Outsourcing, is a process hated by many workers and loved by many executives. There are many people walking around today in the United States that are jobless, have no health benefits and no potential. The industry they worked in is almost gone in this country. Unless these people can retrain for well paying jobs in other sectors, which also seem to be getting more scarce, they can look forward to menial jobs if they are lucky. Some of these people have been out of work so long that they fall into the numbers game. The numbers game is where you are dropped from the list of jobless because you have been jobless too long. Great system for counting jobless isn't it? How did we get into this fix? It was created, most likely, by the need to compete with countries like China which has very cheap or even free (prisoners) labor. What is a country to do if the labor cost to make an item in China is 2.00 U.S. and to make the same item in the United States is 7.00 U.S.? We didn't want to anger countries with large import tariffs because this would also hurt our exports.

The question is did we go too far? Many companies seem to have taken advantage of the situation by outsourcing much more than they really need to. They have fired or laid off workers in huge numbers while giving themselves shameful pay increases and stock options. Yet with all this outsourcing and all the workers unemployed, The Salt Lake Tribune ran a story that states when a pole was taken on outsourcing, most workers said that outsourcing is not a major threat to U.S. jobs. It makes one wonder who they asked the question of? The pole was taken nationally and 2814 workers were questioned by the pole taker, Hudson Global Resources. The type of workers that were interviewed is not stated but the article goes on to state that even though 66% of workers felt that outsourcing was harmful to the economy, 84% felt that it was unlikely that their jobs are in danger of being moved to an offshore location. Now I say again, it depends on who you ask these questions of. If you ask a worker in Burger King then I am sure you will get the answer that the job won't be -+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++, but if you interview a worker who programs computers then you are more likely to get the opposite answer, I would think.

Outsourcing is causing a problem other than lost jobs. It is increasing the pay gap between professional jobs and ordinary jobs. *Since 1964 the U.S. has added 72 million jobs. After adjustment wages have risen quite a bit since then. Women have made the biggest advance with a 37% increase, while men have seen a 18% increase after adjustment. Now I have read that unemployment is exactly the same rate that it was in 1964 but this doesn't take into account the way we figure unemployment today. As I mentioned above, if you are unemployed too long you are no longer counted. The real unemployment rate may be as much as double the stated rate, who really knows?

Outsourcing seems to be accelerating. For those of you who thought that only the computer industry is suffering, think again. Automobiles and their parts are being made all over the world, lawyers are sending their work overseas to India where their briefs are being prepared. Time Warner and Google are planning to open engineering centers in India and the story goes on and on. But does this trend have to be, can items be made in the U.S. and still be competitive in the world market? Ask Honda and Toyota, two of the most successful auto companies. Many of their models are assembled in the good old U.S. of A., yet they are competitive and among the most well made autos on the market, and among the best selling. What is their secret, and can it be applied to other industries?

Unfortunately for the U.S. worker who is at or near the top of the wage rate in the world, the world economy must level out before outsourcing to foreign countries stops. As poor countries get more business their wages go up and eventually the world will run out of places to outsource to. This might not happen in our lifetime however. Also some governments may take steps to prevent this from happening in their country. Such steps might be a limit on the hourly wage or a variable tax to keep the worker at the same wage.

What is the difference in hourly wages between countries? **In China a textile worker receives between $0.68 to $0.88 per hour as compared to $5.00 to $7.00 per hour in the U.S. In Mexico the hourly wage in the same industry is $2.30 to $2.45

Russia is another place which many tech companies find ideal for outsourcing. They have an educated population and many out of work scientists and engineers. But are we losing more than jobs here? We are exporting out technology and technological know how. This fact alone could come back to haunt us. We may be in the position some day that we can no longer compete. After World War II we rebuilt many countries under the Marshall Plan. When we did this we gave them the newest factories while we at home were using older facilities. It wasn't long before we were almost entirely out of the steel production business because we could no longer compete. We had shot our self in the foot. Are we doing this again by going for the short term solution, instead of trying to fix the problem at home?

Outsourcing doesn't always succeed. A good example of this was when a certain computer company decided to outsource all their tech support to India. There were many language related problems and things got so bad that the company had to reverse their decision. Lets hope that this trend slows down or even stops and that a solution will be found that satisfies everyone.

*CareerJournal.com
**North Carolina and the Global Economy Spring 2004