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Astrocloud

02-11-2004 02:15 PM

Over 1/2 of Fortune 500 Companies are Outsourcing -Have you been outsourced?

Quote:

Diverted to Delhi

Indiana or India? Do you know where your customer service calls are going?
By Suzy Brannon

http://graphics.techtv.com/graphics/...on/3597695.jpgYou call Delta about a flight reservation, America Express about your bill, or Dell for technical help with your home PC. The person you talk to sounds like the girl next door. She probably is a girl next door. It's just that her neighbors are in India.

With more than 200 of the Fortune 500 companies outsourcing their call centers to India, most of us have unknowingly talked with someone in the South Asian nation impersonating a local operator. And it's not just American companies that are using Indian call centers. English and Australian companies are catching on to the popular trend as well.

Political, economic, and cultural concerns and implications aside, outsourcing is now big business in India. With 30 percent of college graduates in India unable to find jobs, competition to get hired by a call center is fierce. Though Indian call center employees earn a fraction of the salary of their American counterparts, they pull in an annual $3,000 to $5,000 in a country where the per capita income is less than $500.

"Diverted to Delhi" looks at those on the other end of our calls. It follows a group of college graduates as they go through a three-week crash course at a private college to improve their English and presentation skills, which they hope will prepare them for demanding call center job interviews. The one-hour documentary, third in a series of "Nerd Nation" documentaries, also looks at a group who passed the rigorous interview process and is going through job training. These young Indians must change their names, modify their accents to be able to toggle between English dialects, and put aside their own cultural identities as they learn to speak and think like their international callers.

http://www.techtv.com/nerdnation/sho...597649,00.html

sailor

02-11-2004 09:32 PM

Over the summers I work for one of said Fortune 500 companies doing computer work--programming, DB work, etc. Lemme tell you--I have gotten to be able to understand the *thickest* Indian accent.

So yes, I know a lot of outsourced programmers. However, many of the people working them are brought here, so at least it benefits the local economy for the six months or however long they are here. And there are also a good number (its probably half and half) of (man, I hate saying this, it sounds so bad) non-indians.

Harshaw

02-11-2004 09:59 PM

I work in a call center and I haven't lost my job to India. I don't think they have any plans to move my job over there at this point. I really wouldn't care, I don't like it there and I only think I will be able to work there for another month or two before I go nuts and quit. The main thing that worries me is, its not like we have a huge amount of jobs in this country, so whenever we lose jobs it can be scary.

xjumper84

02-12-2004 09:58 PM

i can't really say... i haven't held a job since last summer :*(

Cynthetiq

02-13-2004 06:48 AM

having managed call centers and managed support staff, I've watched the pendulum for outsourcing swing back and forth.

It's a cycle that will repeat itself over and over so long as companies need to keep their books looking the most profitable.

skysooner

02-13-2004 07:25 AM

I'm in a position it is hard to outsource. I work in an industry where the most advanced knowledge is to be found in the US. I'm more likely to replace an overseas worker than the other way around. I'm not 100% certain how I feel about outsourcing. I feel bad for workers that have lost their jobs, but I also realize that outsourcing certain non-core jobs can help relieve pressure on the overall corporation by making it smaller and more able to concentrate on core issues. I work for an oil company. We do best when we focus on oil and gas production. If we were to have a ton of IT people around here, we would partially be in the computer business and that can create corporate pressure.

absorbentishe

02-13-2004 07:47 AM

We just had a big controversy at work about this. We started out sourcing some of our DP work to India. This has been sort of short lived though, the quality of what has come back isn't what our company expects. It has caused more work than it was supposed to save.

water_boy1999

02-13-2004 08:53 AM

I am a technical recruiter and have been losing business left and right to outsourced call centers. I think in the short term it is good for the companies because it significantly reduces their overhead costs, however, in the long run, I think it is highly detrimental to the U.S. economy. For one, we are losing our jobs to other countries. Second, the U.S. is the center of the world when it comes to the best and brightest. Our technology reigns supreme. When you send all of your technology overseas, you take away our strength in technical advancement, which in turn reduces our technological infrastructure and stability.

