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Career Watch: A Professor Challenges the Conventional Wisdom on Offshoring
Computerworld ^ | December 21, 2009 | By Jamie Eckle

Posted on 01/02/2010 6:03:32 AM PST by Son House

While not all of those jobs will be lost overseas, those workers will face wage pressures. -- Hewlett-Packard has asked many of its EDS employees to take 50% pay cuts.

Even the most pro-offshoring report, written by McKinsey Global Institute's Diana Farrell, which asserted that the U.S. will be better off with offshoring, concedes that American workers will experience major losses in wages and jobs.

Offshoring is a major structural shift in the way the economy works. Alan Blinder has called it a shift equivalent to the industrial revolution. Ponder that!

What needs to change so that companies reject outsourcing options that make economic sense for them? This is a very important observation, one that is lost on most politicians.

When John Kerry was running for president, he called the CEOs who outsource "Benedict Arnolds." They act rationally in their self-interest, and there's nothing wrong with that.

Unfortunately, President Obama named Farrell, who is the leading offshoring evangelist, to the No. 2 post in his National Economic Council. Farrell has done more than anyone else to spread the gospel of offshoring, so it's hard to believe that Obama takes his own rhetoric about Buffalo vs. Bangalore seriously.

The Obama administration has been worse than disappointing on the issue of offshoring, practicing a bait-and-switch approach.

By using the issue for political advantage, Obama has given a false sense to the public that he is taking action on offshoring. His only policy action to date is to try to close the tax loophole that encourages offshoring. It is highly unlikely he will have the political support to close the loophole, even though it should be a no-brainer.

And of course, the Obama administration has done nothing to close the loopholes in the H-1B and L-1 visa programs that spur offshoring.

(Excerpt) Read more at computerworld.com ...


TOPICS: Business/Economy; Front Page News; Government; News/Current Events
KEYWORDS: career; offshoring; professor; watch
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Obvious the professor should understand American Business are desperate for any "public policies that benefit their companies", and under President Obama and the Democrat Controlled Congress it is only going to get worse.

Macroeconomics is the Democrats worst subject, and why McCain and the Republicans didn't get that early on will haunt us all.

Lower the taxes, lower the regulation, companies will prefer America to "Offshoring"

1 posted on 01/02/2010 6:03:33 AM PST by Son House
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To: Son House

I never understood why companies don’t get it...if you ‘offshore’ your jobs to other countries, thereby causing massive unemployment here, how are we supposed to be able to buy your products?


2 posted on 01/02/2010 6:09:34 AM PST by CatQuilt (Lover of cats =^..^= and quilts)
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To: Son House

Another insightful article from February 3, 2009, “either ignorant or naive”;

H-1B, offshoring supporters get key Obama Administration posts

http://www.computerworld.com/s/article/345850/Career_Watch?taxonomyId=


3 posted on 01/02/2010 6:12:33 AM PST by Son House (The Learning Curve for Democrats on Macroeconomics is getting Exponential)
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To: Son House

It is like a vicious circle. The more jobs move overseas, the more Government will make up the difference by hiring more people, the more taxes will go up, the more companies will offshore to maintain their profit margins.

At this point, I think we’ve screwed the pooch anyway. Most rational CEOs see America (and the West in general) as a dead man walking. We have made too many promises that we can’t fulfill. Before the politicians own up to that, they will put the squeeze on business to the breaking point.

As bad as it seems now, this is just the beginning.


4 posted on 01/02/2010 6:14:22 AM PST by rbg81 (DRAIN THE SWAMP!!)
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To: Son House

The only thing you need to know, is that Barack Obama Hates America. All decisions descend from there. This has nothing to do with economics, free markets or anything other than him doing everything he can get away with that hollows us out. Does offshoring jobs make America weaker? If the answer is yes, that will then be the policy.


5 posted on 01/02/2010 6:16:05 AM PST by ecomcon
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To: Son House

I believe that a major revamping of labor law is necessary to stop offshoring. The rats have dropped some major labor bombs on the economy, most notably the Lily Ledbetter law. This terrible law will highly constrain hiring practices especially for talent with highly demanded skills. Beyond this law, I believe that the rats have issued many executive orders encouraging collective bargaining and providing ammunition for EEOC type of lawsuits.

Even if the rats had not changed labor laws, I think that major revamp of employee-employer relationships would be necessary to stem offshoring. The IRS has very tight restrictions on employee-employer contracts. The IRS wants tax withholding. In the 80s, one could become an independent contractor easily. Although many may prefer to work as employees, working as a contractor is much better than not working. With the current arrangments, the only way to work as a contractor is to work for a temp agency. For many, it is advantageous to eliminate the temp agence and work directly as a contractor. Over time, independent contractors can develop a diverse set of clients.


6 posted on 01/02/2010 6:17:31 AM PST by businessprofessor
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To: Son House

Foreign outsourcing is bad for the economy....it just redistributes wealth out of America to some foreign country....many times to a nation friendly to communists and/or terrorists.

