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 ...
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.
“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?
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.
“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.
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.
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.
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.
Our IPODS fell apart. Never again will we buy Apple products when other more sturdily made products are available.
“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.
The problem is that, both in politics and business, politicians and CEOs have their stars rise and fall based on short-term factors.
Your personal opinion about Apple has absolutely nothing to do with the issue of outsourcing
my example could have been GE or anyone
Thank you for explaining in simple terms, a little bit of the technical side of decisions between domestic and foreign labor. The information enriches us in various ways. Some of those who study historical intra-national and international interactions and outcomes do see influences beyond such necessary specificities. I’m sure that you see some of the more general likelihoods yourself. This world won’t be perfect.
IMO, the US dollar will probably continue to fall, off and on, more than rising. Oil prices will rise, and so will foreign product prices (if so many investment advisors are correct about Asia).
In meetings of counties here and there, I’ve become acquainted with “environmentalists” who were employed by or related to international corporates. They were involved in zoning and other regulations against new business starts and homeowner attempts to cut their household energy costs. Nearly all of the local government employees are family members of local other business interests.
I see a country of very aggressive and defensive sole proprietors in our near future. Companies like Monsanto apparently see the same (re. ag. bills against small farms).
Quality.
When I first went from UNIX machines to Windows based (many years ago), I was appalled that anyone would voluntarily put up with the unreliable crap OS.
But business people didn't have a standard of comparison, they didn't know any better.
And from the point of view of the company *doing* the offshoring, what happens is that an easily identifiable, discrete line-item cost gets diminished, but at the cost of a lot of fuzzy, not-easily-attributed items getting larger -- turnover, schedule slippage, re-work time, customer dissatisfaction, etc.
If all major competitors offshore at once, or, if the marketing and sales and legal departments can erect enough of a barrier that customers are locked in for a time, then companies can get away with selling sh*t for a long time.
Cheers!
Quality of Chinese cars -- you can find videos of their crash tests on YouTube.
Or another, price.
Why *do* Nikes still cost > $100/pair?
The costs are already lowered -- surely a competitor can come in and undercut them by lowering their price per pair for the consumer, sacrificing per unit profit for market share and higher OVERALL profit.
Cheers!
“Why *do* Nikes still cost > $100/pair?”
Because there is sufficient demand that will pay that amount.
Ya know. The purpose of a corporation is to increase the wealth of its shareholders. that’s all. If by doing good deeds, that’s the most efficient way to create wealth, then by golly do good deeds.
That doesn’t mean a corporation can act outside the law. It means that it should do what is necessary to compete. If that means outsourcing, then so be it.
What it doesn’t mean is that it has some sort of obligation to act inefficiently in order to pacify some union, for example.
“High taxes and foreign outsourcing just redistribute wealth....they create zero jobs.”
Outsourcing creates jobs here. Just not the ones that can be outsourced.
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