Offshoring U.S. Jobs

[Tmy]

You know who should get more flack for outsourceing work. HOLLYWOOD! DO they bother to make movies in the US anymore?

That Kurt Russel movie thats coming out, the one about the Miracle on Ice US Gold metal Hockey Team from the 80 Olympics. THEY FILMED IT IN CANADA!!!! A patriotic film about events that happened in New york, and they film it in Canada!! Im calling for a boycott.

Do you think Bill Orielly will join me. On one hand he can pickon hollywood, on the other hand that means attacking big business..


I know everyone will blame the unions but at a time when movies are making record money lets not forget the greed factor.

 

[Luke T.]

For a company to continue to survive, they must have continuous growth. That means they must find ways to sell more of their stuff to more people. And since they must sell more stuff, they have to make more stuff, and therefore have to hire more employees. Just because a company opens up a new manufacturing location somewhere doesn't automatically equate to a loss of jobs in that company elsewhere. At worst, it means a lack of growth in jobs at the old location.

 

[dsm]

Yeah it's quite large but the profit margins have not changed all that much even though according to your theories they should be astronomical.

Come again? How have I suggested that they should be astronomical?

 

[dsm]

Because in the case of Intel in Ireland no extra staff were hired as people were being laid off in the US. In fact investment in Intel's Irish operation (I live three miles from there and share a house with one of their employess) stalled, although IIRC there were no lay-offs.

Outsourcing to India and the like is a major talking point here too, since Ireland itself benefited from being a low cost location attractive to US multinationals, and there are fears that we'd now be the ones to lose out to low-cost countries. The multinationals are quick to point out that they've made major investments in their Irish operations and won't be going anywhere. I can see their reasoning. If Intel were to move their Irish operation to India, I doubt very few of their Irish staff would follow. Keep in mind that they've been in these parts for the best part of a decade, so their operation is by now established and efficient. Any move to India would entail quite a bit of downtime, as staff would have to be trained in and facilities set up. I'd imagine that the cost of shutting down an established operation and setting it up again from scratch somewhere else would be prohibitively expensive.

Hmmm. Remember that you're dealing with a company that invests billions annually on new factories (and the like) to build the next new chip(s) using new technologies. They don't have to move out of Ireland tomorrow (as they didn't in Silicon Valley). Instead, if they decide Ireland has become too expensive, they can simply ramp down operations in Ireland to minimal levels as they build new factories elsewhere. For a company the size of Intel, the ramp down operation need not take more than a few years.

 

[Grammatron]

Come again? How have I suggested that they should be astronomical?

Well I believe the claim here is that companies hire cheaper labor to do the same job because they are greedy. One would expect it to make an impression on their profit margins.

 

[Ladyhawk]

Let's say that you are correct and corporations are in control. How would you explain the problems they are having? After all, they're not exactly raking it in right now. After all, if you take away jobs from Americans and Americans are the biggest consumers you destroy your biggest consumer market. Unless of course you mean to say that corporations are stupid and did not see it but are able to run the world.

This has been exactly my battle cry against outsourcing for some time! Corporations aren't stupid...they're GREEDY, boys and girls...very GREEDY. It is, as others have noted, a short term solution. Curiously enough, someone handed me an article the other day from Information Technology magazine, Jan 04 edition, I believe. (I have to find it...) Actually, it's rather ironic since it cites companies in India who are now outsourcing the IT work the US gives them and, apparently these India based companies have wised up and are already starting to charge US corporations more......

I can also tell you, working for a major IT solutions company on the healthcare software side that our experiments with outsourcing basic programming to India based companies has been nothing short of a disaster, so far. We've had some other experiences with outsourcing to Malaysia and that has been even WORSE!!!

 

[Thanz]

That Kurt Russel movie thats coming out, the one about the Miracle on Ice US Gold metal Hockey Team from the 80 Olympics. THEY FILMED IT IN CANADA!!!! A patriotic film about events that happened in New york, and they film it in Canada!! Im calling for a boycott.

Filming a hockey movie anywhere other than Canada is sacrilege. The reason it was so cheap to film is that they don't have to pay for any extras. All the extra players do it for ice time, and the crowd gets to see some free hockey.

anyway.....

I hope that there is no boycott. I like seeing things like Sean William Scott explain to Chow Yun Fat that "This is America!!" when they are clearly standing in the middle of the square in front of Toronto's city hall.

 

[dsm]

Well I believe the claim here is that companies hire cheaper labor to do the same job because they are greedy. One would expect it to make an impression on their profit margins.