ARTelevision

02-13-2004 09:03 AM

We live in a global economy. All workers, worldwide, are stakeholders in it. Jobs move around the world. I don't see a general issue here - I see a lot of personal ones. Career changes are more and more necessary for many reasons. This can be one of them.

A massive reorganization of processes and economic shifts is occurring. To whatever degree it occurs, given the complex geo-political factors involved, economic reorganization is a rapidly evolving world reality. No one is free from that. Make your plans accordingly.

Cynthetiq

02-13-2004 09:12 AM

Quote:

Originally posted by ARTelevision
We live in a global economy. All workers, worldwide, are stakeholders in it. Jobs move around the world. I don't see a general issue here - I see a lot of personal ones. Career changes are more and more necessary for many reasons. This can be one of them.

A massive reorganization of processes and economic shifts is occurring. To whatever degree it occurs, given the complex geo-political factors involved, economic reorganization is a rapidly evolving world reality. No one is free from that. Make your plans accordingly.

the problem with that is while developing countries are retooling and retraining their workforce, the USA does not have something to retool and retrain to.

The technical crop of people that were burgeoning in the late 90's a good majority of them have been displaced mid to late in their career making retraining even more difficult.

ironchef82

02-13-2004 09:52 AM

Here is a link to a great Wired magazine article on outsourcing and all of its repurcussions. It was the cover story for this month, so it's a lengthy but worthy read for all interested in the subject:

http://www.wired.com/wired/archive/12.02/india.html

Astrocloud

02-14-2004 03:11 PM

I found a partial list of companies that take federal subsidies at:

http://www.cato.org/pubs/pas/pa415.pdf

It's a PDF created by the CATO institute which certainly wouldn't be against outsourcing; yet still they have a "selected" list of companies that take Federal Subsidies.

By cross referencing the list of outsourcing companies given by CNN

http://edition.cnn.com/CNN/Programs...et.exclude.html

Then we get the following list of companies that AMERICAN TAXPAYERS ARE PAYING TO HIRE PEOPLE IN FOREIGN COUNTRIES.

Partial List:

Dow Chemical
Motorola
General Electric
United Technologies
Ford Motor Company
Lucent

TM875

02-14-2004 04:37 PM

I work in the Economics business. I'd have to say about 60-75% of the economists in American are from India. I think it has something to do with a better understanding and more innate drive for business. The US needs to re-specialize, and find something that we all are truly better at.

Astrocloud

02-14-2004 11:17 PM

Just more food for thought

http://www.internetwk.com/breakingNe...cleID=17603388

Quote:

Overseas Outsourcing Leads To Identity Theft Risks

By Antone Gonsalves

As business process outsourcing to low-wage countries increase, so does the concern over protecting data.

Personal information contained in patient medical records and income tax documents heading to India or Pakistan must be protected against thieves who would use it to fraudulently obtain credit, merchandise and services under someone else's name.

Identity theft is expected to cost consumers, businesses and government organizations $221 billion in losses worldwide in 2003, according to market researcher Aberdeen Group. Worse yet, those losses are escalating at a jaw dropping 300 percent compound annual growth rate, and could reach $2 trillion by the end of 2005.

Call centers comprise a large portion of the business process outsourcing market. By 2007, 5 percent of estimated 4.78 million agent positions worldwide will be located in countries outside a company's home, according to a recent study by analyst firm Datamonitor.

Increasingly, however, companies with facilities overseas are contracting with U.S. hospitals, accounting firms and insurance companies. The services these outsourcers provide include tax preparation, processing of insurance and medical claims and transcribing dictation from doctors relating to all areas of the health-care process, from patient visits to surgical procedures.

Such activities involve sending personal information to foreign countries, which add to the difficulty of guarding against identity theft. After all, most experts agree that security in protecting data is only as strong as the weakest link.

"The weakest point in the chain -- and that can be anything from a human problem, to a data problem, to an encryption problem, to a policy problem, to a customer service problem -- can jeopardize the security of your system," said Benjamin Jun, vice president of Cryptography Research, a San Francisco security consulting firm.

Contractors to the financial, insurance and medical industries insist that their foreign operations are as secure as in the U.S.

"If the processes and systems are identical, then the security should be identical," David Wyle, chief executive of tax preparer SurePrep LLC in Newport Beach, Calif., said.

