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c1ue
05-22-07, 04:07 PM
Here's a question for the brain trust:

What is the "true" economic impact of an outsourced job?

Let me first preface this by saying that I do very much believe in creative destruction - no gravy train lasts forever and jobs of all sorts fall into this category.

However, what I am wondering about is whether outsourcing is simply a corporate way of capturing more of the economic benefit from its labor at the expense of the local economy.

As a thought example: If 2000 $50K jobs are outsourced, and those jobs have a secondary/tertiary business impact of $30M (30%), is it really better for the overall economy that these jobs are moved to a low labor country such as China where the 2000 jobs are paid $10K?

In this case the economic impact would be $20K + $9K in secondary (this is assuming a higher proportion of spending for food, etc) for China + $20K for the outsourcing company.

The comparison is thus $130M impact on some American town, vs. $29M benefit to China plus some significant profit ($20M?) to one specific American company.

Clearly from the corporate or China standpoint this would be fine, but is it really an overall benefit for the US?

Note that I am distinguishing an outsourced job abroad versus a job made redundant by increased productivity.

bill
05-22-07, 05:17 PM
Outsource Presidency
May 10, 2007: Washington, DC(AP) -- Congress today announced that the office of President of the United States of America will be outsourced to India as of July 1, 2007. The move is being made in order to save the President's $500,000 yearly salary, and also a record $521 Billion in deficit expenditures and related overhead that the office has incurred during the last 5 years. "We believe this is a wise financial move. The cost savings are huge," stated Congressman Thomas Reynolds (R-WA). "We cannot remain competitive on the world stage with the current level of cash outlay," Reynolds noted. Mr. Bush was informed by e-mail this morning of his termination. Preparations for the job move have been underway for some time.
Gurvinder Singh of Indus Teleservices, Mumbai, India will assume the office of President as of July 1, 2007. Mr. Singh was born in the United States while his Indian parents were vacationing at Niagara Falls,NY, thus making him eligible for the position. He will receive a salary of $320 (USD) a month but no health coverage or other benefits.
It is believed that Mr. Singh will be able to handle his job responsibilities without a support staff. Due to the time difference between the US and India, he will be working primarily at night, when few offices of the US Government will be open. "Working nights will allow me to keep my day job at the Dell Computer call center," stated Mr. Singh in an exclusive interview. "I am excited about this position. I always hoped I would be President." A Congressional spokesperson noted that while Mr. Singh may not be fully aware of all the issues involved in the office of President, this should not be a problem as President Bush had never been familiar with the issues either.
Mr. Singh will rely upon a script tree that will enable him to respond effectively to most topics of concern. Using these canned responses, he can address common concerns without having to understand the underlying issue at all. "We know these scripting tools work," stated the spokesperson. "President Bush has used them successfully for years, with the result that some people actually thought he knew what he was talking about."
Bush will receive health coverage, expenses, and salary until his final day of employment. Following a two week waiting period, he will be eligible for $140 a week unemployment for 13 weeks. Unfortunately he will not be eligible for Medicaid, as his unemployment benefits will exceed the allowed limit. Mr. Bush has been provided with the outplacement services of Manpower, Inc. to help him write a resume and prepare for his upcoming job transition. According to Manpower, Mr. Bush may have difficulties in securing a new position due to a lack of any successful work experience during his lifetime. A Greeter position at Wal-Mart was suggested due to Bush's extensive experience at shaking hands, as well as his special smile.

grapejelly
05-22-07, 06:32 PM
As a thought example: If 2000 $50K jobs are outsourced, and those jobs have a secondary/tertiary business impact of $30M (30%), is it really better for the overall economy that these jobs are moved to a low labor country such as China where the 2000 jobs are paid $10K?

In this case the economic impact would be $20K + $9K in secondary (this is assuming a higher proportion of spending for food, etc) for China + $20K for the outsourcing company.

The comparison is thus $130M impact on some American town, vs. $29M benefit to China plus some significant profit ($20M?) to one specific American company.




I think ultimately this is no different than the argument about the true economic output of Jaquard looms or the mechanical reaper or the products made cheap through the industrial revolution.

