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Old 03-30-2004, 12:27 PM   #1
Flub Man
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Default Outsourcing Results in Net U.S. Job Growth

Interesting article on outsourcing:

http://www.prnewswire.com/cgi-bin/st...2004,+01:30+PM
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Old 03-30-2004, 12:42 PM   #2
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Yes what a pity it doesnt compensate fir the NET job losses.
Very sad.
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Old 03-30-2004, 01:07 PM   #3
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Are you for real, Chit? You do know what the word "net" means, right?
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Old 03-30-2004, 01:20 PM   #4
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Indeed I do.
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Old 03-30-2004, 01:35 PM   #5
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While the numbers don't lie, the article reaches a faulty conclusion:

According to the Study, U.S. spending for offshore outsourcing of computer software and services is expected to grow at a compound annual rate of almost 26%, increasing from approximately $10 billion in 2003 to $31 billion in 2008. During the same period, total savings from the use of offshore resources will grow from $6.7 billion to $20.9 billion.
Quite a bit of money, even to corporate giants such as Microsoft and Wal-Mart. But this follows immediately afterwards:

Using offshore resources lowers costs and boosts productivity. As a result, inflation is lower, interest rates are lower, and economic activity is higher. The increased economic activity creates a wide range of new jobs, both in IT and other industries.
Companies saving money != better economy. Outcourcing increases profit margins, nothing more. What the companies decide to do with that is entirely up to them. Some companies operating in sectors with razor-thin profit margins, will simply use the cash to grow and outmaneuver the competition, hoping to corner an even larger share of the market. Other companies have enough net revenue that they have more options with the cash.

They could pay their employees more. This would benefit the economy, indirectly, as long as the pay increases were directed toward low-earning workers. Why not the high income management? They don't spend money in the same places. The 'trickle-down' theory works to such a marginalized extent that all it really is, is an excuse to give rich people more money. Think about it: does Mr. Executive gaining $2000 dollars do as much as Mr. Assembly-line-worker gaining the same $2000? Doubtful. Money given to high-income earners, tends to stay among the high-income workers, because they spend it on luxury goods, manufactured by companies who seek only to increase their profit margins. And this is assuming the company doing the outsourcing isn't one of these already!

They could hire more workers, but that's a laughable thought. Why would they do this? The whole point of outsourcing is that you can save money by hiring workers who will cost you less. You fire 1000 of your $20/hour employees and hire 1000 $3/hour employees, spending maybe $6/hour for the infrastructure to outsource. The company could expand, sure, but unless they have outsourced every job they possibly can, chances of them hiring domestic workers are low.

They could lower prices. If they are in heavy competition, this will likely happen. But, will it do as much good for the economy as the outsourcing did harm? Likely not. Cheap goods mean jack shit if you don't have a job with which to pay for them. Go on about unemployment numbers if you wish; I'm talking about undermployment. You know, IT guys forced to flip burgers. One could argue that they were overpaid, but I wonder why this doesn't apply to CEOs making $10 million or more per year. Are they somehow not overpaid, while the guy earning $120k/year doing 40 hours of IT work per week is? Does the CEO work 82 times as much (can't; there aren't 3280 hours in a week) or 82 times as hard? Some of the toughest, most grueling jobs earn minimum wage in this country, so that's not even an argument.

The most likely secnario is that the CEOs and board members, and other such upper management, will give themselves hefty payraises, as though it's a, "congratulations, you discovered you can outsource! Pat yourself on the back" prize. Shove 'trickle-down' up your ass; if the money went directly to the lower income brackets it would do a hell of a lot more good.

I read an essay about a year ago outlining why the trickle-down theory is flawed. The central argument, as I mentioned above, was that money stays in the same income level as it was earned. It fluctuates, and there is a good amount of 'liquid' income (I think was the term used) that can freely flow anywhere, but the central concept holds true. If you earn very little, you'll probably buy goods that are made by those who earn less. If you earn a lot, you'll probably buy goods made by those who earn more, or are 'luxury goods'.

