The U.S. Department of Commerce reports that services to foreign clients brought Americans $131 billion in 2003. This was in addition to offshore services for U.S. customers, which grew by $7 billion.
The report shows that labor-intensive production and administrative work has grown in low-cost places, while talent sensitive activities have grown in the United States (Malachuk, 2004). This is a major benefit of outsourcing.
Weidenbaum (2005) argues that many American employees are able to keep their jobs because outsourcing allows their companies to stay competitive. Companies in higher-labor-cost economies can stay competitive and thus preserve jobs that remain (Jones, 2005). Many employees as a result will get new or better jobs because the company's financial strength has been enhanced. For example, when a company outsources upgrades for its software system, the domestic demand for basic programmers may decrease, but there will be an increased need for higher-paid systems integrators (Weidenbaum, 2005).
Because of outsourcing, IT departments are placing more emphasis on managerial experience, business process knowledge, and understanding domestic customers. The result is better jobs for Americans because "these capabilities can rarely be provided effectively from an overseas location" (p. 313). New market opportunities and cost reductions can also lead to more jobs being generated and more money available for training programs and new equipment. Companies that outsource jobs help developing countries to become new markets for goods and services, and newly affluent workers are able to buy American made products. DHL chairman Uwe Doerken, who led globalization efforts for 13 years, says offshoring benefits all consumers who can buy goods and services at more affordable prices.
The downside of outsourcing is very real people whose jobs have been lost as a result. They are truly hurting. When asked if CEOs owe any allegiance to workers in their home country, Doerken replied, "Yes. They owe them fairness when new business practices force layoffs. Social plans, outplacement assistance, transfers to other parts of the same company, etc. The same fairness is owned to all employees these companies employ in all geographies" (Jones, 2005, p. 2).
Trade Adjustment Assistance (TAA) is a government program that offers free job retraining and other benefits to workers who have lost their jobs because of foreign trade and outsourcing. For example, due to a flood of Chinese goods into the U.S. In the past ten years 827,000 American apparel and textile manufacturing jobs vanished and the remaining 489,500 workers face a bleak future. People like them can go back to school, usually to community colleges, and learn new skills, which will enable them to find rewarding employment.
TAA would help them do this. The problem is that the program is not administered well. "TAA is frequently disbursed ineffectively or not at all to workers forced into early obsolescence due to free trade, and it does nothing to address the vanishing of white-collar jobs" (Kinetz, 2005, p. 63). A full one-third of applicants are immediately turned down for assistance. An appeals court found that 42 out of 91 such cases had been rejected unfairly. Unfortunately, the Labor Department routinely takes the word of employers rather than workers, and many employers are "less than eager to admit to shipping work overseas" (p. 64). For those workers who are accepted for TAA assistance, many do not get full benefits because of funding shortfalls in the states where they live.
In fact, the unions call TAA "burial insurance." Although Department of Labor statistics reveal that 63% of last year's TAA recipients did find jobs, "on average, they took a 26% cut in pay" (p. 64). Clearly, this is unacceptable. When he was running for re-election, President Bush talked about TAA in nearly every campaign speech, preaching that retraining is the way to transform the losers of the old economy into highly skilled, high-wage earners in the new. But a job at Sam's Club, Kohl's, or Super-Wal-Mart (stores that pay $8 an hour with no benefits) is not a transformation.
Unemployed workers should not be political footballs. As President Kennedy said at the time he introduced TAA, "Those injured by [trade] competition should not be required to bear the full brunt of the impact. Rather, the burden of economic adjustment should be borne in part by the federal government...there is an obligation to render assistance to those who suffer as a result of national trade policy" (p. 63). Having said all this, it must be pointed out that outsourcing itself is not the cause of the suffering. The government's lack of effective administration of its own program, created specifically to address the issue -- its lack of commitment to helping unemployed citizens -- needs to be addressed.
Outsourcing is here to stay. The practice of sending jobs overseas is part of globalization and the worldwide shift to information technology. Through the practice of outsourcing work, employers can remain competitive by sub-contracting work to foreign workers abroad who gladly work for lower wages. Consumers reap the benefits of cheaper prices. Workers abroad in developing countries gain money to spend and become our customers. Outsourcing results in the creation of new jobs, and helps to make more money become available for training and new equipment. The jobs that disappear to other countries leave American workers with better and higher-paying jobs in the long run. Sending work to other countries has been found to benefit nearly everyone. It's a good thing.
Feldman, W. & Feldman, P. (2005). In or out? Journal of Property Management, 70 (1),…