If a company cannot survive in America by hiring Americans....it probably should not be in business in the first place.

As for Obama...he is just another Liberal Globalist.....thinks foreigners are better than Americans. Obama just another of those Economic Anti-Americans


7 posted on 01/02/2010 6:27:44 AM PST by UCFRoadWarrior (Merry Christmas and Happy New Year to all FReepers)
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To: businessprofessor

Unfortunately the IT company I work for is in the midst of moving many jobs to India (and possibly China). The math is very easy. An American engineer costs the company over $60/hr. Someone in India costs $20/hr. If you’re a CEO selling IT services, you are very apt to take the option that allows you to sell services at a very low rate. Therefore you offshore.

And if you’re a CEO buying services, patriotism usually isn’t a good enough reason to pay extra and have to explain that to Wall St. The only viable solution, other than protectionism, is to wait until the cost of resources offshore don’t offer the 3:1 advantage they do now.


8 posted on 01/02/2010 6:29:12 AM PST by paul544
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To: rbg81; CatQuilt

if you ‘offshore’ your jobs to other countries

“they will put the squeeze on business to the breaking point”

^
And that’s where we’re going fast, it starts with profits and risk, but ends with macroeconomic catastrophe as Democrats run business out of America and other countries welcome them by realizing Democrat tax and regulate mistakes


9 posted on 01/02/2010 6:29:35 AM PST by Son House (The Learning Curve for Democrats on Macroeconomics is getting Exponential)
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To: Son House
"Lower the taxes, lower the regulation, companies will prefer America to 'Offshoring'"

The taxes are for using social programs to break families that would otherwise start new businesses to compete with those companies. The regulations are for the same purpose. The richest moguls on this planet are notoriously in favor of western population reductions and associated efforts. The degreed environmentalists and anti-growth government employees aren't crawling out of slums.

There was only one candidate in the last election who was against both the onerous regulations and anti-American trade practices, but our bipartisan political influence classes despised him. So we'll have to pay the economic consequences of shutting American production down over the past 30 years or so.


10 posted on 01/02/2010 6:30:51 AM PST by familyop (cbt. engr. (cbt), NG, '89-' 96, Duncan Hunter or no-vote.)
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To: businessprofessor

Agreed on contracting.


11 posted on 01/02/2010 6:33:47 AM PST by familyop (cbt. engr. (cbt), NG, '89-' 96, Duncan Hunter or no-vote.)
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To: UCFRoadWarrior

“Foreign outsourcing is bad for the economy....it just redistributes wealth out of America to some foreign country....many times to a nation friendly to communists and/or terrorists.If a company cannot survive in America by hiring Americans....it probably should not be in business in the first place”.

Preposterous. Outsourcing is GOOD for the economy.

Example: Apple makes products overseas which has caused their company to grow tremendously in the US thus hiring more people here


12 posted on 01/02/2010 6:34:14 AM PST by cowtowney
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To: CatQuilt

I never understood why companies don’t get it...if you ‘offshore’ your jobs to other countries, thereby causing massive unemployment here, how are we supposed to be able to buy your products?


Not only companies do not understand....there are still quite a few here on FR that do not get it. If Americans are not employed...they cannot buy those foreign made products....or those products outsourced

Eventually, these companies that outsource will have nowhere to go....they will eventually lower prices, reduce services, or go out of business. The current Liberal Globalist mentality of Free Trade and Outsourcing eventually will collapse

As for Obama...he pretty much is doing what George Soros wants him too....Free Trade, Globalism, Outsourcing...and scary is that a lot of GOP support this nonsense


13 posted on 01/02/2010 6:35:02 AM PST by UCFRoadWarrior (Merry Christmas and Happy New Year to all FReepers)
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To: paul544
“An American engineer costs the company over $60/hr. Someone in India costs $20/hr.”

You forgot the additional $60/hr. the boss has to pay you top fix the crap that Apu coded so that the original business purpose for the program is achieved.

Virtually my first year at my current company (2006) was rewriting tons of SAP programs and interfaces that were so screwed up by our SAP implement or’s outsourcing company in India, that my company tried to get most if not all of their money back for this part of the project.

My friend who worked for Philips and is now a contractor for IBM says that IBM's main staff is in overseas and that the quality of work is below that of dog crap. He says Philips now regrets laying off their entire IT staff and go with IBM consulting.

14 posted on 01/02/2010 6:41:05 AM PST by CapnJack
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To: cowtowney

Preposterous. Outsourcing is GOOD for the economy.

Example: Apple makes products overseas which has caused their company to grow tremendously in the US thus hiring more people here


If Apple was making those products in America....they would be creating more jobs in America. That is a no-brainer.


