Economics of Outsourcing

Data

Exporting America
Outsourcing the American Dream
U.S. Company Resists Job Outsourcing Trend
India's Prime Minister Defends Outsourcing
How Offshoring to China Saved the Day at DuPont
History May Offer a Solution to the Outsourcing Dilemma

Exporting America

Excerpts from the book by Lou Dobbs

"In Syracuse, New York, Carrier, the maker of air-conditioning and heating units, is closing two of its most productive and profitable factories and laying off 1,200 workers. Most of those jobs are headed to Singapore and Malaysia."

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Maytag decided to close its Galesburg factory and move much of the work to a new refrigerator manufacturing plant in Reynosa, Mexico. None of the American jobs are slated to be transferred - all 1,600 are scheduled to be laid off. Employees who made $15 an hour are being replaced by Mexican workers who earn less than $1 an hour."

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Clintwood, Virginia, has a population of 1,800. It's not a big town, but 250 of its best jobs are in the process of being outsourced to India. Online travel service Travelocity is shutting down its call center here. Workers at Travelocity made a starting wage of $8 an hour, plus training and benefits. But Travelocity lost $55 million last year and was looking to cut costs fast. It decided it could save $10 million by moving its Clintwood call center to India."

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The people of Celina, Tennessee, have experienced firsthand the cost of free trade. Twelve hundred people once worked in the town's OshKosh plant in Celina. Now only fifteen do. The rest of those jobs were sent out of the country, to Mexico and Honduras. Some of the company's employees had worked at OshKosh for three decades. But with OshKosh gone, the unemployment rate in Celina is 15.5 percent, and its per capita income has fallen to $13,000."

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If you look at every one of these companies, industries, towns, and communities, outsourcing has far-reaching and devastating effects across all aspects of our society. Yet there is still one more insidious element: the growing multibillion-dollar industry made up of companies that are actually getting paid to help other companies outsource their businesses. Many of the companies exporting American jobs to cheap foreign labor markets are not doing it by themselves, and there are a lot of consultants anxious to help."

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Outsourcing the American Dream

By George J. Bryjak

"Economists Ashok Bardhan and Cynthia Kroll of the University of California at Berkeley estimate that in July 2003 between 25,000 and 30,000 IT (information technology) positions were outsourced to India. According to the Bureau of Vital Statistics, since 2001 'more than 500,000 people in IT professions in the United States have lost their jobs.'"

" Some outsourcing advocates contend that shipping jobs overseas is a way of redistributing wealth from rich to poor countries, a potent mechanism for creating a democracy-oriented middle-class in developing countries. However, the reality of the situation belies such 'noble' intentions. Between the late 1970s and late 1990s, the CEO to workers salary-ratio in the nation's top 100 corporations increased from 47 to 1, to approximately 1,000 to 1. "

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U.S. Company Resists Job Outsourcing Trend

Los Angeles, May 14, 2005

"The company has 1,600 people sewing, working three shifts a day, finishing a T-shirt or sweatshirt every 11 seconds. It's the kind of thing that strikes fear in the hearts of Americans who could lose their jobs to foreign workers.

But this is not a sweatshop in Honduras. This is America - downtown Los Angeles. "

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India's Prime Minister Defends Outsourcing

March 12, 2004

"Seeking to cut costs, companies from the United States and other Western countries have hired about 170,000 workers in India over the past few years for jobs such as payroll accounting, telemarketing, and customer-support services. The figure is expected to reach 1.1 million by 2008, industry groups say.

'Outsourcing makes businesses more competitive, increasing their exports and their profits and placing more investment surpluses in their hands which can be deployed to make more jobs,' Vajpayee said. "

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How Offshoring to China Saved the Day at DuPont

By Beth Ellyn Rosenthal

"DuPont was in a bind. It outsourced the creation of an online fabric database for retailers and apparel manufacturers. Its first supplier failed."


"But the company couldn't delay its Online Fabric Library because the CEO had sent letters to thousands of companies announcing the system would go live by a certain date. 'There was a lot of internal pressure to deliver because this project had a lot of visibility,' says Mike Keating, Partner, Freeborders, the supplier who saved the day by stepping in and delivering the project three weeks early.


Freeborders's secret: offshoring to China."

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History May Offer a Solution to the Outsourcing Dilemma

By Bob Davis From the Wall Street Journal

"What could be a more modern dilemma? High-speed data links allow employers to ship white-collar jobs from rich countries to India, China and other nations where workers earn far less.

Yet losing skilled jobs to low-wage foreign competition is as old as the Industrial Revolution."

"As Americans grapple with the fallout of shipping hundreds of thousands of jobs overseas, history echoes with many similar episodes -- and lessons. Trade and technology can boost living standards for many people, by creating lower-priced goods. But those same forces can destroy skilled jobs that workers thought never would be threatened."

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