Outsourcing, Offshoring, Jobs, Research, Commentary

[SharedXpertise Commentary] Offshoring of jobs is top concern in U.S.

03 Apr 2006 | (News) | SharedXpertise Editor Commentary

For SharedXpertise Commentary, please see below

Many Americans are preoccupied with the practice of offshoring jobs to foreign countries to do work previously done at a higher cost in the United States, according to a poll by Greenberg Quinlan Rosner Research and Public Opinion Strategies for National Public Radio. 26 per cent of respondents are worried about global economic competition and the outsourcing of American jobs, topping the list over the Iraq war.

It was only weeks earlier in India that President Bush discussed the impact of globalization, declaring that America would not "throw up protectionist walls".

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SharedXpertise Commentary:

Earlier this month, the SharedXpertise staff was in unanimous agreement with President Bush's comments about protectionism (see our commentary here), but apparently Bush's comments flamed the American public's fear over job loss often associated with offshoring. Since his comments, job loss due to outsourcing surpassed the war in Iraq as the top concern for Americans.

Outsourcing is taking it on the chin. First, if there is a culprit, it would be offshoring, the practice of outsourcing to foreign locations. Outsourcing has been a viable and productive business option for decades. Second, outsourcing is being used as a political tool by both major American political parties. In a move to grab votes, politicians will denounce outsourcing as the root of all evil.

If we rationally look back at economic history, there has been a longstanding cycle of innovation and resulting job loss. Each new innovation draws the ire of the public, fearful of losing their jobs.

One of the three useful tidbits I learned while getting an MBA degree was 'Change is the only constant.' As SharedXpertise Advisory Board Member Martin Fahy points out, one-third of the Fortune 500 companies from 1983 are no longer are in existence, and that "we need to stop worrying about old economy jobs. We will invent whole new industries to keep us gainfully employed." The problem is always in the transition, and this is where government leadership plays a vital role. While Bush pointed out the benefits of outsourcing to India, where a large middle class exists to buy products from American companies, he could be doing more to lay out the social and political benefits of outsourcing besides the economic ones.

Along these lines, SharedXpertise Advisory Board Member Ivor Masters embraces globalization as not only a tool for efficiency, but of global cohesion. He suggests creating an approved register of acceptable and aligned outsourcing companies supported by their country of origin. SLA's would be in place, reducing risk and encouraging stability - economic and political. Companies, as well as the political leadership, could be proactive in PR celebrating the approved lists and country support. "It is a mechanism to reinforce special relations between countries, enabling benefits and trade growths (and stability)."

Another socio-political factor to consider is the role of the corporation in society. As long as the intention of corporations is to maximize shareholder value, they are acting within integrity by outsourcing, or by doing any action that drives down costs and maximizes revenues. According to SharedXpertise Advisory Board member Amit Badami, the best companies in delivering shareholder value "are firm believers of globalization - sourcing the best skills wherever they come from in the world. That's why they've been able to generate so much shareholder value."

His advice to America: "Look ahead and re-train displaced workers with new skill sets - for which there is no easy solution." Leadership is in place to provide opportunities for its people. Jobs are not guaranteed, but every opportunity to jobs and education should be in place. Apparently, the American public has not put its faith behind its leader that he will make programs that ensures a painless transition to new job skill sets as promised. Until this administration matches actions with its words, the American people will not be relieved by soundbites.

Mr. Fahy echoes the sentiment about the need for re-training: "Stop worrying about old economy jobs...Protectionism doesn't work, comparative advantage matters and Schumpeter's creative destruction eliminates the inefficacy." In other words, every innovation will cause job loss as workers with obsolete skills are not needed. Outsourcing, like all the innovations before it, is a focal point of negative public opinion, yet is exactly the tool that continues to propel the economy forward. The key is to stay at the forefront of innovation, creating new industries to keep us gainfully employed.

Martin reminds us that the real cause of job losses according to the OECD is technology, not outsourcing (click here to read about it in the SharedXpertise news).

Author: Commentary, SharedXpertise Editor
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