How does outsourcing IT jobs help the economy?
StrWtchr asked:
To me this only seems to help the rich get richer. Also, what about all the IT workers who lose their jobs? How can this help the economy when they are unemployed? Also, what is America going to do in 10 years when we become entirely dependent on India for our technology needs?
To me this only seems to help the rich get richer. Also, what about all the IT workers who lose their jobs? How can this help the economy when they are unemployed? Also, what is America going to do in 10 years when we become entirely dependent on India for our technology needs?
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We outsource because, we have more expertise over there. We are not totally dependent because we have an SLA which is a well written agreement between the outsourcing firm and the organization.
Let’s say we own a food industry and we produce cereals. If we outsource the IT works in the cereal firm, the company has more time to focus on the cereal itself and producing more cereal in less time. Id we did not have a outsourcing firm, we would having an IT department, which is quite costly in USA. I’m not talking of the hardware or software which is only 20% of the IT cost. The 80% is maintenance, labor cost etc…
So these people handles the IT stuff and we produce better cereals to become more competitive, not only in USA but as around the world. angate
They need to raise the Global hourly wage to match the wages in the US…then the big greedy corporations will have no profit from outsourcing. It would simply be a corp’s personal choice to help another country economically, by providing some, not all, employment opportunities offshore. They could only assist the Global Economy out of compassion, not greed. They’ve completely moved offshore recently… only in it for the money at the present time. If the companies from the US want to outsource, they should have to pay the same wage to a foreign worker that they pay here.There has to be a global standard wage…then greed would cease to matter in the decision. No foreign profit incentives means less outsourcing..
Yo Homie, Eat My Shorts… I gladly eat Top Ramen to rebel against your financial institutions of greed, as much as possible…Go Minimalism!. I hate financial know it all’s who agree with the world’s vastly different levels of suffering and existence…One World Economy…it’s only fair. By the way, I took Macro Economics, it doesn’t change the fact that less foreign profit incentives means less outsourcing. Coming from a sales/client relations- business services background, I can promise you jobs are going off shore due to corporate greed, not to enrich the lives of the foreign workers. It may help some, but it’s off the backs of the bruised, and the Us workers who forfeit their jobs to outsourced unfair wage competition. PS, think about this…the less jobs for people on the lower end of the so called ladder, the more unemployed. When they lose their call center jobs, and can’t afford college, they end up sucking the resources right out of your taxable pocket. So have a heart, support your poor, your needy, the world’s poor, the world’s needy, or shove that pampered suburban, middle class /wealthiest 1 percent mentality back down your throat with the silver spoon you were born sucking on…before you have a fall from your high horse. SJG
SJG: Based on your rediculous arguement, firms should also have to pay the same wage in new york that they do in nebraska. You will also see the absurdity of your arguement if you read an introductory macro econ textbook- in particular, look up absolute and comparative advantages and purchasing power parity. In addition, you DESPERTELY need to learn about supply and demand.
First of all, the jobs that are being outsourced were state of the art 15 or 20 years ago. The people losing their jobs because of outsourcing are losing them because they failed to move up the value chain. Had they improved or expanded their skills during this time, they would have new, better, more productive and higher paying jobs. In other words they only have themselves to blame. What makes them so special that they should have the exact same guaranteed job for life when the rest of us are constantly moving up the value chain to not only survive, but prosper?
Second, and related to one, the Indian tech firms are doing high volume, low margin business. American tech firms on the other hand specialize in low volume, highly profitable ventures. I used to have two articles handy that I liked to throw in the faces of people like you. They appeared on the same day, on the same page of a newspaper. The first said that Dell struck a deal to outsource some call center operation. The deal was for something like $5 billion over 10 year and had a profit margin of around 5% or so. The second article said that IBM struck a deal with the Indian for $15 or 20 billion over 15 or so years with profits of about 20-30%. Although I don’t remember the exact terms or numbers, these illustrate the point that American firms don’t want to waste time/resources on the crap jobs that are being outsourced. They have MUCH bigger fish to fry. Further, when people get laid off from unproductive jobs, it frees them up for the “bigger fish” jobs. Without this creative destruction, both our domestic economy and the world economy would stagnate. This is also why thousands of jobs are being outsourced, yet our unemployment rate is around 4.5%. In other words, that whole unemployment argument is absurd non-sense.
Third, the cost cutting efforts eventually flow down to the consumer. If one company outsources and starts to make large profits (economic profits vs. just accounting profits) then either they will lower prices to beat out the competition or competition will increase to erode those profits. That is the beauty of capitalism.
Now, why should someone like me who benefits from such cost cutting have to pay a premium for goods and services so that someone who is too stupid, lazy, or genetically flawed to move up the value chain can have a particular job?
Fourth, related to the second point, lets say that you plan on spending $1,300 on a computer, but because the manufacturer reduced its costs, the machine only costs $1,100. Now, are you going to burn the other $200? Of course not. You are going to spend it on something that increases your utility. This in turn creates jobs elsewhere in the economy, and more importantly, in more productive sectors.
Finally, your conjecture about becoming dependent on India for technology is stupid for two reasons. First, the ultra high tech output from the tech sector comes almost exclusively from the US. Of the $1 trillion or so of hardware and software firms in the world, I can only think of two- SAP and Lenovo- that are not based in the US. IN addition, the US has the best schools and US firms spend more than any other country on R&D. In other words, it will take a lot longer than 10 years to usurp the US from its position as tech leader of the world. Second, even if we don’t do any of the low end, unsophisticated stuff in house, we are not going to have to rely on India. China, Russia and Eastern European countries are gearing up to get pieces of our table scraps.
So stop being a whiney little socialist, move up the value chain, and you will be fine. Homer J. Simpson