10 Myths about Offshoring -- Which ones can be debunked?

[Deja Q]

http://www.heritage.org/Research/TradeandForeignAid/wm467.cfm

Myth #5: A job outsourced is a job lost.

Fact: Outsourcing means efficiency.

Outsourcing is a means of getting more final output with lower cost inputs, which leads to lower prices for all U.S. firms and families. Lower prices lead directly to higher standards of living and more jobs in a growing economy.

Only for those who still have jobs.

Myth #7: American manufacturing jobs are moving to poor nations, especially China.

Fact: Nations are losing manufacturing jobs worldwide, even China.

America is not alone in experiencing declines in manufacturing jobs. U.S. manufacturing employment declined 11 percent between 1995 and 2002, which is identical to the average world decline.<7> China has seen a sharper decline, losing 15 percent of its industrial jobs over the same period.

True. Automation streamlines a lot.

Myth #8: Only greedy corporations benefit from outsourcing.

Fact: Everyone benefits from outsourcing.

Outsourcing is about efficiency. As costs decline, every consumer benefits, including those who lose their jobs to outsourcing. A 2003 study by Michael W. Klein, Scott Schuh, and Robert K. Triest, which includes dislocation costs in its calculations, shows the benefits of trade outweighing its costs by 100 percent

Gee, so people will have no jobs but more lower cost items? (Last I checked, offshored jobs leading to products like Office 2007 haven't resulted in lowered costs. Skyrocketed costs, maybe, but not always lowered ones...)


The whole article is a riot. But it's not explaining the trade deficit or much else.

But one thing is true:

Myth #6: Outsourcing is a one-way street.

Fact: Outsourcing works both ways.

The number of jobs coming from other countries to the U.S. (jobs “insourced”) is growing at a faster rate than jobs lost overseas. According to the Organization for International Investment, the numbers of manufacturing jobs insourced to the United States grew by 82 percent, while the number outsourced overseas grew by only 23 percent.<5> Moreover, these insourced jobs are often higher-paying than those outsourced.<6>

I recall reading an Indian firm was opening up shop in Georgia... or was it Florida? The news (from go0gle) was something like a couple weekw old by now...

Besides, Toyota has plants in the US. Toyota is not an "American" company.

[treestar]

1. They couldn't do it if we still didn't have the $$ to buy the stuff

That's why I'm skeptical that all outsourcing necessarily just leave us unemployed. Maybe we just change employment and there is insourcing. Look around you, if you're middle class, do you see real suffering? I don't. So I don't buy that every Chinese person who gets a job is hurting us. The economy expands, it always has, that's why it can support a billion people now when in the 19th century it couldn't have.

I think we all need a basic course in economics. Jobs are not a static thing. Also, we don't have a right to them that is greater than persons not lucky enough to be born on U.S. soil. Jobs have grown in variety since the early industrial age. Personally, I don't think there is that much to worry about in modern times and we need to quit thinking that the poor getting a break and becoming somewhat less poor is such a horrible thing for us middle class people. We live in the same comfort while condemning the fact that some desperately poor people get a little improvement in their lives.

[Warpy]

2. I've been reading industry trades lately and discovering a few things

about the savings from offshoring. Yes, the labor costs are lower, mostly due to the offshore workforce being paid in a cheaper currency. However, with the dollar in free fall, that's not as big an advantage as it was five years ago. Now companies are starting to look closely at the invoices from vendors overseas and are discovering some odd things, like extra charges for every phone call or email sent to and from the vendor in the course of everyday business, plus surcharges for all sorts of bizarre things no US vendor ever thought of as anything but ordinary business practice, to be lumped in with overhead.

It turns out they're saving on labor, all right, but they're being nickeled and dimed to death by junk charges on everything else.

As the dollar continues to slide as long as we have a witless oaf in office, expect to see more and more corporations realize that they're being shafted by offshore vendors and they'd have been better off keeping operations right here.

[high density]

3. The economy runs mostly on consumer spending

Yet the companies do not want to pay the wages to enable this spending. They are creating a bad situation for themselves with offshoring.

[Tierra_y_Libertad]

4. Corporations need to grow to survive.

In order to do so, they need to produce goods the public will buy. If another corporation can produce equal, or near equal, quality of goods at a cheaper price, the public will buy those cheaper goods.

In order to compete, the corporations have to cut costs. Labor being one of the largest costs, it is in the corporations best interests, in fact, it's a matter of survival, for them to get the cheapest labor possible.

I read an interesting commentary a few months ago, (I don't remember where), saying that we are wasting our time with the middle-men when we try to get politicians to do much of anything. We should be going after the real powers, the corporations.

[stillcool]

7. that's what I thought..

'out-sourcing' and global presence are a natural extension of capitalism. I wonder if the down turn in U.S. consumption can be absorbed by creative marketing in other countries. I hear Dubai is the Las Vegas of the Middle-east.

[Fierce]

5. Sounds great!

Let's outsource all the think tanks!

[lapfog_1]

6. I could go on and on about how wrong the "Facts" are...

But I'll contain myself and just talk about #6 (Insourcing). True, we now "insource" some jobs. But this is to take advantage of the new realities... i.e. the previous loss of manufacturing jobs and replacement with minimum wage jobs now makes the US Labor market more competitive (we now have a lower standard of living compared to 20 or 40 years ago). And the products of those jobs are aimed at the US market (for the most part), not the country who "outsourced" (unlike when we were massively outsourced in the preceding 4 decades). The labor "input" is only one of the cost considerations, shipping is another. Shipping raw material (at higher costs) to an overseas plant, only to then ship the finished goods back to the US, even with the low wage rates of the foreign country... doesn't make that much sense (economically) in the face of increasing energy costs.

So... what did we accomplish by outsourcing...

Two things.

one. Kill off the unions and the "middle class wage" manufacturing, software, back office support jobs.

two. Transfer "ownership" of the corporations and the "home nation" status (which reduces the tax revenue paid by corporations... even when they "insource the new jobs" back to the US).

So now we have true multinational corporations that can more effectively "game" the tax codes, and we now have "cheap" labor pool in almost every nation. As the dollar continues to deflate (because of massive financial problems in the US brought about by wreck less fiscal policies of the neocons), we will soon look at lot like Mexico or India... the ownership class and the working poor.

Which, I believe, was the intent all along.