In general, overseas facilities in countries where cut-rate work enables outsourcers to offer services at half the cost of similar work in the U.S. are often referred to as "paperless environments." This means workers enter the office without any writing materials, or handbags and briefcases that could be used to sneak out documents.

"Basically, they walk in to the office with the clothes on their back, and that's it," Mark Albrecht, chief executive of Xpitax LLC in Braintree, Mass., said. Xpitax contracts with a third party for facilities in Chennai, India.

Computers used within these offices do not have hard drives or the ability to copy information to floppy disks or CDs. There are no printers, and workers often use dual screens, particularly in tax preparation, where they call up the source material on one screen, and fill out the forms on the other. Source material is view-only, and filled-out forms can only be filed into the facilities' central servers, or sometimes to data centers located in the U.S.

Clients usually are provided the software to encrypt and upload their data the contractor's server via file transfer protocol. Information moving between the U.S. and overseas facilities is usually over virtual private networks.

Despite these precautions, which have become commonplace in the industry, problems can occur.

A Pakistani medical transcriber last year threatened University of California, San Francisco, Medical Center with posting patient's medical records online. The home worker was upset over money she claimed was owed to her by a man who was a subcontractor of the subcontractor who worked for Transcription Stat, the Sausalito, Calif., firm hired by the hospital.

UCSF Medical Center, which has a "practice" of not sending transcription work to offshore companies, was unaware that patients' records were going overseas, a spokeswoman said. The Pakistani woman was paid some of what she claimed she was owed and no patient records were compromised.

David Stephens, vice president of sales and marketing for BPO Frontline Inc., Saratoga, Calif., insists that no reputable company with overseas facilities serving the financial and medical industries would use people working out of their houses.

"Once that data reaches someone's home, then they can do virtually anything they want with it," Stephens said. BPO, which provides medical transcription services, insurance claims processing and call centers, has facilities in the Philippines, Jamaica and India.

Nevertheless, Cryptography's Jun says the best protection against misuse of data sent overseas is a clear description of which company in the chain is liable for fraud that occurs in the process.

"If you recognize that a certain portion of the transaction is your responsibility and you're going to be left holding the bag if there's a problem, then you're going to do what you can to minimize that risk," Jun said.

Illegal recording of new films in movie houses is an example of the kind of problems that can occur when there is no liability, Jun said. Theater owners are not held accountable for movies recorded in their businesses, so there's no incentive to spend more money on security to catch people with video recorders in the back of the theater.

Before doing business with an offshore outsourcer, chief information officers should scrutinize processes ensure the outsourcer is able to meet the same quality standards as if the work was done in-house.

In addition, the contractor has to prove it can protect data against unexpected disasters, such as earthquakes, power outages and major computer failures.

Finally, its data protection policies must encompass technology, people and facilities, because security is only as strong as its weakest link.

ARTelevision

02-15-2004 06:05 PM

Cynthetiq, I've been thinking about your response.

"the problem with that is while developing countries are retooling and retraining their workforce, the USA does not have something to retool and retrain to."

My response to that would be: I see your statement to be a deserved indictment of the American educational system.

floydthebarber

02-15-2004 07:39 PM

Although I feel bad for people who loose their jobs, I don't have a problem with outsourcing. What makes people in Western countries think they are the ones that deserve all the decent jobs? It's a global economy folks.
If you can't compete, get a different job.

forseti-6

02-15-2004 07:51 PM

God Bless the Military -> No outsourcing :)

I have a few friends that have been affected by it though. It's a double edged sword. Do we want jobs and higher costs or lower costs and have outsourcing? It's a lose-lose situation.

Astrocloud

02-15-2004 08:41 PM

I don't think that anyone has really responded to my post above. The Federal Government has subsidized many companies with what is called corporate welfare.

Quote:

The justification for much of this welfare is that the U.S. government is creating jobs.

http://www.cnn.com/ALLPOLITICS/time/...p.welfare.html

These same companies are eliminating American jobs and replacing them in foreign countries.

This amounts to American Taxpayers subsidizing jobs for foreigners in their own countries.

I'm not sure how anyone can say that this is a global issue when American corporations are feeding at the American economic trough.

