Outsourcing Jobs and Visas - Good, Bad, Indifferent?

[TaintedAndDelish]

So in a nutshell, Outsourcing jobs to countries that pay less means cheaper labor for large companies here in the US. Likewise, employing folks from other countries who are here on a temporary work pass ( aka VISA ) has a similar benefit. Some in the "for" camp will argue that work related immigration is good for the US because we end up getting lots of talented folks from other countries helping us ( companies in the US ) develop new technologies - which is good for the country in the long term.

On the other hand, for those of us who are competing for jobs, it can be very hard to compete with someone who will gladly work for a fraction of the price - especially when the opening of employment doors to them results in the closing of doors here as is the case of outsourcing overseas.

What is disheartening is how US companies will argue that local workers are not skilled enough or that the schools are not educating them enough when it appears that the real reason for outsourcing is simply money. It appears that large corporations simply do not want to invest in the people who live here.

Of all people, I really didn't expect Obama to jump on this band wagon like he did here. I'm no fan of Obama, but to see a democrat wag job opportunities overseas while people here in the US are struggling to get by is saddening. Yes, it's good for them, but very bad for us. ( If I read this correctly, he's talking about extending the length of visas - which means more Chinese citizens visiting here to attend colleges - and thus spending their money on tuition and living expenses - then possibly landing very good jobs )

http://www.usatoday.com/story/news/world/2014/11/10/apec-beijing-obama/18786007/

I really don't want this to turn into a racially biased argument or one that insults "foreign" workers. After all, we are all "foreigners" from one perspective or another. But the question I have is, how good or bad is outsourcing and offering foreign workers passes to enter the country and take good paying jobs? Again, this applies not just to the US, but to other countries who may be seeing the same sucking effect in their job market.

[Caehlim]

Well sometimes it's going to be essential.

For example in my city, we have a particular public transport system called an O-bahn (it's like a railroad that's built for buses to drive on). It needed some repairs once and since it was originally designed in Germany and that was the only other country with one, the only way to get it repaired was to get a German company to send people over here to fix it. Maybe a local company could have figured it out, but it would have taken more time, been more expensive and they would have had huge liability issues if anything went wrong.

We also have issues where our locally trained doctors don't want to take up jobs in small country towns, even though those towns are often willing to give all sorts of benefits paid by the local governments. (One town offered a free house to any doctor going there for example and still couldn't get volunteers). So our government was talking about offering conditional visas for foreign doctors to come over here and work in those places, didn't see whether that policy went through or not, but it was talked about.

This isn't the case with all foreign work, but you're always going to have some cases like the above ones where it's the only practical way of solving a problem.

[Hemingway]

There's a few questions in there, and a few different things to take into consideration.

To start with, the consequences of labor migration really depend on whether you're talking about unskilled or skilled labor. For an argument for attracting skilled workers, you could for instance see Michael E. Porter's cluster theory. A simple version is that geography does matter, and having a high number of highly skilled individuals working in related fields in the same area, can help businesses in that area.

Unskilled labor is, at least to me, somewhat trickier. In particular for the reasons you mentioned, of immigrants working for lower wages, as part of the informal economy ( i.e. off the books ). It obviously has implications for the local population, who may be outcompeted by people who accept wages below legal requirements. And, while it may be seen as exploitation, research does suggest that immigrants working in the informal sector, who send remittances to their country of origin, can be a great benefit to the economy they're coming from. The flipside is of course that you get highly skilled individuals whose skills go to waste, say, picking fruit even if they have a degree in neurosurgery.

It's made even more difficult by the potential of losing workplaces completely, if they're not allowed to operate as they do. Restricting access or tightening requirements for immigrants coming to work is nothing like a sure way to boost work opportunities for locals. Precisely because of the other side of what you mentioned; offshoring and outsourcing.

Just like the above situation, this has a range of benefits and drawbacks, and various things that must be taken into consideration.

One thing that's often mentioned by way of justification, is creating jobs where they might be sorely needed. While this may sound good in theory, it may actually slow down development, depending on a few different factors. An important one is whether or not knowledge used is transferred to the local population, enabling them to start their own businesses ( otherwise, any benefit is lost once the company leaves the country ).

The fact that having local industry and local jobs can be seen as a benefit in and of itself, at least to me speaks for subsidies and support for local businesses. That's also a balancing act ( like just about everything in social and political science, subsidies can go both ways ).

But, I won't bore you with more details. The short version is that it's an extremely complex issue, where you're unlikely to find a single answer. It's simultaneously good and bad, depending on a) who you ask, and b) how it's done.

