50 year old, regardless of job and life experience, is not as highly sought after as a twenty something year old. What do we do with our older displaced workers? Do we expect them to start over again? Who is going to hire them? This is something that needs to be addressed.
I agree that we need to start voting people into office that can get the job done and get our country back on the right path. To be honest, I worry about the well being of my countrymen and our economy before I worry about anyone else.

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