15 posted on 01/02/2010 6:43:59 AM PST by UCFRoadWarrior (Merry Christmas and Happy New Year to all FReepers)
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To: UCFRoadWarrior

That is why a third party will loom over the horizon in 2012. Dems do not understand that taxes and regs are killing businesses, and the GOP put too much faith in Wall Street/Bankers (more schemes/financial bubbles) and CEO’s to do what is right for the country. Net result is a diseaster for Main Street and opportunity to have a decent life and future in America.


16 posted on 01/02/2010 6:46:04 AM PST by Fee (Peace, prosperity, jobs and common sense)
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To: CatQuilt

Oh, they ‘get it’.....but you have to understand the corporate mindset that is dictated by the Street: quarterly performance. It’s ALL about the latest quarter and how investors/financial analysts respond. Lower costs by off-shoring? You get rewarded by the Street; your stock takes a bump, you keep your cushy jobs in Mahogany Row.

American business is doing this to themselves with such idiotic, short-term thinking.


17 posted on 01/02/2010 6:49:08 AM PST by RightOnline
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To: Fee

That is why a third party will loom over the horizon in 2012. Dems do not understand that taxes and regs are killing businesses, and the GOP put too much faith in Wall Street/Bankers (more schemes/financial bubbles) and CEO’s to do what is right for the country. Net result is a diseaster for Main Street and opportunity to have a decent life and future in America.


So absolutely correct....

Neither the GOP or DNC understand what it really takes to fix the economy. High taxes and foreign outsourcing just redistribute wealth....they create zero jobs.

A candidate running on a low tax/no free trade platform will have a good chance of winning in 2010 or 2012....regardless of party affiliation.

Few argue that small businesses do most of the hiring...and....consumers drive the economy. High taxes and outsourcing hurt the two main cogs of the economy....small businesses lose revenue thru taxation...and consumers lose money from high taxes, and the loss of jobs.


18 posted on 01/02/2010 6:51:25 AM PST by UCFRoadWarrior (Merry Christmas and Happy New Year to all FReepers)
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To: paul544

I agree with your assessment. Revising our labor laws would reduce the cost of employment here so I think the changes would have an impact on offshoring. However, CEOs react to the overall costs so I still think offshoring will be attractive in many situations. I believe that CEOs are reacting to political risk here. The pro labor and pro litigation bias of the rats frightens CEOs so they factor political risks into their cost models. No CEO wants to deal with unions, trial lawyers, and populist politicians.


19 posted on 01/02/2010 6:53:05 AM PST by businessprofessor
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To: cowtowney

I have never purchased any crap made by Apple and I never will. It is junk.


20 posted on 01/02/2010 6:54:12 AM PST by SatinDoll (NO Foreign Nationals as our President!!)
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To: cowtowney
Preposterous. Outsourcing is GOOD for the economy.

Uh oh. You just made an unemotional statement. I hope you're wearing asbestos underwear, because you're going to get flamed, LOL!

21 posted on 01/02/2010 6:57:57 AM PST by Jeff Chandler (:: The government will do for health care what it did for real estate. ::)
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To: UCFRoadWarrior
If Apple was making those products in America....they would be creating more jobs in America. That is a no-brainer.

If Apple was making those products in America, it couldn't compete and there would be FEWER jobs in America.

22 posted on 01/02/2010 6:59:41 AM PST by Jeff Chandler (:: The government will do for health care what it did for real estate. ::)
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To: SatinDoll
I have never purchased any crap made by Apple and I never will. It is junk.

Cue the Apple fans, 1, 2, 3 . . .

23 posted on 01/02/2010 7:00:43 AM PST by Jeff Chandler (:: The government will do for health care what it did for real estate. ::)
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To: Jeff Chandler

Make that 3, 2, 1, . . .


24 posted on 01/02/2010 7:01:17 AM PST by Jeff Chandler (:: The government will do for health care what it did for real estate. ::)
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To: Fee

Australia is looking better and better to me. I’m worried about my 18-year-old daughter and what the economy is going to be like for her here.


25 posted on 01/02/2010 7:15:57 AM PST by CatQuilt (Lover of cats =^..^= and quilts)
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To: Son House
Lower the taxes, lower the regulation, companies will prefer America to “Offshoring”

You are exactly correct.

It is a common misconception that China and others have attracted our industry.

Not correct.

We have driven our industry out of the country and they ended up in China, Vietnam, etc., simply because they had to go someplace.

EPA has been the biggest driving force.
Just make a list of how many industries EPA has made difficult or impossible.

Tax laws, health insurance laws, etc., close behind.

I was once a major distributor of heavy equipment to an industry that has gone overseas and my customers had to have degreed engineers whose job as to keep up with federal and state EPA regulations.

Then there was the personnel department head that had to be expert on all of the many new laws relative to everything from sex discrimination to benefits.

Some of the laws are admittedly good. However, too many of them are needlessly complex, harassing, overly expensive.

All figure in overhead as well as direct labor costs.