My company outsources projects that we would not have done here in the US at all. As a result, we have a chance of (hopefully someday) earning a profit and even (gasp) paying our salaries. Or is it the other way around? Anyway... ;)


All markets are linked, especially services, because the Internet has made outsourcing many services so easy. So now the same thing is happening in services as happened in manufacturing -- services are being imported because they are artificially cheap.

China's pegging their renmimbi to the US$ means imports are just too cheap. American manufacturing is hollowing out as a result.

The same thing can be said about services -- importing services is very cheap.

c1ue
05-23-07, 04:50 PM
GrapeJ,

Note I explicitly differentiate between replacing a job due to higher productivity, vs. replacing a job due to lower cost.

In the first case, the machine or software which increases productivity can be used by an employee anywhere.

In the second case, the employee's location and salary is the only difference.

Certainly there are cases where both occur simultaneously.

However, my point is that from a purely corporate perspective, either case is fine but from a national perspective the 2nd case is destructive if my fictional example is anywhere near the truth.

The reason I bring this up is 2-fold:

1) I intrinsically agree with Galbraith's view that a large population of middle class with 'X' amount of spending is more stable than a small population of rich people with the same 'X' amount of spending. The middle class has needs more in line with subsistence, while the rich can vary their spending enormously.

2) I have personally experienced the differences between a "capitalist" society (US) and socialist societies (Japan, France). Interestingly enough the cost of living comparison between the 2 types is very close; previously Japan was more expensive in their bubble era, but now San Francisco/New York living is much more expensive than Tokyo.

France has been pretty stable all along.

The difference seems mostly to be in peace of mind vs. the belief in being a winner...

brucec42
12-04-07, 08:41 PM
My understanding is that outsourcing would benefit those who own stock in the company that does it, but not the laborer who lost his job. He could hedge somewhat by owning stock in the company that just laid him off.

I would also add that it seems to me that we can't all sell each other financial instruments, homes, and insurance, and that something of tangible value actually needs to be produced, ultimately. Maybe if were were all able to sell Pakistanis and Chinese citizens life insurance and stocks, we could move everything there and still prosper.

I would also note that outsourcing might be benign or beneficial if not for the double-whammy of mass immigration occuring simultaneously. Normally, those displaced would move on to presumedly more efficient uses of their labor. But with mass immigration, the "service economy" jobs are largely filled by immigrants, with a resulting wage depreciation.

Finally, I would like to point out that the Forrest Gumps in our population will still needs jobs even if we manage to overcome the need to do actual work producing things and instead let those foreigners do the actual work for us. Remember 100 is the average IQ, so for every 130 IQ whiz kid there's a 70 IQ dullard who is unlikely to master the nuances of medicine, the law, or trading stocks. I think it is enlightened self-interest for those of us who can do more than wash cars or mow lawns or cook burgers to make sure that these people have jobs that pay them enough to live reasonably well on. Otherwise they will simply vote it right out of our pockets in the form of taxation and income redistribution.

I think that sometimes those who deal in dollars and cents for a living forget that there is much more to life than that (politics of envy, for example), and that neglecting to realize this would be a huge mistake.

Andreuccio
12-10-07, 02:07 PM
Finally, I would like to point out that the Forrest Gumps in our population will still needs jobs even if we manage to overcome the need to do actual work producing things and instead let those foreigners do the actual work for us. Remember 100 is the average IQ, so for every 130 IQ whiz kid there's a 70 IQ dullard who is unlikely to master the nuances of medicine, the law, or trading stocks. I think it is enlightened self-interest for those of us who can do more than wash cars or mow lawns or cook burgers to make sure that these people have jobs that pay them enough to live reasonably well on. Otherwise they will simply vote it right out of our pockets in the form of taxation and income redistribution.



Not at all. The Republicans have clearly demonstrated this to be false. The key is to persuade these dullards that gay marraige and "family values" are more important in choosing political candidates than economic self interest, and that any economic hardship the dullards are enduring are due entirely to the influx of immigrants you spoke of. Accomplish this, and there is no risk from them at the ballot box. The fact that their IQ is in the 70 range makes this task that much easier.

seo-internet
07-02-09, 10:45 AM
Outsourcing doesnt belong to anyone these days. Even jobs from India are being outsourced to China and other locations.