Stop Offshoring
Tuesday, April 27, 2004
I'm seeing an increasing number of articles that claim offshoring will benefit the US economy. Interestingly, none of them have statistical evidence that prove offshoring creates more jobs for Americans -- the unemployment figures and anecdotal evidence still point to a weak job market and more jobs going abroad. Rather, what these articles put forth are theories of why offshoring shouldn't have as negative an effect as offshore outsourcing opponents suggest.
The first and most common argument compares the number of jobs moving offshore with the number of jobs the US economy is projected to create. By saying that more jobs are created than are offshored, these studies claim that offshoring is beneficial. There are two major flaws with this line of reasoning. The first is the quality of jobs being created versus the jobs going offshore, which I've mentioned before. If I lose my job as an IT programmer to someone in India, would I be pleased that there are now 2 new low-paying jobs at the local coffee shop that I can take instead? Clearly not. The second flaw in their argument is that any net job creation is a sign that offshoring is good. What if job creation would have been even greater without offshoring? Even if less jobs are created, but even fewer jobs move offshore, that is still a net benefit to Americans.
Another argument used by these studies is that global free trade will result in hiring of Americans by foreign companies, making up for the loss of jobs offshore. I see anecdotal evidence that this will not turn out the way offshoring proponents think it will. While American companies hire citizens of India when they open an office there, an Indian company in the U.S. is more likely to hire Indian immigrants than Americans. My experience at my last three jobs have all been similar in that respect -- whenever we deal with an Indian-run company, a significant majority of the employees of that company are Indian. This in no way helps the displaced American worker looking for a job.
Finally, the articles argue that the cost-savings benefits of offshoring will translate into more profitable American companies that will hire more American workers. This argument is only half correct. These companies will hire more workers. However, they are more likely to expand their offshore operations than hire more Americans. Even pro-offshore articles have noted that companies have been hiring more offshore workers and keeping their American workforce stagnant.
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