Industry is not coming back until we invite them back by making the manufacturing climate more hospitable.

26 posted on 01/02/2010 7:16:19 AM PST by old curmudgeon
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To: CapnJack

Agreed. I think there is some mythical status people assign to these foreign engineers. But truth is their quality is severely lacking.


27 posted on 01/02/2010 7:16:49 AM PST by paul544
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To: UCFRoadWarrior
If a company cannot survive in America by hiring Americans....it probably should not be in business in the first place.

It's not that a company cannot survive by hiring Americans. It's that they make more money by off-shoring their work. That's all that matters.

28 posted on 01/02/2010 7:41:12 AM PST by Non-Sequitur
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To: Son House
Lower the taxes, lower the regulation, companies will prefer America to "Offshoring"

You could remove taxes and slash regulation and companies will still off-shore. The cost of employees is too low and the profit margins too high. All you'll do is tax them less and regulate them less on the money they make by shipping work overseas.

29 posted on 01/02/2010 7:44:37 AM PST by Non-Sequitur
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To: Son House

Proponents of offshoring refuse to see the forest for the trees, or maybe they’re making handsome profits from offshoring. But the US population is around 300 million, and China and India have combined populations of around 2.3 billion with large numbers of unemployed and underemployed. Other nations easily move that number up to 3 billion.

So, the US is going to move manufacturing jobs to cheap labor nations and offshore all the work that can be performed through modern communications, and still somehow have job opportunities for its 300 million population, the so-called high tech jobs of the future.

The real driving force is cheap labor, not regulation or corporate tax rates in the US. With unskilled labor in cheap labor nations at 5% - 10% of US rates, and skilled and degreed workers available for 10% - 20% of US salary levels, it is impossible for the US generate enough jobs that remain here to provide reasonable opportunity for its citizens.

300 million Americans. 3 billion in cheap labor nations, with tens of millions of unemployed and underemployed.


30 posted on 01/02/2010 7:45:10 AM PST by Will88
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To: CatQuilt
Australia is looking better and better to me. I’m worried about my 18-year-old daughter and what the economy is going to be like for her here.

What makes you think that Australia doesn't offshore?

31 posted on 01/02/2010 7:47:27 AM PST by Non-Sequitur
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To: old curmudgeon

We have driven our industry out of the country

EPA has been the biggest driving force.
Just make a list of how many industries EPA has made difficult or impossible.

Tax laws, health insurance laws, etc., close behind.

^
Glad you’ve elaborated on that point, in fact, now that we verfied Global Warming is a hoax, there should be massive roll back of EPA regulation


32 posted on 01/02/2010 7:55:19 AM PST by Son House (The Learning Curve for Democrats on Macroeconomics is getting Exponential)
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To: Son House
The Obama administration has been worse than disappointing on the issue of offshoring, practicing a bait-and-switch approach.M

Obama probably loves offshoring and the export of US manufacturing jobs. Just another, actually the most 'efficient', means of international income redistribution. Fits right in with his cap and trade scheme of income redistribution.

33 posted on 01/02/2010 8:01:29 AM PST by Will88
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To: CatQuilt
I never understood why companies don’t get it...if you ‘offshore’ your jobs to other countries, thereby causing massive unemployment here, how are we supposed to be able to buy your products?

I wrote about that on FR in a series of articles:

(Vanity) Another Look at Outsourcing

(Vanity) Whither the Economy?

(Vanity) A Falling Tide Grounds All Boats

(Vanity) Peak Labor

(Vanity) A Nightmare Scenario

Cheers!

34 posted on 01/02/2010 8:08:35 AM PST by grey_whiskers (The opinions are solely those of the author and are subject to change without notice.)
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To: CapnJack
You forgot the additional $60/hr. the boss has to pay you top fix the crap that Apu coded so that the original business purpose for the program is achieved.

Two examples of just that:

I worked for a software company a few years ago that decided to outsource a new app. They got an estimate from one of our developers, huffed that it was going to take far too long and cost too much money to do it locally. So they outsourced it to a whole team in Pakastan. It took four times as long, four project managers quit, and when it was "done" they demo'ed it to our customer who said, "You're kidding, right?". Then they had the original developer rewrite it in the amount of time he first estimated. And naturally, declared the outsourcing a complete success and started outsourcing everything else.

I currently deal with two companies from which I buy software solutions. Company A outsources all their development to India, and a good portion of their support. Their software sucks. It is buggy, resource intensive, impossible to upgrade, and needs constant monitoring to keept it operational. To make matters worse, if it wasn't enough that their Indian developers are incompetent, they have a horrible attitude and are utterly convinced of their innate superiority. They never offer solutions, only excuses for the lousy state of their software. Any time I browbeat them into actually doing something about a problem, I can guarantee their "solution" will only make things worse.

Company B develops their software in the US. The difference in quality and support is shocking. I can virtually forget about company B's software from a support standpoint. It just works. When I do have a problem I can put in a call and get a response, usually a solution on the same day.