[Valthazar]

The fact is that most of us in the Western world for the past half century have experienced a quality of life well beyond our economic worth.  For example, the average electronics engineer in the United States makes a little more than $120,000, according to Salary.com, as opposed to India, where Glassdoor.com says he or she might pull in less than $12,000 a year at a company such as Samsung India.

I have recently been reading the book, The World is Flat by Thomas Friedman.  It is an excellent read for anyone interested in learning more about the impacts outsourcing - and what we can do as Americans (or Westerners in general) to hedge against an increasingly globalized world.  The bottom line is that whether a Democrat or Republican is in office, they will most certainly be lobbied to favor increasing globalization.

As Friedman describes, globalization is serving as the great equalizer of mankind.  If we are truly pursuing equality, we must realize how inflated our quality of life is in comparison our economic output as individuals (when looking at the global labor market).  More than likely, quality of life will go down for most of us, while emerging markets like India and China will feature a growing middle class.  With that being said, there are other factors at play which will still retain the superpower status of United States.

[Hemingway]

Yeah, I think Friedman misses the mark somewhat; to say the world is 'flat' as he does, and what he means by it, is a considerable exaggeration. If you want to understand economic globalization ( and what it is, which is not necessarily what people think it is ), I'd personally recommend Global Shift by Peter Dicken. Or, hey: Read both!

[alextaylor]

Yeah, it's good. I like it when Americans offer me a job that pays higher than a prime minister's salary, for work that an engineer with 2 years could do. Outsourcing FTW.

[Steampunkette]

That's both true and false, though, Valthazar.

Yeah, an American Electrical Engineer can make a lot more money: But there are fewer of them, here. So they command a higher salary. Thanks to India's economic shift of the 1950s Engineering (Electrical or Otherwise) has seen a high rate of popularity in universities for graduate degrees. Here in the US Business degrees are, by and large, the most popular. And that's regardless of level of study, except Doctorate, where the Medical Profession takes the lead.

You're dealing with an entirely different economic situation, there.

And while we're looking at that 120,000 to 12,000 difference, let's keep in mind that the Cost of Living in Delhi is 30% of that of living in New York City. And both of those are about the highest CoL as you're gonna get in either country. So while they're paid 10% as much they're about 20 times more common and the CoL is about 70% cheaper.

Honestly, that kinda looks like a win, to me, economically speaking. But then you get into the stuff you were -actually- talking about. The Quality of Life which has a lot less to do with how much cash you bring home.

The LG 55inch 4k HD 2160p tv is just about the biggest and boldest move someone in the US might pick up without dipping into an 84 inch TV. And the Suggested Retail Price is... drum roll, please!

$5,499!

And in India it's price is RS 1,84,900. That's 1.849 lahk or 184,900 rupees. Which comes out to about $3,000. So more than half price in a nation with a 30% CoL. Of course, that's high end luxury, for the middle class, in either case.

However, it should be noted that someone such as a Chartered Accountant usually earns somewhere within 10-15 lahk RS a year (assuming they've got a good degree and 7-10 years under their belt). That translates to around $200,000 per year.. in the US $60k is the average. They can earn up to 24 lahk RS per year which is right around $390k. And then you get into Investment Banking which in the US pays around $450k average and in India pays almost $400k. (For Vice Presidents in both cases)

So you've really gotta look at the difference in economy and compare things that line up, adjust perception to the cost of living, and go from there. That said, high end luxury items are flatly more expensive in India, compared to the US.

Real Estate, on the other hand...

A 51,000 square foot villa on a 4,000 square foot plot comes out to just about $3.7 million in Delhi (one of the most crowded cities in the world. A 15,000 square foot home in New York City comes in at $118 million...

So there's still a lot of kinks to work out in a direct comparison.

[TaintedAndDelish]

Just a note: Prices in New York City are not typical of the rest of the country. They would be considered rather extreme. Likewise, the smaller cities and suburbs within a 50 mile radius of NYC (reasonable commuting distance) range from poverty stricken to super wealthy. Most of the property is super expensive and the housing projects (aka. ghettos ) are not very pleasant to say the least.

A person making 100,000 to 120,000 a year in NYC and presumably living within 50 miles or so of the city might have a hard time supporting a small family ( 1 wife, several children) depending on their housing expenses - which vary by neighborhood and distance from the city. Unless you wish to take your chances living in the slums, you would likely spend half of your salary on housing, taxes, and transportation and the rest on all the other necessities of life. It may sound like a lot of money, but once you factor in the costs of living, you are not left with much.