I'd like to find this essay again. It was online, but I can't remember for the life of me where I found it...
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Old 03-30-2004, 04:14 PM   #6
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You are exactly right. Companies improving their profit margins are evil! They take all our money and hide it under their matresses! Everyone knows that companies that make luxury goods don't need raw materials or subcomponents from less skilled workers.

I mean it isn't like people invest money in these companies to provide for their own retirement or anything.
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Old 03-30-2004, 04:41 PM   #7
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Dont forget the extremely low prices on consumer products as a result of ourtsourcing, dvd players werent always 25 dollars.
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Old 03-30-2004, 04:58 PM   #8
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Lol, can't say for certain but I'm fairly sure DVD players were never produced on a significant scale here even when they first came out: most electronics manufacturing had been shipped to Asia long before DVDs hit the mainstream.

I'm always puzzled by working class people who are ok with outsourcing. You're not some ivory tower academic economist who can afford to play theoretical games with these numbers for intellectual exercise- these are your jobs in jeopardy. I guess I can trust you won't complain when some guy in New Delhi or Beijing is doing your job for nickels to the dollar?
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Old 03-30-2004, 05:17 PM   #9
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I was just using DvDs as an example. 3 years ago could you buy a 5 megapixel major namebrand digicam for under 180 dollars? or a top of the line VCR for under 100?
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Old 03-30-2004, 05:26 PM   #10
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Outsourcing also provides Americanization of other countries.
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Old 04-01-2004, 03:37 AM   #11
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I mean it isn't like people invest money in these companies to provide for their own retirement or anything.
Your whole post makes a good point, but it misses fundamentally the entire argument: outsourcing does not benefit the economy as a whole. What good is an investment if you don't have a job earning money to invest in the first place? The wealthy benefit, but everyone else gets screwed.

Outsourcing also provides Americanization of other countries.
Because this is such a good thing...
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Old 04-01-2004, 04:03 AM   #12
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The wealthy benefit, but everyone else gets screwed.
Gotta love these numbers, 3% of all US jobs are outsourced? Is the other 97% of america considered wealthy? Who got screwed?
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Old 04-01-2004, 04:16 AM   #13
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Well, maybe DVD players is a bad example, but let's look at computers. Dell Computers are based in Texas, but I've seen a lot of "Made in Malaysia" stickers on their products, which are usually pretty cheap, compared to what you used to have to pay for a PC. I know the school district where I work benefits greatly from this, as we have at least one PC in every single classroom, with some schools that have as many as 5 in each room (not counting labs).
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Old 04-01-2004, 06:08 AM   #14
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A good example. I am in the construction business. We had a vendor in yesterday in the insulation business. He was talking about how the insulation (asbestos) union goes on strike today for more money. Keep in mind they already make about $24.37 an hour and thats not top pay. I believe that's Journeyman level. He's got all this work and his workers are going on strike. He said he's not to worried though because he has about 60 hispanics coming in from Virginia to help him out.
These hispanics work for a insulation company in Virginia and the company in VA is slow right now so it worked out great. It keeps the company in VA from having to lay off these 60 guys.

I know this isn't outsourcing in the sense of sending jobs overseas, but it's the same principal. If Americans would stop being so greedy, companys wouldn't be forced to send their business overseas.

If I was a business owner, I would be all for "America First", until the point in time the American workers were trying to screw me so bad that:
#1 I had to bid so high because of their wages that I never got any work or
#2 I was paying out so much in wages that I wasn't making any profit.
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Old 04-01-2004, 06:28 AM   #15
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If Americans would stop being so greedy, companys wouldn't be forced to send their business overseas.
This could be aimed at the CEOs. If they weren't so greedy,, they wouldn't be trying to increase their profit margin as much, requiring that they outsource to and keep wages down.
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Old 04-01-2004, 06:48 AM   #16
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Because this is such a good thing...
It is if your American, and I suspect it's not bad for the county too.

Say an foreign county starts making a boom in profits. If that county is Americanized then they most likely buy from American stores so we also celebrate in their boom in profits. If one country rises we rise with them, which in turn will keep us on top.

Of course that is a very elementary way of looking at it, there is a hell of a lot more depth to it.
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Old 04-01-2004, 07:11 AM   #17
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Maybe I'm being naive. But many of the call centres over here, insurance companies, telephone directory services, catalogue firms etc are outsourcing to India.

