Outsourcing frontlash

Pardon the phrase.

The mainstream US press started rejecting the populist claims of politicians. The Washington Post editorial says that job losses due to offshoring are just “one percent” of the problem and the protectionist measures proposed by the presidential hopefuls are either irrelevant or counterproductive.

Nobody can say for sure how many U.S. jobs will be “offshored” to places such as India, but the best estimates are around 3.5 million between now and 2015. If that number sounds scary, try this one: The total number of U.S. jobs destroyed over the same period is likely to be well over 300 million. Capitalism eliminates jobs constantly, but except during recessions it creates new ones even more quickly: In 1999 alone, 33 million jobs were destroyed and 36 million created.

In short, the loss of a few hundred thousand jobs per year to offshoring is a small part of the churning that goes on in the U.S. labor market. Precisely because every job loss is painful, it makes more sense to think of ways of stimulating employment generally than to craft legislation to address 1 percent of the problem[Washington Post]

It goes on to advise the politicians to put solutions to the larger problem on the table. And what it says makes an enormous amount of sense.

Politicians want to be seen responding to the job anxiety of the moment. But they would do better to think big about the job market. They should struggle to improve public education. They should invest more in retraining for laid-off workers. They should minimize taxes that directly penalize job creation. And they should fight against changes in the tax code that benefit the wealthy, exacerbating the inequality that technology and globalization tend to accentuate.[Washington Post]

Updates: Wall Street Journal takes Lou Dobbs & ‘Exporting America’ to task

This Tuesday, after Lou described “the shipment of hundreds of thousands of hi-tech jobs to cheap foreign labor markets,” a CNN reporter’s piece on the outsourcing of computer jobs bowed in Lou’s direction, then quoted an industry source who says they still can’t meet the demand here for programmers. Later, after Lou teed up Ohio’s manufacturing job losses, a CNN reporter found evidence to blame Ohio itself — its crummy educational performance and an uncompetitive tax structure with nine income-tax brackets. (If this amazing even-handedness keeps up, CNN will be the network letting us decide.)

Lou’s guest was the hyper-liberal Sen. Max Baucus of Montana, once a stronghold of unionized mining. But Sen. Baucus was a globalized moderate compared to his host. After Lou grumbled about “corporate America” having responsibilities “that extend beyond a quarterly profit statement,” the Montana liberal said, “We can’t as Americans bury our heads in the sand, we cannot put up barriers.” Lou ended the show by arguing with two letter-writers who disagree with him.

The next night, Lou’s guest was Hillary Clinton, who like Sen. Baucus sensed the need to emigrate from Louville. Lou noted that “your husband’s administration was a leading proponent” of free trade, as if outing an Albigensian heretic. Lou attacked something called Tata Consultancy in Buffalo, “a well-known outsourcer.” “I know they outsource jobs,” the senator replied with the patience of Job, “but they’ve brought jobs to Buffalo. You know, outsourcing does work both ways.” Lou wanted to know if John Kerry has been strong enough on “stopping outsourcing.” The senator offered a reassuring answer yes and added, “I’m not in favor of putting up fences around the country.”As the show ended, Lou announced that the French Senate had voted to ban Islamic headscarves.

The ratings are up and we hope they stay up. On two hours earlier than “The Factor,” Lou Dobbs doesn’t get in the way of any basketball games. And unlike O’Reilly, “Exporting America” is a boatload of straight-faced fun. And I think Lou Dobbs knows it. [WSJ Mar 5]

Brian Micklethwait makes an important point – outsourcing is not just about getting more for your IT budget, its more about pushing the innovation envelope further

Remember the days when there would only be demand for six mainframe computers. As cheaper computers materialised, people thought of steadily more things to do with them. And it will be the same with outsourcing. My guess is that outsourcing will not so much make certain already familiar types of software cheaper, but will make new kinds of software possible. The big impact will come not from the people asking: how can we do our stuff more cheaply? It will come from those asking: what software can we now do that will make use of outsourcing, which we could not do before?

But what do I know? Meanwhile, I am quite prepared to believe that making profitable use of outsourcing is a skill that has to be learned, and that outsourcing definitely has its pitfalls.[Brian Micklethwait/Samizdata]

Jeff Roehl makes the point light-heartedly in the Chicago Tribune

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