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Job outsourcing not new

by Juan Salazar, '05

In the past few months the outsourcing of American jobs to other countries has generated disagreement and controversy, but outsourcing is by no means a new issue. American companies have been outsourcing jobs for decades; in fact, over the past 20 years a large number of American manufacturing jobs have been moved overseas (Lou Dobbs, CNN). The difference now is that the outsourcing of jobs has grown to include white-collar positions in such areas as accounting, computer network administration, insurance claims, and stock analysis, among others. This has left highly educated and experienced people jobless and needing to re-educate themselves in order to find employment. This is what has given the issue its recent notoriety.




The recent trend toward globalization has made it easy for companies to cut costs conveniently by moving some of their operations to other countries, where the cost of labor can be a fraction of what it is here in the United States. Some, like President George W. Bush’s chief economic adviser Gregory Mankiw, believe this is a good thing because when companies can produce cheaper products abroad, they can substantially cut costs, pass on those savings to the consumer, and increase profits for investors.

Another argument in favor of job outsourcing is that doing so is just another form of international trade: American companies have to export certain jobs to be able to compete with foreign firms that have lower costs.

The two countries that have been attracting the most jobs are China and India. Both have highly educated work forces and substantially lower labor costs, on average less than one third of American labor costs, according to The Wall Street Journal. The fact is, countries all around the world have welcomed American companies looking to cut costs, and this has prompted many American groups, including labor unions, and local governments, to push for tougher trade laws that would keep jobs here in America.

In New Jersey, for example, the issue gained notoriety when (D) Senator Shirley Turner became outraged because an Arizona company that was contracted by the state to assist welfare recipients, sent nine jobs to India. This prompted the New Jersey senator to introduce legislation that would require contractors bidding for state contracts to hire only local employees.

More recently, President Bush signed a bill that would stop the outsourcing of federal contracts.
In fact, the job outsourcing issue has become so politically charged that it has become almost as important to some people as the war in Iraq, with commentators such as Lou Dobbs, one of CNN’s top political and economic news anchors, dedicating many hours to discussing the issue. On a regular segment he calls “Exporting America,” Dobbs openly criticizes companies and politicians who support the outsourcing of jobs.

Thea Lee, assistant director of the AFL-CIO (American Federation of Labor – Congress of Industrial Organizations), illustrated the fears of labor unions when she said: “The logical extension is that you will see massive erosion of living standards of a big chunk of the U.S. middle class.” The sudden rise in popularity of such politicians as John Edwards, who have criticized foreign policy that allows companies to move jobs overseas, proves that this will be a crucial subject for the presidential elections.

Still there are those who, like Treasury Secretary John Snow, believe that outsourcing jobs is a good thing. Snow said in an interview on CNBC last month: “I think American companies need to do what they need to do to be competitive, and as they’re competitive, it’s good for their shareholders, it’s good for their consumers, and its good for their employees.”

Snow and other Bush officials such as Mankiw, have been the target of a lot of criticism for not opposing the outsourcing of jobs, and in fact actually encouraging it by holding seminars for executives on how to do it (NPR, 4-6-04). But the truth is, nobody really knows how many jobs have been lost to outsourcing to cheaper labor markets outside the United States since President Bush took office.

In the past few years, the U.S. economy has experienced recession, terrorist attacks, and corporate scandals. Any of these, or the combination, could be responsible for the downturn of the job market.

According to The Economist, the U.S. economy is recovering from the recession. Optimistically, perhaps the job market may also recover soon.


“ The great hollowing out myth,” The Economist, Feb. 19 2004.
Michael Schroeder. “Unions and states aspire to block job outsourcing.” The Wall Street Journal.
“ India warned about job outsourcing.” Silicon Valley/San Jose Business Journal, Feb. 16, 2004.
“ Treasury’s Snow defends U.S. job outsourcing.” Reuters, Feb. 24, 2004.


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