The outsourcing of American jobs overseas, or offshoring, is a sensitive subject that pulls at the heart strings of many Americans. Most businesses see an economic recovery within sight, but are not willing to hire American workers because of uncertainty and doubt about the overall economic picture. Outsourcing – which is the purchasing of an item or service from an outside vendor to replace an organization’s internal operations – increases productivity. Due to balance of payments, offshoring returns equity to the United States. As a result, America is a more productive place to do business.
Most jobs that use offshoring – with the exception of high tech jobs – are low-paying and will soon be replaced by the technology of tomorrow. Why should America be concerned?
Education. The American education system is failing to keep up with the rest of the world. Without a skilled and educated workforce, globalization will negatively affect the U.S. job market over time. People will find themselves competing for jobs that no longer exist with skills that are no longer in demand. As the business cycle churns, those who are not educated lose out more and more as time goes by.
The U.S. should really be focusing on these things: improving the education system through providing better K-12 education; adult education; free college tuition at public universities; job-training; and improving the safety net for laid-off workers. Another problem area is that the U.S. is graduating more lawyers than engineers and scientists. Dwight Eisenhower must be rolling in his grave.
Will offshoring erode the technological edge that the United States currently holds? No, but our education system will. It may not be education, but to assist in reducing the expense of hiring new workers, there must be universal access to medicine that maintains quality of care. This requires that structural changes be made to the government. A single-payer healthcare system is one such option. Out-of-work people are not being hired due in part to uncertainty about the future, but also because of the purported expense of their benefits.
Another culprit for the offshoring trend is the American economy’s addiction to cheap money. Record low interest rates – a trickle-down effect from the Discount Rate – have enticed businesses to turn their attention towards capital investments while the Fed’s monetary policy still encourages those types of investments.
Pointing fingers, Federal Reserve Chairman Allen Greenspan can join President George W. Bush as another scapegoat. Politics aside, offshoring existed before either of the two executives, and neither has the power to tell corporations how to run their business.
The legal and regulatory environment in the U.S. is also said to be a problem, but the U.S. cannot allow a corporate free-for-all as seen in the past. Corporations benefit from being responsible corporate citizens. DuPont is a good example of that concept flashed out in real life – it is slowly but successfully getting out of the chemical business and investing in renewable resources.
Likewise, obtaining cheaper prices by way of eliminating regulation and hacking away at worker’s benefits is not the way to go and does more harm than good. Healthy workers with portable and guaranteed retirement benefits are happy and motivated workers.
There will always be some place that is cheaper to do business. In several generations, India and China will face the same dilemma as their economies mature and populations shift to urban areas from their rural countryside. In addition, China will also certainly face the consequences of its poor environmental policies, and in the case of India, its underlying caste system.
It is very easy to blame foreigners and offshoring for our own failings. Blaming non-Americans reeks of ethnocentricity, but isn’t that the American way? Tariffs and bans on offshoring will negatively affect consumers and the economy; not to mention tick off our trading partners who would then retaliate by placing restrictions on U.S. goods and services. Tariffs would essentially raise the price of everyday household items for the average American family and trigger inflation.
To stave off an over-dependence on offshoring, the people of the United States have to be productive and skilled – making the U.S. the best place to do business. Productivity is not a miracle pill, but certainly helps keep the U.S. more competitive in the global marketplace.
Americans need to calm down – outsourcing is not as widespread as it is being made out to be. When Americans talk down the economy by saying that all jobs are going overseas, it affects consumer-buying behavior. That in itself can lead to recession. The underlying problems and deficiencies that have led to the cadre of jobs being exported overseas are the real issue.
David Worthington can be reached at dworthington@betanews.com.
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