"Cheaper labor" making "an impression on their profit margins" does not necessarily equate to "astronomical" profits. It may simply be enough to keep them in business.



(Edited to remove fallacy reference -- I always get them wrong.)

 

[Grammatron]

"Cheaper labor" making "an impression on their profit margins" does not necessarily equate to "astronomical" profits. It may simply be enough to keep them in business.



(Edited to remove fallacy reference -- I always get them wrong.)

We can go in circles like this forever. My point is yes, corporations try to make profits (show me a business that doesn't). But their goals are not all that cynical, which is make a product which manufacturing coasts are as small as possible compared to production and marketing coasts. Corporations have been going to cheaper labor markets ever since they could -- which I believe is late 70's though I could be wrong -- and yet average person in USA has been getting richer not poorer.


P.S. As far as greedy CEOs go, I compared them to the likes of Carnegie, Rockefeller and Ford and none even come close to comparing with them.

 

[billydkid]

Well

More important: where are all those who just cannot stop praising the virtues of capitalism?

I look at it this way - in spite of being libertarian I find the notion of a world economy very scarey. It is not very far off from a world government. I believe in nationalism. I believe in free trade throughout the world. On the other hand, I believe corporations ought to be located someplace. I you want to be an American company, then be one. Don't be beholden to the rest of the world. There are many benefits to being an American based company. With that should come a certain amount of responsibility.

There is nothing wrong with capitalism. This is not really a capitalist issue. I believe companies should have a citizenship. What happens if there is a war with a country in which an "American" company has billions of dollars invested? I do not believe that free trade is at all synonymous with being able to ship your jobs overseas for the cheapest labor. I do not in anyway see how a company can be an American company and have a significant part of its workforce residing in and being citizens of a foreign country. Taken to its logical conclusion all "American" companies could consist of a handful of top tier executives living in America while their entire workforce lives in China or India. For American workers of all stripes this bodes very badly in my opinion. If you don't want to be American, then don't be American, but don't pretend you're an American company and send all your jobs overseas. In twenty years all of us Americans will be working at Walmarts and Jiffy Stops at this rate.

 

[WildCat]

Right here.

Dean is an economic illiterate and a danger to the US.

This shows all the signs of a healthy functioning economy. Something laypeople like yourself really need to learn from economists is that the decline of industries is a central part of process that increases incomes and prosperity over time.


Just as an historical tidbit. Did you know what kept you great great great grandparents awake at night? It was the threat that that upstart young America was "stealing jobs" and something had to be done.

Oh dear.

Drooper, you are right on! Dean and the rest of the Dems really scare me when it comes to economics. All apparently believe it is a zero sum game, for every winner there must be a loser. They rail on and on about losing jobs overseas, with the implication that protectionist trade practices will solve all these problems. Actually, it will make it much worse. Take the recent Bush steel tarrifs for example - for every steel-producing job it saved 10 were lost in industries that used steel. Sugar is another example of protectionist policies costing jobs, especially here in Chicago which has a large number of candy manufacturers. One by one they're closing and going to Mexico or Canada, and the primary reason is the cheaper price, not of labor but of sugar. Just last week Fanny May announced the closing of their plant on the west side, and the loss of the 650 jobs it provided. All to protect a few sugar producers with political influence. Even Mayor Daley (a Democrat) saw the light and denounced the sugar trade barriers.

Free trade benefits all parties involved, it may cost a few jobs in the short term but produces much larger but less visible benefits down the road. It's not at all surprising to me that the Irish posters on this board understand that, given that they've had protectionism and free markets back to back and can see the results of both clearly. Ireland is even trying to bring emigrants back to Ireland because there are not enough workers for the jobs, I know a few sons and daughters of Irish immigrants who have been granted Irish citizenship as part of this effort. No one I know has moved there yet though.

 

[Luke T.]

Hmmm. Remember that you're dealing with a company that invests billions annually on new factories (and the like) to build the next new chip(s) using new technologies. They don't have to move out of Ireland tomorrow (as they didn't in Silicon Valley). Instead, if they decide Ireland has become too expensive, they can simply ramp down operations in Ireland to minimal levels as they build new factories elsewhere. For a company the size of Intel, the ramp down operation need not take more than a few years.

Intel fabs have a life expectancy of about ten years. Then they build a new one. There were rumors the fab I worked at was paid for in one month of operation.

The infrastructure necessary for an Intel fab is one of the strictest. And so is the skill level required.

