I’ve touched on these issues before, but let me say it again. The current flow of certain services jobs to other countries is a necessary process crucial to the ongoing vitality of the US economy. It’s nothing more than the continuing evolution of our business base. It’s been going on for centuries. The issue has become so politicized, however, that it can be difficult for many people to deal with it rationally. Here are some basic facts.
The number of jobs in traditionally “white collar” industries that have been sent abroad remains a very small fraction of the job market, even in industries such as computer programming which have received an inordinate amount of media attention recently. In fact, the Infotech sectors’ losses to outsourcing (or offshoring as it’s often called) are dwarfed by the employment reductions caused by the bursting of the Internet bubble several years ago and the subsequent economic slowdown, although many people tend to ignore this fact.
The companies sending jobs abroad save substantial sums on wages. These funds are then available for investment in innovative work, which as I have said many times, will be the lifeblood of future economic growth. The firms are also better able to control costs, helping keep a lid on inflation.
As these companies innovate, spend money on research and development, control costs, and otherwise become more efficient, they contribute to job gains across a spectrum of industries. A recent study sponsored by the Information Technology Association of America puts these gains at 90,264 in 2003, with expected growth to 317,367 by 2008. Texas, they estimate, has already gained some 7,236 jobs. Net new jobs. In other words, more jobs were gained due to lower inflation and higher productivity than were lost to companies in India, China, and other countries due to offshoring.
Without a doubt, the trend has caused huge problems for thousands of Americans. I do not mean to minimize the misery to those individuals who have lost jobs to people in foreign lands. However, it is far better that we help those affected find other jobs through quality training programs and other services than to try to stop the evolution of our economy.
Outsourcing is a term used decades ago to refer to the practice of companies contracting with specialized firms for particular tasks rather than performing them with existing staff. For example, a decade ago my employees folded, labeled, mail metered, sorted, and posted our monthly publications. Now, we hire a company to do it—they’re faster, better, and cheaper. They have the right equipment; they know all of the shortcuts. My staff’s time is better spent doing the things that we do well—economic research and analysis, for one thing.
Similarly, the technology industry (as well as others affected by the current outsourcing trend) should focus on what US firms do well—namely innovative, cutting-edge advances. Sending work to other countries is a part of the process.