KungFuGuy

02-16-2004 11:11 AM

its all about profits.

instead of just having your clothing and soccer balls made over seas (displacing american factory workers who traditionaly made such goods), you now have technical support and everything else going overseas too.

Since the US seems to be a service economy, whats going to happen when all of the service is outsourced too? (like tech support)

personally i think outsourcing is bad because all its goals realy are is to increase profit margins for the corporate owners, and those profits dont really make their way to the larger populace at all. (i also think trinkle down ecomonics is a farce...couldnt u tell?)

Cynthetiq

02-17-2004 08:15 AM

Quote:

Originally posted by ARTelevision
Cynthetiq, I've been thinking about your response.

"the problem with that is while developing countries are retooling and retraining their workforce, the USA does not have something to retool and retrain to."

My response to that would be: I see your statement to be a deserved indictment of the American educational system.

hmmm... so I go to private schools, and private universities. I've trained myself with private funding for new emerging technologies. My job is outsourced and the data center I've worked at for 6 years has moved to another state or even another country. It's now imperative for me to find something else to work in since the tech sector is now contracting. While this isn't much different than the steel workers of Allentown and the autoworkers of Detriot, it's still an issue that crops up.

I don't see how that's a deserved indictment of the American Educational system. Especially for those that have been contstantly training and learning funded by their own dollars, finding themselves with the rug pulled out from under them and now all their training and experience is worthless.

Ripp3r

02-17-2004 08:41 AM

I work for a Call Center Based in Ireland for one of the Fortune 100 companies in the world

There are mentionings in the hallway about new callcenters being installed in India to support large parts of the world, however the Irish center still has no reason to have any fears of becoming obsolete.

Starting up call centers in low wage countries is basicly the only way for a company to survive the cut throat competition that is going on within the economy, with manpower being the highest cost in a company, and the need for that manpower to grow in order to provide adequate support to the customers, the choice for lower wages but equally skilled labourers is obvious

I read an article a while ago that India has more students graduating in computer engineering than america, (difference about 100.000 if i'm not mistaken) but their wages are a lot lower than their america counterparts.

Being payed less does not mean that they are less skilled imho.

Imho this is an excellent opportunity for the Indian Economy to gain in strength and become a serious competitor on a global scale.

KungFuGuy

02-17-2004 07:04 PM

I'm not intending to sound rascist at all when i say this. but,

when i was attending R.I.T. (technology school) for engineering, there were loads of kids from presumably India. And they also traveled in packs! (ok this is understandable- ur a kid in a new country so naturally ur gonna band together with other people from your own country to feel more comfortable)

quadro2000

02-18-2004 07:57 AM

I called Kensington yesterday for difficulties with my mouse, and the person I spoke to had an Indian accent. I wouldn't have thought twice about it had I not read this article. I asked him where the support center I was calling was based, and sure enough, it was in India. Very interesting.

Astrocloud

02-20-2004 12:27 AM

Quote:

A Survey of Information Technology Workers

In December 2003, the Washington Alliance of Technology Workers (WashTech) commissioned a national
survey of technology workers. The purpose of the survey was to quantitatively measure the opinions of U.S.
technology workers on a variety of issues, including free trade, future information technology (IT) job
demand, legislative action, party affiliation and voting behavior.

The results challenge conventional wisdom about “independent” IT workers who cannot be galvanized
around any one set of issues to seek political change. In fact, IT workers appear to be an emerging political
constituency that is increasingly looking for political action to address its economic concerns.

This report outlines the key findings from the survey.

Who Are IT Workers?
----------------------------------

Just who are these IT workers? IT workers are an experienced and highly educated group. Based on the
results of the survey, 70% of respondents said they had five or more years of experience working in an ITrelated
job and 68% had a college degree or higher. They include software developers, data processors,
technical writers and more.

Most are direct, full time employees, though nearly one in five is an independent contractor, speaking to the
ingenuity and energy that characterizes this group of workers.

What Are the Issues?
----------------------------------

IT workers face a host of challenges, among them an increase in the practice of off shoring and gaps
in training.