I didn't choose company A. Who would? I inherited them. Whose business will be growing? Who would you rather own stock in? Company A is ruthlessly bottom-line oriented. And a good portion of that bottom line comes from the customers they are ripping off.

35 posted on 01/02/2010 8:14:25 AM PST by hopespringseternal
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To: Non-Sequitur

remove taxes and slash regulation and companies will still off-shore

^
but not taxed and regulated until all companies prefer off-shore


36 posted on 01/02/2010 8:30:34 AM PST by Son House (The Learning Curve for Democrats on Macroeconomics is getting Exponential)
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To: CatQuilt; UCFRoadWarrior; Son House; rbg81; ecomcon; businessprofessor; paul544; familyop; Fee; ...
Why do companies offshore? Well, there are a number of reasons, but the main basis for understanding it from a LOGICAL perspective (not the ravings of either side of the political aisle) is by looking at the dynamics and interaction of accounting versus economic profit. This is the primary basis for offshoring ...all of the rest is just a medley of icing, yapping and obfuscation.

Now, most people know what Accounting profit is. For instance, if the total cost of making a wrench is 5 bucks (btw ...the numbers are not accurate, just for the purposes of making a point), and you sell it for 8 bucks, you just made yourself an accounting profit of 3 Dollars. In a nutshell, accounting profit is total revenue minus total explicit cost. Makes sense so far.

However, we now have economic profit. Economic profit looks at both explicit AND implicit costs ....which means that OPPORTUNITY COSTS are now taken into consideration. A quick example of an opportunity cost is as follows:- imagine John dropped out of high school, and now works at Burger King making 7 bucks an hour. However, had he finished high school, he could have gotten a job transcribing medical data that paid him 12 bucks an hour. Thus, dropping out of school had a cost amounting to 5 Dollars per hour.

So, going back to our first example ...you have two companies. Spetz's Wrench firm, and Cat's Super-Wrench firm.

Both of them, while based in the US, have a total cost of making a wrench of 5 Dollars, and they both sell their wrenches for 8 bucks ...thus both have accounting profits of 3 Dollars.

Now, Spetz's Wrench Shop decides to move production to Indonesia, where the cost of production goes from 5 per wrench to 1 per wrench. Now, instead of making a profit of 3 dollars, I am now making a profit of 7 dollars (selling at 8, producing at 1 buck).

Now, let's have a look at Cat's Wrench Shop ...he decides to stay in the US. He keeps making wrenches at 5 bucks an hour, and selling them at 8. Thus, he is making a profit of 3 Dollars per hour! A profit ...an accounting profit.

It looks all good at first, until you look at Cat's Economic Profit ...had Cat gone to Indonesia, he would have made a profit of 7 rather than 3. Thus, while he has an accounting profit of 3, he has an economic LOSS of -4 Dollars (8-5-7).

Thus, even though he has an accounting profit, he has an economic loss.

Now, also look at it from another perspective ...the money that Spetz's Wrench Shop has made/saved, can now be used for better marketing and advertising, or by better enriching its owners, or even simply by going into some rainy day fund just in case some day the market for wrenches dips for a year or three. Furthermore, Spetz's shop is better positioned to compete with new entrants, wrench substitutes, or whatever (anything from a shift of tastes, re-tooling, to even an all out price war) as compared to Cat's shop, which would be living on borrowed time.

That is the main reason for offshoring. Sure, it can be masked under 'they are only going there because of the slave labor' and such talk, but the fact is that it boils down to the hard financial difference between accounting and economic profit.

And as long as the opportunity gains/costs are significant enough, companies WILL continue to offshore. The only way it would change is if some external factors came in to shift the implicit costs (e.g. say cost of freight becomes too high, or wage differential between, say, Indonesia and the US evens out, or say some MAJOR incentives are given for firms to stay onshore, or the heavy stupid clumsy hand of government). Also, there are some disincentives for offshoring (e.g. the fact that your customers may speak to some person with a weird accent ), but the fact of the matter is that most customers do not really care about that! Some will, and some of those will cancel the service, but most customers will not. Thus, the economic profit garnered far exceeds the handful of customers who say no mas.

Anyways, I am not here to advocate for offshoring ...however, that is the hard financial truth behind it. This is why, unless your company has a very STRONG domestic demand market (who are willing to pay EXTRA to cover Cat's Wrench Shop from its economic cost element ....say, instead of paying 8 bucks per Wrench paying 16 bucks per wrench) ...unless that happens, companies will offshore. Looking at FR, there are many who speak against offshoring, but are not willing to pay (much) extra to 100% American companies. For many people, a wrench is a wrench. Some bemoan the fact that there are no American companies left to give them that option ...the reason for that is that many went offshore, and those that did not simply died (could not compete) with those that did, and were not fortunate enough to find American consumers willing to pay (double ...at times more) much more.

