Vox populi on tech outsourcing

No one likes to hear that their job may be at risk because of more efficient foreign competition, and readers of this Web site are no exception.

It didn't take long after my column, "The truth about offshoring," appeared last week for the responses to flood in. Most replies were carefully and cogently argued; others were vitriolic. But nearly all made the same point: They thought that I was too dismissive of the downsides of more U.S. technology jobs going overseas.

My column argued that outsourcing is yet another example of free trade, which does bring temporary disruptions. But in the long run, I said, free trade is vital to a society's overall health. After all, the richest nations in the world, according to the 2004 Index of Economic Freedom, are the ones that have embraced free trade the most passionately.

Here?s a sample of the feedback, with last names withheld:

• J.W. thought that my argument was myopic: "Destroying jobs here might be OK--as long as more are created than destroyed. The problem is, that isn't happening. The (column) raises the issue of what happens when China, India, etc. start developing, creating, marketing and selling their own products, based on technology and learning they got from the USA. They won't need us for anything other than to buy their homemade developed and manufactured products."

• Mark, a software developer who's been out of work for two-and-a-half years, said: "Offshoring's good business? Really? And just who is going to buy the good products, when the overwhelming majority of jobs in this country are nurses' aides, telemarketers and pizza delivery?"

• Phil argued for equal treatment. "Most of the middle class' bread-and-butter jobs are leaving our shores. While I'm not a fan of protectionism, I really doubt government-mandated disincentives, such as forfeiture of tax deductions for outsourced or offshored labor would inhibit foreign investment in U.S. corporations. It would, in fact, make labor cost arbitrage a non-issue and labor selection could then be based on merit, not cost alone."

It's important not to minimize the disruptions and dislocations that outsourcing will cause.

• Neal made a good point about double standards. "Both India and China have significant barriers to foreign goods and services," he wrote. "This does not benefit the U.S. economy nor the U.S. worker whose employment prospects might improve from the increased economic activity...American professionals are largely excluded from participating in the Indian market. Accounting practice is one particularly egregious example. U.S. tax returns are being outsourced to Indian accountants. Yet a U.S. accountant is barred by law from practicing in India."

• Paul argued along the same lines. "I agree that globalization, aka free trade, is good thing. But to gain benefits we need to have a level playing field. Anything less is arbitrage, where the main beneficiary is the corporation, not the consumer nor the worker. Right now we have free movement of capital. Employees do not enjoy that right. I've worked overseas; I know how hard it can be. Until I can work wherever I want, I cannot compete because of my fixed costs."

Other replies weren't quite as cordial.

Michael stated: "I think your job should be sent to some other country, then let us all see how you feel about outsourcing. Sure you can have a low unemployment rate, but what about the quality of jobs? What a dope you are."

For his part, Jack was convinced I represented a "right-wing extremist mindset that's infected this country."

And Greg noted that he has become an activist on offshoring. "I can certainly take the job offered to me earlier this morning--if it is still available, that is--but I will have to take a 50 percent pay cut and lose major benefits. That...Indian in India is doing my job for only $8 an hour with no benefits, (with) long hours and no overtime." Until overseas workers make the same wage as Americans, Greg added, "I will be against any form of free trade. I will write my congressperson and speak out against it as loud as I can at rallies."

While outsourcing of technology jobs is growing, it's not as extensive as some might think.

These replies have a point. It's important not to minimize the disruptions and dislocations that outsourcing will cause. But it's equally important to understand what's going on and to prepare for the future.

For starters, let?s recognize that the U.S. unemployment rate four years ago at the height of the dot-com boom--around 4 percent--was artificially low. That was due to Wall Street's mania and the Federal Reserve Board's decision to inject money into the economy, and it couldn't last. America's current unemployment rate of 5.7 percent is not especially high by historic standards.

And while outsourcing of technology jobs is growing, it's not as extensive as some might think. Forrester Research estimated in November that a total of 472,632 computer-related jobs will move overseas between 2000 and 2015. That's small compared to the churn rate of the incredibly dynamic U.S. economy, in which about 2 million jobs are created and eliminated every month.

What?s more, salaries of Indian and Chinese programmers will increase over time and make them less attractive. Already, one offshore consultant told me, the best programmers in India receive around 70 percent the salary of their U.S. counterparts. Add in the costs of dealing with time zone differences and potential language and cultural barriers, and their comparative advantage eventually will shrink.

To be sure, elementary and secondary education in this country is hardly stellar. Government schools need to get better, something that TechNet, a confederation of Silicon Valley businesses, properly lists as one of the group's top priorities. Innovative solutions like vouchers might be the way to go.

Most importantly, we should remember that understanding the real but limited phenomenon of overseas outsourcing does not mean conceding defeat. There's still a lot of life in the U.S. economy--especially the technology sector--but changes are afoot. The writing on the wall is clear for everyone to read. If we avert our glance because we dislike the message, isn't that the larger danger?