There is overwhelming concern about high-tech job flight

• Nearly all respondents (93%) were aware of off shoring and expressed concern about its impact on
the industry
• Close to one in four IT workers said his or her company had off shored jobs
• Even more incredibly, almost one in five had lost a job or knew someone who had lost a job after
training a foreign worker

IT workers believe globalization will lower wages and benefits

• The majority of respondents indicated that off shoring has impacted wages and benefits
• 56% of these respondents said the trend has put downward pressure on wages and benefits
• One third of survey respondents cited a decrease in job stability as a result of off shoring
• 53% of these respondents felt that off shoring created a less stable U.S. job market or resulted in
cuts and lay offs
• The jobs most often off shored included programming/data processing, tech support, customer
service, software/systems developer and database design/development

Companies are not investing in employees

• 64% of IT workers said their employers do not offer adequate training on the latest technologies
and programming languages
• What’s more, 87% questioned whether they had the time, money and resources to independently
obtain needed training
• A strong majority of IT workers believed that demand for highly educated workers will increase in
the future and that specialized training will be critical to success in the industry
• Perhaps incongruently, however, 42% said demand at their company would stay the same, and
16% said demand at their company would decrease

High-Tech Workers Demand a Political Response to Off Shoring
----------------------------------

• More than two thirds (69%) of respondents supported legislation that would require customer
service representatives to identify the city and country in which they are located
• An overwhelming majority (84%) also supported legislation to enhance unemployment benefits to
workers whose jobs had been off shored
• Nearly three quarters (73%) did not think there is a need for the H1-B program, which enables
companies to bring in foreign professionals to fill jobs in the event that American labor cannot be
found, and 81% supported legislation to place restrictions on the program
• In a similar vein, 86% of respondents supported legislation requiring government IT-contract work to
be performed by U.S. workers and 71% supported legislation requiring companies to inform local
officials if they plan to use U.S. workers to train foreign replacements

An Emerging Constituency
----------------------------------

IT workers are just beginning to self-identify as a group with common interests. While IT workers are far
from homogeneous, their influence as a constituency can only grow stronger.

IT workers are well educated and have financial means

• 68% have a college degree or higher
• 54% are between the ages of 18 and 44
• 49% have yearly salaries between $75,000 and $125,000

IT workers are found all across the ideological spectrum

• 26% identified themselves as Democrats
• 32% identified themselves as Independent
• 41% identified themselves as Republican

IT workers vote

• The vast majority (91%) of IT workers are registered to vote
• 87% said they vote in most or every election
About This Survey
----------------------------------
In December 2003, the Washington Alliance of Technology Workers (WashTech) commissioned a
410-respondent national Web survey of technology workers. The survey was conducted by The
Evans/McDonough Company. The survey was checked to ensure proportional representation of technology
workers geographically and demographically in the United States, using U.S. Bureau and Labor Statistics
reports, U.S. Census information, and prior research on technology workers available to the public.

http://www.washtech.org/wt/report/WashTech_Survey.pdf

ironchef82

02-22-2004 08:04 AM

Outsourcing is the cover story for TIME magazine this week. I'd link to it but for the time being it's only available online to subscribers... this should change tomorrow I think.

Astrocloud

03-04-2004 11:20 AM

Hooray!

http://sanjose.bizjournals.com/sanjo...1/daily35.html

Quote:

Anti-offshoring bill lacks Silicon Valley support

A proposal to discourage U.S. companies from sending jobs to cheaper labor markets overseas has yet to see support from Silicon Valley's three members of Congress, Reps. Mike Honda, D-San Jose, Zoe Lofgren, D-San Jose and Anna Eshoo, D-Palo Alto.

Aides said to Reps. Honda and Eshoo said they were not familiar with the legislation.

"Congresswoman Lofgren has not yet read the bill and will not take action dealing with outsourcing until a report from the General Accounting Office is presented," says a spokeswoman for Ms. Lofgren. The GAO is investigating how extensive job outsourcing has become and its impact on the U.S. economy.

Since the peak of the high-tech boom in 2000, Silicon Valley has lost more than 200,000 jobs. It has never been determined how many of those jobs were sent to India, China and other overseas locations where highly educated work forces will toil for a fraction of what American workers will accept.

The legislation by Rep. Bernie Sanders, Ind.-Vt., would bar companies from receiving federal grants, loans and loan guarantees if they lay off a greater percentage of workers in the United States than they lay off in other countries.