One thing about our FReepers, as well as the silly DUmmies in DUmmieland, is this ...both sides of the aisle will always buy the cheapest good/service that satisfies their need. You can be certain that the cheapest good/service that satisfies your need was not made in the US of A (outside a very defined sub-set that bucks the trend).

That's the truth.

An important note: I did NOT even add some of the unique costs that can be found in the US ...such as some unique labor costs that can be both explicit and implicit. Some of these 'costs' (to take a simple one, say Unions ....or say, some rather restrictive regulation) simply make offshoring all the more attractive. I decided not to include these for the purpose of simplicity. Add them, and Spetz's Wrench Shop would kill Cat's Wrench Shop even faster.

Also, I did not include the amplifier effect that would arise if both Spetz's Wrench Shop and Cat's Wrench Shop were LISTED COMPANIES. If we are listed, then suddenly our quarterly performance becomes VERY VERY VERY KEY (I am a Fund Manager ...though for emerging/frontier markets, and based in Africa, and I can assure you that analysts can definitely kill a company if your quarterly numbers buck projections negatively). Suddenly, if we are both listed companies, my stock jumps up ...while your stock first stagnates, and then plummets ...leading to very bad analyst calls, and shareholders asking why the heck you as Managing Director are not cutting your cost base, and before you know it the Board of Directors calls you in for a very short and shocking discussion about your future in the company! That is another factor I did not include that also has a significant impact.

37 posted on 01/02/2010 8:47:02 AM PST by spetznaz (Nuclear-tipped Ballistic Missiles: The Ultimate Phallic Symbol)
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To: spetznaz

Do you understand the concept of national technical advantage. Example if we invented a drug that will make old people ten years younger and cure most cancers, you keep the technology to yourself so the whole world will come to your doorstep and be willing to pay a good price for it. From that good jobs will be created, government will get good tax revenues so they can create and maintain a strong military and the whole world will be beholden to our technical, economic and military prowess. If the secret is well kept, we can have generations of prosperity derived from this one discovery.
If we use your logic, we would teach the Chinese to manufacture it, we will share this knowledge with Chinese and Indian universities so we will have available low paying technically competent biotechs to manufacture it. Unfortunately as the Chinese and Indians learn of this process thru US tech transfers and sharing manufacturing techniques they will learn to manufacture it themselves. How convenient for the globalist and corporate America because they now cry that they cannot compete (a situation they created) unless they offshore the manufacturing and labor. All they wanted to do was manipulate the global, technological and financial system to benefit themselves. The people on Main Street are onto their game and they will not tolerate it anymore.
I know what the next argument will be, no one can keep a secret, well read about the Secret of Silk and how it kept China, Persia and India prosperous for centuries.


38 posted on 01/02/2010 9:42:09 AM PST by Fee (Peace, prosperity, jobs and common sense)
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To: UCFRoadWarrior

If America weren’t such a lawsuit happy place then I am sure that companies wouldn’t be moving overseas. Then of course with Zero in office there’s no guarantee that Zero won’t decide to conficate a company and then seize the assets and hand job over to his favored cronies.

He’s already overstepped boundaries by firing several executives from GM and there’s no guarantee that he won’t start taking over small businesses and squeezing the bank accounts of people who look at the regime the wrong way. I don’t think that any dynamic businesspeople will be interested in taking a huge risk, succeeding, and then having it simply taken away from them and then run into the ground through stupidity.

Anyone with a brain is going to start building their businesses outside of the US. To say the least about the taxes that are required to be paid. Too much red tape, uncertainty, and high risk of confiscation are the three red signals that any smart businessperson takes into consideration.


39 posted on 01/02/2010 9:44:59 AM PST by Niuhuru (The Internet is the digital AIDS; adapting and successfully destroying the MSM host.)
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To: Fee
Do you understand the concept of national technical advantage. Example if we invented a drug that will make old people ten years younger and cure most cancers, you keep the technology to yourself so the whole world will come to your doorstep and be willing to pay a good price for it. From that good jobs will be created, government will get good tax revenues so they can create and maintain a strong military and the whole world will be beholden to our technical, economic and military prowess. If the secret is well kept, we can have generations of prosperity derived from this one discovery. If we use your logic, we would teach the Chinese to manufacture it, we will share this knowledge with Chinese and Indian universities so we will have available low paying technically competent biotechs to manufacture it. Unfortunately as the Chinese and Indians learn of this process thru US tech transfers and sharing manufacturing techniques they will learn to manufacture it themselves. How convenient for the globalist and corporate America because they now cry that they cannot compete (a situation they created) unless they offshore the manufacturing and labor. All they wanted to do was manipulate the global, technological and financial system to benefit themselves. The people on Main Street are onto their game and they will not tolerate it anymore. I know what the next argument will be, no one can keep a secret, well read about the Secret of Silk and how it kept China, Persia and India prosperous for centuries.

