“The result (of outsourcing) is more American jobs, higher wages and a faster growing economy overall… Global sourcing continues to be a net positive for American workers and the US economy” – so said Harris N. Miller, president of Information Technology Association of America in 2005.
Look at the contradiction now. Here is what Mr. Barack Obama, the democratic presidential hopeful had to say about outsourcing recently. “Number one, we still provide tax breaks to companies that are sending jobs overseas. Let’s put an end to that practice. We may not be able to stop a company from moving, but we can stop from providing him incentives to move”!
Now this is what I call the heights of ignorance by Mr.Obama.
Lets get the facts straight first. First of all, US companies are NOT doing any favor to India by outsourcing their jobs here. Its a straightforward business compulsion which every company has to face due to the increased competition as a result of globalisation.
Its strange to observe that on the one hand the US doesnt wants developing economies like India to provide any subsidies to their farmers (to face US competition), it wants India to open up its markets even wider for American companies, and at the same time they want to discourage American companies from outsourcing their jobs to India! Come on Mr. Obama, you cant have it both ways, can you? :)
The allegation against outsourcing in America and Europe is that it results in a job loss in the outsourcing countries with the jobs moving into the outsourced countries.
Yes of course, thats the very basic definition of outsourcing.
But then the question is does outsourcing result in a net job loss ? Of course not. The jobs that are outsourced from US to India indeed come back to US in a bigger mangnitude.
Let me first give our own Indian example. Initially when the computers came to India in the 1980s people protested saying, if computers start doing stuff like accounting, automated data entry etc, then the Indians will be losing millions of jobs. Did they lose? Yes. But at the same time alternate jobs got created in the form of computer programmers, hardware industry, software industry, computer opertors, IT divisions, computer training institutes, computer lecturers etc!! So there was no real truth in the allegation that computers would create a massive job loss. Just the nature of the jobs changed, that was it.
Similarly, when it comes to US and european outsourcing to India, outsourcing enables the American companies to reduce their manufacturing costs. Reduced costs mean less expensive products and services at the same quality, which in turn means ability to enter even bigger growing markets like that of India.
Because of outsourcing more jobs were created in India, in turn this created a booming economy and an increased buying power in India, and this not only reduced manufacturing costs for American companies but also gave them access to a bigger market inside India since even Indians started buying American products because of their increased purchasing power! Which in turn created more job opportunities within US too! A study conducted by Global Insight showed that in 2005 alone 257,042 net new jobs were created in US due to outsourcing! Look at the growing presence of american companies in the Indian market today.
Those who want to stop outsourcing should also stop their companies from entering the markets of India. Can they? :) While the entire American population is just over 300 million, in India just the number of youth who are below the age of 25 is over 550 million, and the country is growing younger day by day! Who is benefiting from the widening buyer base of this Indian youth? Of course companies from all over the world including US and Europe which are entering this market. Look at the growing number of American companies that are entering India every day. Automobiles, mobiles, retail, hardware, software, soft drinks, fast food, you name the sector and there are multinational companies in India in that sector. Doesnt this simply mean more jobs in America and Europe too?
Now you obviously cant expect US companies to do manufacturing in US and sell those products in India. Having a plant in India instead would be more cost efficient allowing them to compete with companies within India as well as from other countries.
The U.S. imports goods which would have been expensive to produce locally inside US, and then the US companies manufacture and sell commodities to other countries (which would have been expensive to manufacture in those other countries). So, it is a win win situation for both the parties. Isnt it?
Many wrongly assume that outsourcing is cheaper. Well, there is a difference between being cheap and inexpensive. For instance, Chinese toys are cheap , but Indian IT services are inexpensive. When its cheap, the quality suffers, and when it is inexpensive it doesnt. Obviously when Microsoft or Google outsource to India, they dont want the quality of their products/services to suffer! Isnt it?
Its surprising that Mr.Obama is not aware of all these facts, and in that case it is also sad that he is one of the presidential hopefuls! For if you dont understand the basics of today’s global economy, then you are bound to spell disaster on your own economy. Imagine Indian general public starting to say that they want US companies out of Indian markets!
Now lets turn back to the job opportunities created directly by Indian companies in US. The Tata Group, Ranbaxy, Mahindra USA, Bharat Forge, ITC Kitchens, HCL America – all Indian companies, have created thousands of jobs in America! Tata Group alone employs over 5000 Americans! Ranbaxy is creating jobs in North Carolina, New Jersey and Florida. From Illinois alone the exports to India have more than doubled in the last four years creating more job opportunities in that state.
American firns like Federal Forge, Eight O’Clock Coffee etc that were on the verge of bankruptcy were saved by the Indian firms which acquired and revived them. What about these saved jobs by the Indian firms, Mr Obama? :)
San Francisco-based McKinsey Global Institute, an independent research group with McKinsey & Co. reported that in 2002 alone, for every dollar spent on offshoring, US derived a value of $1.47. The report also said that “For every dollar of spend offshored, offshore service providers buy an additional five cents worth of goods and services from the US economy”.
“If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.” Just imagine that if US companies do not outsource, then their costs will be higher than that of companies from other countries which do outsourcing, which in turn means reduced market share for American companies, and then these other companies will also enter US and offer services and products at rates inexpensive compared to their American counterparts, and so finally even within America the American companies will be unable to compete. And then finally, along with an existing cry against outsourcing to India, there will also be a cry in US against allowing foreign companies into US market. In other words, a demand for total international isolation in terms of doing business!
Finally a question to Mr.Obama. “What do you think would the American companies would opt for when the profits they earn by outsourcing to India is 20 times more than the profits earned by the tax breaks offered to them by the US government for not outsourcing to India? And also, where does the US government get the money from, to offer those tax breaks? Already US is the world’s larget debtor with about $30000 per head on every American citizen!”
By the way if somebody thinks that today Indians are scared of losing jobs if outsourcing is stopped, well not really, for we have both our own big companies as well as bigger market. Its the american and european companies that need access to the Indian markets. Already Indian companies are slowly reducing their dependency on american clients, so as to shield themselves from any possible US economic slowdown. Outsourcing is a one way drive, and I would love to see Obama prove me otherwise :)