"In my view, it is an insult to the middle class of this country, that American taxpayer dollars are being used to provide loans, loan guarantees, grants, tax breaks and subsidies to huge and profitable corporations who then say to the American people: 'Thanks for the welfare, chumps. But we're closing your plant and taking your job to China," Mr. Sanders says in a written statement.

Rep. Pete Stark, D-Fremont, has signed on as a co-sponsor of the legislation, dubbed the Defending American Jobs Act of 2004.

"The idea that in this tough economy an American corporation can lay off thousands of employees, move those jobs overseas and still collect fat subsidies from the taxpayers is not only irresponsible, it's obscene," Mr. Stark says in a written statement.

The congressman cites a recent study by the Haas School of Business at the University of California, Berkeley, which says 14 million white-collar service jobs, most notably in the information technology sector, are in imminent danger of being outsourced to other countries. This constitutes 11 percent of Americans working today in non-farm payroll jobs.

"There are strong signs that the economy isn't done hemorrhaging jobs," Mr. Stark says. "We've shed 3 million good-paying manufacturing jobs in just the past three years. Just around the corner, we could see an estimated 14 million more jobs outsourced overseas, mostly in the high-paying technology sector. That kind of job loss would be staggering."

Mr. Stark was joined by Reps. Barbara Lee, D-Oakland, and Lynn Woolsey, D-Petaluma and 48 other members of Congress in endorsing the proposal.

In February, N. Gregory Mankiw, the chairman of the White House Council of Economic Advisers, stirred controversy when he told reporters: "Outsourcing is just a new way of doing international trade. More things are tradable than were tradable in the past, and that's a good thing."

And therein lies Silicon Valley's future, says job outplacement expert John Challenger, chief executive officer of Challenger, Gray & Christmas Inc. He says American small business -- the nation's largest creator of new jobs over the last decade -- may become the largest outsourcer of jobs to foreign countries.

"It is a matter of survival for these firms, especially those in the information technology sector where the company's highest costs can be payroll. One venture capitalist even told our researchers that it would be virtually impossible to start a new IT or software company in Silicon Valley without offshore outsourcing," Mr. Challenger says.

© 2004 American City Business Journals Inc.

Yakk	03-04-2004 12:05 PM

How about an option
"I am a cheap source of foreign labour. All your jobs are belong to me."
?

=)

RelaX

03-04-2004 12:12 PM

But what about Europe?
I haven't heard anything about outsourcing over here, is it because of a difference in legislation or something like that?

Cynthetiq

03-04-2004 01:38 PM

Quote:

Originally posted by RelaX
But what about Europe?
I haven't heard anything about outsourcing over here, is it because of a difference in legislation or something like that?

EU rules. Most call centers are in Ireland from what I understand.

Astrocloud

03-05-2004 08:42 PM

Quote:

Reuters' Offshore "Experiment"
Global Managing Editor David Schlesinger talks about why the news service is hiring reporters in Bangalore to cover U.S. companies

Now you can add journalist to the growing list of white-collar jobs -- along with radiologist, animator, and Wall Street analyst -- that can be outsourced overseas. Reuters, the British news agency that employs some 2,400 journalists and photographers around the globe, said last month that it would hire six journalists in Bangalore, India, to cover news on small- and mid-cap U.S. companies.

Technically, it isn't outsourcing, which involves handing off work to another company, says David Schlesinger, Reuters' global managing editor, who's based in New York. The Bangalore scribes will be Reuters employees with Reuters training. Even so, under what the company is calling a pilot program, they'll be doing something unusual in a news organization: Covering U.S. companies from a distant shore. Mainly, it will be grunt work -- writing routine financial news stories from corporate press releases.

It may seem a bit odd that a profession that's already known for modest pay -- trust me, the multimillion-dollar contracts of TV news personalities such Barbara Walters are the exception -- is the latest to be shipped to a low-wage country. But thanks to union agreements, Reuters journalists in the U.S. make a decent living. An entry-level reporter in New York can earn about $58,000 a year, says Peter Szekely, chairman of the Reuters unit of the Newspaper Guild of New York.