Maybe you have a problem with comprehension ...where did I say that we need to transfer technology, or that 'my logic' doesn't understand national technical advantage, or how you can foresee my 'next argument' on how no one can keep a secret? I understand that there are some issues (like offshoring) that make people both on the Right and Left shoot their cognitive wad, but at FR people tend to read and understand before making 'predictions' off cuff (and yes, I could probably dance circles around you when it comes to cogent comprehension of both 'national technical advantage' LOL as well as the secret of the Silk Worm).

To make it easier for you ...I AM NOT ADVOCATING OFF SHORING (something I put in that post, but apparently you were in a myopic state). I understand the issues at play, and that it affects people. People get hurt.

If you read my post (and think of what you are reading), I was showing WHY companies make that decision. I explained the rationale of accounting vs economic profit, and how it brings about that decision EVEN WHEN I DISCOUNT other issues like adverse Government regulation, unions, and even quarterly reports.

If you want to beat someone around the ears over off shoring, I suggest your local congress person. Your emotive post will get better traction that way.

Once more ...the chewed pre-digested version is as follows: I was not advocating off shoring (just for you ...once again ..I am NOT advocating offshoring. However, I know why it occurs). Off shoring happens. It happens due to many reasons, ranging from lower cost base to regulatory factors ....but all those reasons, from a financial perspective, boil down to the interplay between accounting and economic costs. most people arguing the issue, on both sides, do not look at the effects an economic loss can have on a firm.

Anyways, if you want to pick an argument over this, pick someone easier.

40 posted on 01/02/2010 10:05:14 AM PST by spetznaz (Nuclear-tipped Ballistic Missiles: The Ultimate Phallic Symbol)
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To: spetznaz

Exactly.

But the uneducated public, which apparently includes a majority of our congress, doesn’t understand any of this.

They think that it is just a matter of the lower wage.

Wages in Asia were much lower than in the US before I was born, and that was 81 years ago.

Yet we still were king of the industrial world.

So what happened over the ensuring years?

You described it perfectly.


41 posted on 01/02/2010 10:07:42 AM PST by old curmudgeon
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To: UCFRoadWarrior

“If Apple was making those products in America....they would be creating more jobs in America. That is a no-brainer.”

and then they’d be too expensive so nobody would buy them and then everyone involved would be out of work

would that be your solution?


42 posted on 01/02/2010 10:19:49 AM PST by cowtowney
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To: spetznaz

I hear what you’re saying. Of course, my offshoring, we put take some jobs way from our people. So people who once made a middle class living, now make a lower class living. As a result, they will buy less of product X. In theory, that is what should happen.

However, Americans have actually increased their consumption. Why? I think most of us know the answer is entitlements and Government jobs. More people work for the Government, less for companies that actually make things. This has a cost, however, as we are borrowing to finance the trade deficit and entitlement spending. This can’t go on forever and it won’t. However, it HAS gone on long enough to trick enough people into thinking it will go on forever—people who should know better. Unfortunately, people can make a lot of $$ by think short term, so its hard to argue against.

Once upon a time, we had leaders who did what was in the best LONG TERM interest of the American people. Short term think has dominated for the last 50 or so years. So, while the Economic Cost you speak of is real, its only short term. Long term, we are shooting ourselves in the foot.


43 posted on 01/02/2010 10:43:46 AM PST by rbg81 (DRAIN THE SWAMP!!)
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To: Jeff Chandler

“If Apple was making those products in America, it couldn’t compete and there would be FEWER jobs in America.”

And why is that? It’s mainly because environmentalists and overpriced government have jacked up the cost of business so much here. Overseas they don’t have to be concerned about pollution, minimum wage, taxes (as much), and on and on.

The environuts didn’t want manufacturing jobs here, and they got their way. It’s so crazy that even solar energy projects in the Mojave Desert are being challenged on environmental grounds. Does that make sense to you?

I have a feeling that things will be very different in just a few years though. America is finally reaching a breaking point, one way or the other. Anyone who thinks the economy is “improving” is confused.


44 posted on 01/02/2010 10:44:15 AM PST by PreciousLiberty (In theory, theory and practice are the same. In practice, they're not.)
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To: rbg81
Once upon a time, we had leaders who did what was in the best LONG TERM interest of the American people. Short term think has dominated for the last 50 or so years. So, while the Economic Cost you speak of is real, its only short term. Long term, we are shooting ourselves in the foot.

Short term thinking is indeed a problem, and not just for Government but also for business. To borrow from Goldman Sachs (a saying I totally believe in), it is always better to be Long-term Greedy than Short-term Greedy. Short term can kill you if you let it hang around long enough.

The problem is that, both in politics and business, politicians and CEOs have their stars rise and fall based on short-term factors. Thus, for as long as that will be the case (and I don't see how it can change with a major systemic shift) then the captains of politics and industry will always use shorter-term loci to map their movement rather than longer-term milestones.