 

[RussDill]

Intel fabs have a life expectancy of about ten years. Then they build a new one. There were rumors the fab I worked at was paid for in one month of operation.

The infrastructure necessary for an Intel fab is one of the strictest. And so is the skill level required.

The Intel fabs here in phoenix have been operational for longer than 10 years, they recently did an upgrade on one of them. Everyone complains about outsourcing, but phoenix sure seems to be a popular location (avnet, microchip, on, motorola, intel, sumitomo, etc, etc). Might have something to do with the low cost of living.

 

[Luke T.]

The Intel fabs here in phoenix have been operational for longer than 10 years, they recently did an upgrade on one of them. Everyone complains about outsourcing, but phoenix sure seems to be a popular location (avnet, microchip, on, motorola, intel, sumitomo, etc, etc). Might have something to do with the low cost of living.

Yeah, they have one that is over 10 years old here, but it is really limping along. It has mostly been gutted.

 

[Zep]

Re: Well

This is a good post to respond to, so let me just insert some comments in it.

There is nothing wrong with capitalism. This is not really a capitalist issue.

Disagree. Ultimately, the goal of ANY company, anywhere in the world, as Gramma has said, is to remain profitable. That means it needs to trade, which leads inevitably to the issue of capitalism.

I believe companies should have a citizenship.

Alas, most multi-national American companies don't agree.

What happens if there is a war with a country in which an "American" company has billions of dollars invested?

They get "nationalised" by the other country, tossed out, or they appeal to the US government in the name of "patriotism" to help or bail them out in some way. The choice depends on the size, type of industry and government commitment. Aside: In a small, low-interference government situation as espoused by Libertarians, these companies MAY be left to fend for themselves.

I do not believe that free trade is at all synonymous with being able to ship your jobs overseas for the cheapest labor. I do not in anyway see how a company can be an American company and have a significant part of its workforce residing in and being citizens of a foreign country.

Alas, many American multinationals disagree with you on this. Effectively, they see "the globe" as their country, not America. That's a much bigger playing field, with many more opportunities for them, so they would be foolish NOT to take advantage of them, no?

Taken to its logical conclusion all "American" companies could consist of a handful of top tier executives living in America while their entire workforce lives in China or India.

Already happening, and has been for some time.

For American workers of all stripes this bodes very badly in my opinion. If you don't want to be American, then don't be American, but don't pretend you're an American company and send all your jobs overseas. In twenty years all of us Americans will be working at Walmarts and Jiffy Stops at this rate.

I have no argument with your patriotism and standing up for the local worker's rights - that is highly commendable. But can I just point out (with no value judgement attached) that you are actually espousing ideals here that are way more in line with many left-wing workers' groups and union policies than anything else in particular. Perhaps even the more left-leaning popular political parties may also publicly support that line as well.

 

[dsm]

My point is yes, corporations try to make profits (show me a business that doesn't). But their goals are not all that cynical, which is make a product which manufacturing coasts are as small as possible compared to production and marketing coasts. Corporations have been going to cheaper labor markets ever since they could -- which I believe is late 70's though I could be wrong -- and yet average person in USA has been getting richer not poorer.

First, there is no need to anthropomorphize corporations. The corporations do as the top management directs. Some management think long term and either cause the corporation to succeed in the long term or be buried in a short term blizzard. Other managers think in the short term and cause the corporation to possibly succeed in the short term (as far as the shareholders are concerned) or die off due to inadequate planning. Management can make or break the corporation.

Second, corporations have been moving to cheaper labor markets as far back as you want to go. However, when the "cheaper" market was (artificially) limited to the US, the difference in wages between the markets was not all that great and tended to quickly even out. The last 30 years of globalization, however, have opened labor pools where the difference is very significant. Also, the size of the labor pool is and will be growing way beyond the amount of new jobs that are generated. Unless new markets are constantly "grown", the labor market will be hurt.

Third, the management of many corporations have lost sight of the fact that wholesale loss of jobs will hurt the consumer base in the long run. The shareholder drive for short term profits is partially to blame for this as many people have significant money tied up in the stock market. Hopefully, there will be a correction in this attitude, but the expansion of the market (from the US to the world) may delay the realization.

Finally, it's true that globalization will bring significant new areas to market products to (as in the Far East, etc.), but it will also significantly expand the labor market. This will mute (if not eliminate) any real long term effect on the American labor market.

P.S. As far as greedy CEOs go, I compared them to the likes of Carnegie, Rockefeller and Ford and none even come close to comparing with them.