"A LOT OF ANXIETY." With Reuters striving to trim $1.6 billion in costs by 2006 vs. what it spent 2000, there's no doubt that it likes the idea of paying Indian-size wages. Archrival Bloomberg has overtaken Reuters in the highly profitable business of selling financial-data terminals used by traders and other financial professionals (see BW Int'l Cover Story, 2/9/04, "Rescuing Reuters"). And as part of its cost-cutting, Reuters is already moving technical jobs to Bangalore and software positions to Bangkok.

Talk that Reuters could some day expand its Bangalore news operation has made its reporting ranks nervous about job security, Szekely says. "There's a lot of anxiety as a result of this," he adds. Reuters responds by saying it'll always need plenty of journalists on the ground in the U.S. and elsewhere around the world to gather news that can't be obtained from a press release.

Although Reuters isn't a U.S. company, it's now likely to be drawn into the debate on overseas outsourcing, which is shaping up as a Presidential campaign issue. The wire agency's initiative could even end up influencing coverage of the subject, as its employees worry that their jobs could one day be at risk.

more:

http://www.businessweek.com/bwdaily/...9957_db053.htm

Astrocloud

04-18-2004 01:04 PM

A Finance Professor Speaks on the Subject.

http://money.cnn.com/2004/03/11/comm...obbs/index.htm

Quote:

[source=6]Answers on Outsourcing[/size]
A finance professor argues against placing blind faith in outsourcing. His views follow.
March 12, 2004: 8:18 AM EST
By Rory L. Terry

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.

Our labor force is not better trained, harder working, or more innovative than our foreign competitors. The argument that we will create new jobs in highly paying fields simply is not true. We have no comparative advantage or superiority in innovation. To assume that we are inherently more creative than our foreign competitors is both arrogant and naive. We are currently empowering our competition with the resources to innovate equally as well as we. 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.

Most of our best, high-paying jobs can be exported.

1. doctors (even surgeons)

2. mathematicians

3. accountants

4. financial analysts

5. engineers

6. computer programmers

7. architects

8. physicists

9. chemists

10. biologists

11. researchers of all types

Our trading problem is an externality

An externality exists in economics any time there is a separation of costs and benefits, and the decision maker does not have to incur the full cost but receives the full benefits of the decision. The fact is, there is no economic force, no supply and demand equilibrium, no rational decision process of either business or consumer, that will make an externality go away. Classic examples of externalities are when a business dumps toxic waste into a nearby river and the downstream residents incur the costs of cancer. The business is able to lower its costs and pass those lower costs on to its customers, and never pay for the treatment of the cancer patients. We have laws in this country against dumping and pollution because they are externalities -- they require a legislative solution.

Cost reductions and other benefits provide a strong incentive to outsource jobs. A company that decides to move its production overseas cuts its costs in many ways, including the following:

1. Extremely low wage rates

2. The circumvention or avoidance of organized labor

3. No Social Security or Medicare benefit payments

4. No federal or state unemployment tax

5. No health benefits for workers

6. No child labor laws

7. No OSHA or EPA costs or restrictions

8. No worker retirement benefits or pension costs

Besides cutting costs, there are other benefits to exporting jobs, including the following:

1. Tax incentives provided by our government

2. Incentives from foreign governments

3. The creation of new international markets for the company's products (which ultimately empowers the company to turn a deaf ear to this country's problems and influence)

4. The continued benefits of our legal system and the freedoms that we provide

The net effect of all of this is lower costs, higher revenue, higher profits, higher stock prices, bonuses for management, and the creation of wealth for a subclass that benefits from low taxes at the expense of the rest of us.

The costs of the decision to outsource are not borne by the decision maker. As a society and as a country, we experience many costs from outsourcing, including the loss of jobs, social costs, higher costs of raw materials and loss of national sovereignty. Loss of jobs reduces the tax base, creates high unemployment benefit costs, and raises the cost of government retraining programs. Displaced, unemployed workers have higher rates of child and spousal abuse, alcoholism, bankruptcy, divorce, etc. As China and India and other large populations grow, they demand huge quantities of oil, gas, steel and other basic raw materials. These costs are born by all of us -- every time we fill our gas tanks, for example. And as a nation, we lose our ability to make independent decisions that are in our best interest when we are dependent on foreign debt and foreign manufacturing. This is a classic externality.

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Rory L. Terry is an associate professor of Finance at Fort Hays State University

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