For instance, what you said about economic profit probably being for the short term is true. After all (to stick to my example), Spetz's Wrench shop has gone to Indonesia, and it has managed to do quite well due to the lower cost base. However, while the Indonesia factory makes my wrenches by day, by night the SAME factory starts to make 'counterfeit' (in honesty, the same wrench as mine) wrenches under its own brand. Before you know it, I have 3 Indonesian companies as ULTRA-low cost competitors, and by the end of the year I have a baker's dozen of such companies! Then before long we are not talking about wrenches, but cars (at first ugly unreliable cars ....but give Chinese companies like Geely and Chery time. Sooner or later they will start producing good cars at low cost, just as the Japanese and Koreans went up the curve. I hear one of the Chinese companies just bought Volvo). Before you know it, suddenly we have higher technology factors at play ...not useless stamped metal wrenches!

I also hear China has stopped the exportation of rare earth (they make 97% of this particular type, which is needed in all sorts of industry ...including defence).

Now, I see that. You see that. I am sure the Managing Director / CEO also sees that ....he did not get to his post by being too stupid. The problem is the short-term factor. By the time that happens, he has already made enough money to retire for half a millenium, and it is his successor's successor who will have to deal with the poison apple at the end of the road.

It is quite the issue I'd say.

45 posted on 01/02/2010 11:11:12 AM PST by spetznaz (Nuclear-tipped Ballistic Missiles: The Ultimate Phallic Symbol)
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To: paul544; businessprofessor
An American engineer costs the company over $60/hr. Someone in India costs $20/hr. If you’re a CEO selling IT services, you are very apt to take the option that allows you to sell services at a very low rate. Therefore you offshore.

I think some USA IT professionals would work for a lot less than $60/hr, but there are a couple of problems:

1) Employers assume that US workers are prohibitively expensive, and don't get far enough in the employment process to even ask them how much they will work for.

2) As businessprofessor posted above, the government will not allow individuals to work as a contract worker directly with a company, so the employer has to pay overhead to the agency.

46 posted on 01/02/2010 11:15:03 AM PST by ding_dong_daddy_from_dumas (Joe Wilson said "You lie!" in a room full of 500 politicians. Was he talking to only one person?)
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To: SatinDoll
I have never purchased any crap made by Apple and I never will. It is junk.

My 3 ipods would seem to flatly overturn your case. All going strong and far and away the best portable music platforms I have EVER purchased.

47 posted on 01/02/2010 11:19:56 AM PST by Centurion2000 (Something is seriously wrong when the .gov plans to treat citizens worse than they treat terrorists)
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To: Centurion2000

Our IPODS fell apart. Never again will we buy Apple products when other more sturdily made products are available.


48 posted on 01/02/2010 12:48:59 PM PST by SatinDoll (NO Foreign Nationals as our President!!)
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To: CatQuilt
I never understood why companies don’t get it...if you ‘offshore’ your jobs to other countries, thereby causing massive unemployment here, how are we supposed to be able to buy your products?

Their bottom line thinking is so short sighted that they don't realize (or care) that there is a long term. Best case scenario, sending out the jobs makes money this year. Worst case : the company collapses in a couple years, they divide the equity of the company among themselves and dump whatever debt remains.
49 posted on 01/02/2010 12:55:39 PM PST by mysterio
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To: spetznaz

“One thing about our FReepers, as well as the silly DUmmies in DUmmieland, is this ...both sides of the aisle will always buy the cheapest good/service that satisfies their need...”

“That’s the truth.”

Not for me!

I learned a long time ago that cheaper is never better nor always the same as a higher priced item. At age 58 it has been a lesson learned a long time ago - read the label for purity of ingredients (food) and especially origin, either where grown or manufactured.

I will not buy from China. I will buy from Canada or Mexico (sometimes manufactured goods, never food items from Mexico).

Always, I try to buy American made or grown, and no, I am not rich but neither am I poor. Often it is cheaper to buy second hand, particularly tools. Those made 60 to 80 years ago are usually very durable and purchasing those help the local resale market. Similiar with food. Buy at local farmer’s markets and help small farmers stay in business.

As an example using food, why should I buy French wine shipped thousands of miles to the Pacific Northwest (where I live) when we produce award-winning wine right here? Wine does not travel well so for folks on the Pacific coastline, French wine is not a good choice.

I know this doesn’t exactly address what you’re discussing in your statement but as a consumer I have to tell you, Mr. Fund Manager, that people like me look for bargains in certain things, like phone service (I rarely talk on the phone) or eliminate services such as cable (never have time to watch TV) or garbage service (I’ve found an alternative). So yes, I do have money to invest but right now it is NOT going into overseas markets but into real estate, diamonds, and gold.


50 posted on 01/02/2010 1:13:55 PM PST by SatinDoll (NO Foreign Nationals as our President!!)
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