Do you include Bill Gates in this list? We need significant new markets (like the Internet) to be created in order to allow the new Carnegies, Rockefellers, and Fords to surface. Currently, though, with the demise of the Internet boom, I don't see much on the near horizon for significant new markets (that will also generate jobs).

AND nanotechnology could completely reshape the world labor market in 20 to 40 years.

 

[karl]

Third, the management of many corporations have lost sight of the fact that wholesale loss of jobs will hurt the consumer base in the long run.

Are you sure they really have lost sight of this? It seems to me that it would make perfect sense, even in the long run, for an individual company to increase its market share at the expense of a very small reduction in the total market, plus the risk of a tiny consumer boycott that will probably blow over in two weeks.

Of course, when a lot of companies do this it becomes a problem and everybody suffers, but that doesn't change that from an individual company's perspective it may very well be the optimal course of action. And that's not very encouraging. To generalize a bit, I'd say that if you have a system that breaks down in the event that everyone looks after only himself, there is reason to worry.

 

[Shane Costello]

Originally posted by Wildcat:
Free trade benefits all parties involved, it may cost a few jobs in the short term but produces much larger but less visible benefits down the road. It's not at all surprising to me that the Irish posters on this board understand that, given that they've had protectionism and free markets back to back and can see the results of both clearly. Ireland is even trying to bring emigrants back to Ireland because there are not enough workers for the jobs, I know a few sons and daughters of Irish immigrants who have been granted Irish citizenship as part of this effort. No one I know has moved there yet though.

In 2000 our Tanaiste (Vice Prime Minister) estimated that this country (population 4 million) would need to attract 200,000 immigrants over the next few years. Now I'm arguably still at the spring chicken stage of my life cycle (25) but even in my short life the changes I've seen in this country are amazing. The country has got visibly more prosperous. People have the disposable income to paint and refurbish their homes and businesses more regularly. Restaraunts have sprung up in the most unlikely one horse towns. Second hand cars are rusting away in dealership lots as more people can now afford to buy new cars. Now compare Ireland's experience over the past decade to countries like Germany or France that continue to cling to statist regulation.

Originally posted by dsm:
However, when the "cheaper" market was (artificially) limited to the US, the difference in wages between the markets was not all that great and tended to quickly even out.

And this won't happen with cheaper markets now because........?

Also, the size of the labor pool is and will be growing way beyond the amount of new jobs that are generated.

How is this demonstrable? Ireland is a counterpoint to this scenario. Enough new jobs were generated for a rapidly increasing workforce (the Irish baby boom was during the 1970s) as well as returning emigrants. And according to the government we still need 200,000 more immigrants over the next few years.

It's worth pointing out that profits made by multinational operations will be repatriated back to wherever the corporation has it's headquarters. I've read that this explains the disparity between Irish GDP and GNP.

 

[dsm]

And this won't happen with cheaper markets now because........?

Because not all markets play by the same rules where (in this case) employment is concerned, thus, putting some markets like (in this case) the US at a significant disadvantage competitively. Unlike in the US, redress for this inequity is not always available.

How is this demonstrable? Ireland is a counterpoint to this scenario. Enough new jobs were generated for a rapidly increasing workforce (the Irish baby boom was during the 1970s) as well as returning emigrants. And according to the government we still need 200,000 more immigrants over the next few years.

How long will this remain true? Is Ireland simply experiencing the same growth that the US experienced in the 80s and 90s? How will things change if an educated India and China come into the workforce in force??

 

[Shane Costello]

Orignally posted by dsm:
How long will this remain true? Is Ireland simply experiencing the same growth that the US experienced in the 80s and 90s? How will things change if an educated India and China come into the workforce in force??

Employment has held up very well, and is still below 5%. If educated Indians and Chinese come into the workforce then we will have to repsond to this challenge by innovating and exploiting these expanding markets. We could for instance market smoked salmon to the nouveau riche of Shanghai, or an indigenous biotech company might patent a new drug and benefit from an emerging market of two billion consumers. All these newly educated and upwardly mobile Asians might have an unquenchable thirst for foreign goods, and China and India could run up trade deficits. You make it sound as if competitive pressures are unprecedented in a free market. I'd wager that a few decades down the road that Indians and Chinese could well be fretting over how to respond to a reformed and economically emerging African continent.

Personally I think this argument about emerging Asian economies has a racist undercurrent. No one seems to be that worried, or even aware, about emerging low cost economies in Eastern Europe. What is it about Asians that's scaring people so much?