That same 100,000 salary would be nice to have if you lived in Florida or another relatively low income state, but in those states, you just don't make the same money. ( I'm sure there are exceptions here and there )

[Valthazar]

Steampunkette, I agree that a direct comparison becomes complex, but after your post, your conclusion is still the same as mine - "high end luxury items are flatly more expensive in India, compared to the US," which implies that labor is also cheaper in India.  As any economist would say, the cost of products is based on supply and demand - as well as the buying power of the consumer.  The Indian economy has naturally adapted to the wage spectrum of its consumer base (hence why cost of living is lower), just as our economy has adapted to our consumer base in a similar manner.

Outsourcing essentially redefines economic boundaries - meaning that someone from an area with a low cost of living (such as India) can directly compete for a job originating in an area with a higher cost of living (such as the US).  Outsourced wages are decreased, of course, but they are still drastically higher than wages from comparable Indian jobs (by Indian companies).  It is problematic since it shifts economic productivity to other parts of the world - productivity that we, as Americans, created.  An outsourced job will yield a paycheck to a foreigner, who will spend that money in his home country, while a job remaining here in the US will yield a paycheck to an American who will spend that money in the US economy.  It essentially siphons capital away from the US, and creates prosperity in other countries to our detriment.

[Steampunkette]

Yeah, Tainted. I know that. It's why I used New York and Delhi as the comparisons because they're both big expensive to live in cities and are thus closer than, say, Delhi and Shell Lake Wisconsin.

Valthazar: On second look I just found out that India has a different structure for taxing on Luxury items including Electronics. Specifically in a bid to cut down on imports such as LG TVs... So we may be looking at an artificial economic difference neither of us is actually accounting for, even as we imagine we are.

[kylie]

Outsourcing essentially redefines economic boundaries - meaning that someone from an area with a low cost of living (such as India) can directly compete for a job originating in an area with a higher cost of living (such as the US).  Outsourced wages are decreased, of course, but they are still drastically higher than wages from comparable Indian jobs (by Indian companies).  It is problematic since it shifts economic productivity to other parts of the world - productivity that we, as Americans, created.  An outsourced job will yield a paycheck to a foreigner, who will spend that money in his home country, while a job remaining here in the US will yield a paycheck to an American who will spend that money in the US economy.  It essentially siphons capital away from the US, and creates prosperity in other countries to our detriment.

          I don't know...   I get that from one perspective, if a company is going to have a given number of jobs and they go somewhere else, that affects the previous location's community and it makes certain waves in other markets that may lift up the relative security or buying power of people in another place.  That's just how companies work, if you let them operate in a more laissez-faire vacuum around the world.  The other choice is perhaps to give regional or national priorities more clout somehow, and risk retaliation from foreign alliances or blocs... 

         Though companies (at least big ones) may also say, well "someone is going to do it and sooner or later they are competing with us."  So if we are not allowed to move and compete, well you will have to subsidize us or give us some other incentives to stick around.  Or at least, you might need to protect your smaller companies some other way from other, more globally mobile and cash fluid companies that can go wherever labor is cheap and regulations are less cautious.

          But from another angle, I also don't think "productivity" exists in a vacuum where employers can easily decide what region 'should' benefit without a whole string of global consequences.  Actually making anything beyond the basic idea requires enough people (and talent, awareness, contacts, even languages?) to get all the creation and support and distribution and marketing done in a material sense.  Actually gaining and maintaining -- or moreover as larger companies generally say they seek, especially expanding -- market share requires new populations with some level of increasing income to at least become potentially interested in some of those products (or even for starters, cheaper versions of somehow complementary or similar products).

          While an Indian worker may well spend some income on necessities and fashions that are often cheaply available from local, more "native" if you will sources, that worker could also sooner or later buy some things from foreign companies in certain areas.  And at some point, a larger internationally marketing company takes an interest in having a certain reputation in having name familiarity and a pool of workers with increasing incomes in various countries, so that it might think of selling to a market where it is producing as well as in those higher income populations it has been exporting stuff (or, also sending stuff "back"?) to.

         So to some degree it depends what your model is for economic growth or stability.  Workers are getting burned pretty well in many places in all but the "highest value" industries.  That's not just in the U.S. -- You can look at things like the living and working conditions that clothing or even, some computer chip workers face in some parts of either China, Southeast Asia, or even Mexico and find that regardless of marginal wage gains, probably many are not having an 'easy' time of it. 

         While Americans - men in particular - have had some complaints of a drain on industrial jobs since at least the 70's-80's, many Asia-Pacific countries speak of a situation with "rich country, poor people" as much of the corporate money coming in goes to bureaucracy, outright bidding fees and kickbacks or informal "greasing the wheels," and finally into facilities that may only last as long as the company hangs around before moving on to the next cheaper labor force.  There is surely a bit of worker versus worker competition that appears more toward the month to month survival level when whole operations move about, but I think more of the "big" game of wealth collection and market fixing is still being played between a small number of government elites and top company board types. 

[Steampunkette]