This has caused thousands of jobs to be axed, and in turn that means more people living off benefits, which is paid for by those of us that work.

It's not made people's lives any better, catalogue goods haven't fallen in price, getting a phone number from Directory Enquiries still costs me as much as it did before, my insurance premium hasn't dropped. It's made no appreciable difference to anyone in the UK other then those thousands of people who were laid off.

I suspect as more people claim benefit and the country gets into more debt our taxes will go up to pay for them.

I'm not arguing this, but I'd really like you to explain because I do not understand.

So outsourcing hasn't helped the UK. I don't see how it can help the US either.
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Old 04-01-2004, 07:25 AM   #18
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It's the way of the future. There is nothing really you can do to prevent it. You can slow it down maybe, but risk hurting yourself doing so.

The same thing happened with the invention of the steam engine. Read up on John Henry
Here is the main quote

Steel-drivin' men like John Henry used large hammers and stakes to pound holes into the rock, which were then filled with explosives that would blast a cavity deeper and deeper into the mountain. In the folk ballads, the central event took place under such conditions. Eager to reduce costs and speed up progress, some tunnel engineers were using steam drills to power their way into the rock. According to some accounts, on hearing of the machine, John Henry challenged the steam drill to a contest. He won, but died of exhaustion, his life cut short by his own superhuman effort.
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Old 04-01-2004, 08:36 AM   #19
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Yeah, but steam drills have been shown to work. I've yet to see an example where outsourcing doesn't hurt people in both the long and short term.
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Old 04-01-2004, 07:57 PM   #20
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Heh did you even read Flub's article?
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Old 04-01-2004, 08:12 PM   #21
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Dont forget the extremely low prices on consumer products as a result of ourtsourcing, dvd players werent always 25 dollars.
So please explain to me how cheaper goods which equal less money into the economy helps create jobs in the US?
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Old 04-01-2004, 10:27 PM   #22
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So please explain to me how cheaper goods which equal less money into the economy helps create jobs in the US?
Well, goods with an elasticity > 1 can create a higher percentage demand than a percentage drop in price. So in those cases it would increase the money into the economy and increase the labor/resources required to create more goods.
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Old 04-01-2004, 10:49 PM   #23
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I have to disagree with you on this.
How many more DVD players can be sold at 20% of the cost of two years ago that would pour the same amount of money into our economy.
To begin with if a DVD player is selling for 25 and it used to be 125 then you need to sell 5 times as many DVD players. Next, that money doesn't come to pay American workers, thus generating more jobs overseas to meet any future demands. When you have deflation which is what the argument is for this, you take money out of the economy.
Is this good for the economy? It helps businesses grow, but encourages them to hire out of the US as their profits keep rising from doing such things.

The original argument for outsourcing was that the jobs going out would be replaced with higher tech jobs. In other words, the manufacturing jobs would be replaced with the higher tech jobs that helped create the goods being manufactured. Now that is no longer possible as there are not any jobs above the high tech jobs to replace them.
The study that outsourcing was good was advocated by the high tech industry. Go figure, they are the ones that profit by outsourcing.
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Old 04-02-2004, 12:53 AM   #24
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Yes I read it. Could have benefited from a few more hits on the enter key but I still dont buy it.

I wonder if the people looking for IT work, which is now harder then before, believe it to be true. So the work is outsourced and you get lots of people abroad earning more money. To benefit the economy you rely on those people reinvesting in your own goods and the truth of the matter is that this is not always the case.

Even if the money comes into your economy it creates a higher profit margin which is not passed on to the average guy on the street. Sure in theory it sounds great that more money is in your the economy but it's never converted to real terms, as in how much person a has in his pockets.
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Old 04-02-2004, 01:02 AM   #25
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I was just really answering your question that it can happen, and not trying to get in the debate/taking sides... but I'll add a little something along with it. Also realize that the money a consumer saves, on a dvd-player for example, is spent on other products. People generally have a certain amount of wealth in which they will spend, it's not as if most people turn around the put the money they saved into actual savings.

So the fact that they can get certian goods at lower prices means they will pour that savings into other goods, which helps that sector.
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