Answers on Outsourcing

CNN Money ^ | 03/12/2004 | Rory L. Terry

[neutrino]

A finance professor argues against placing blind faith in outsourcing. His views follow.

The following is a guest column by Rory L. Terry, an associate professor of finance at Fort Hays State University.

NEW YORK (CNN) -- A great deal of effort is being expended to convince us all that the outsourcing of jobs under the rubric of free trade is a good thing. I would like to discuss some of these arguments.

[neutrino]

I'm creating an offshoring ping list. Please FReepmail me if you'd like to be added.

[Thane_Banquo]

We have no comparative advantage or superiority in innovation.

HA! BS! Economists will tell you that innovation is exactly what America has a comparative advantage in!

[Thane_Banquo]

The economics is so flawed in this article that I don't even know where to begin.

For one, I'd like to know how we can profitably export our doctors and accountants.

You can hire anyone you want overseas. But if you can't do it profitably compared to here, it isn't going to happen.

[CR]

Note that most of the "externalities" he sites are CREATED by government.


The circumvention or avoidance of organized labor
No Social Security or Medicare benefit payments
No federal or state unemployment tax
No health benefits for workers
No child labor laws
No OSHA or EPA costs or restrictions
No worker retirement benefits or pension costs

[NukeMan]

Note that most of the "externalities" he sites are CREATED by government.

True enough, but they are also part of what makes our country an attractive place to live, and are desired by the majority of people. Improvements and efficiencies could no doubt be found, but can you imagine _no_ OSHA, or EPA, or NO child labor laws? There are countries like that.

[Ben Chad]

Consider the number of new non-native Ph.D.s that leave our universities each year; consider our low rank in the education of mathematics and the sciences; and consider the large number of international students enrolled in our most difficult technical degree programs at our most prestigious universities.

I can believe this. Education in the U.S. has gone soft and flaccid.

[Ben Chad]

For one, I'd like to know how we can profitably export our doctors and accountants.

It's quite simple. Digitize your x-ray, transmit it to India for the reading.

[Drango]

For one, I'd like to know how we can profitably export our doctors and accountants.

I'll give you two examples...In India, Radiologist are reading X-Rays and accountants are doing US income taxes. Both are being done for less than the domestic market charges.

[expat_panama]

the U.S. has gone soft and flaccid

Speak for yourself there.  (We're talking about outsourcing aren't we?)

[Ben Chad]

Was that a jab below the belt? ;-)

[spetznaz]

HA! BS! Economists will tell you that innovation is exactly what America has a comparative advantage in!

And what has made that possible in the past? Well, a go-getter attitude that strives for achievement no matter what, and the yearn to consistently go a step further than the next guy. Go to a highschool or university campus and tell me if you see that. America's greatest resource is its people, a people like no other. And they are also its greatest weakness.

[NoControllingLegalAuthority]

Oh yes, foreign governments don't have the annoying rules that keep people safe on the job. We certainly want to do away with all OSHA regulations. We want to join the third world in its disregard for health and safety of workers. SURE! Why can't a human life be as cheap in America so profits and executive bonuses can increase over the bodies of injured and dead workers? It's certainly a worthwhile goal.

It costs businesses a hell of a lot of money to install fire extinguishers and fire sprinklers and adequate lighting and ventilation. Those building and fire codes are a damn nuisance, too. We don't want annoying fire marshals demanding we keep exit paths clear and exit doors unlocked. It costs money to install lighted exit signs and battery-powered emergency lights to light the inside of plants when the power fails. Do away with all of that and think of the money we'd save.

We'd also save a lot of money if we could hire little kids to work in smelters and slaughter houses.

If you go down the list, it's no wonder we can't compete. America simply treats human beings with entirely too much respect to be a profitable place to do business.

[SteelTrap]

My company is in discussion right now with the major Indian "outsourcers" and I have had the opportunity to have a front row seat to see what factors go in to deciding whether or not the company will hire them instead of maintaining (or creating) a US operation.

Once you work out the real costs of sending the work over there, you realize the only costs that matter are burden and overhead. But wages are NOT the deciding factor. Wages are wildly different, in some cases by 200%. But once you apply productivity factors, the job is less costly if kept in the US.

The last remaining wildcards are the legal and regulatory factors. This is where the decision starts getting easier (at least from the big boss point of view). Exposure to legal and regulatory costs imposed on business is the tipping factor that often determines whether or not a job/service can be outsourced.

It is an seductive notion that you can have an educated workforce with a strong work ethic AND not be burdened with the HR and PC crapola that most people have to deal with here in this country.

[Lael]

I came across this on a private "Weather Report" listserv that currently runs 75-100 posts per day...it was forwarded by a Market Guru who lives 400 miles south of the Arctic Circle.

Yes, put me on the List!

[neutrino]

For one, I'd like to know how we can profitably export our doctors and accountants.

Very well. Regarding doctors, here is a link