Engineering Outsourcing/Workshare Concerns? 4

[Jafka]

Virtually all of the major engineering firms are now sending at least some piping design and CAD work overseas (namely, India) and many are beginning to do the same for the various engineering disciplines.

I would be curious to hear everyone's experiences, worries and predictions about a growing trend of American engineering firms sending engineering work abroad.

Jafka

 

[davefitz]

A tariff on imports would violate current fair trade agreements- but of course the tariff works best if the objective is to reduce imports and inicease domestic production. Maybe it is time to renegotiate the trade agreements- but apparently the only persons that are heard by our representatives are those that profit from outsourcing.( according to the superme court, free speech = $ contributed to elected representatives, so he who contributes the most money is he that is heard)

A uniformly applied VAT , to imports as well as domestically produced goods and services,does not violate the fair trade agreements, but does cause the imported goods + services to contribute to the federal treasury. Current tax model in the US implies foreign produced goods and services contribute ZERO to the US treasury, while doemstically produced goods and service bear the brunt of the cost of running the gov't based on employee contributions to income tax, SS tax, medicare tax ,etc.

 

[KENAT]

csd72, no it doesn't. The seller collects the VAT in the UK and then passes it to govt as I recall. The point is VAT is only collected on something sold to someone in the UK. If you sell it to someone outside the UK you, the seller, don't have to pay VAT on it to UK govt.

Likewise, if I send stuff to my family in the UK direct from a US online or catalog or similar VAT has to be paid on it.

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[csd72]

But how does that penalise those using overseas companies as dave was implying?

 

[KENAT]

VAT is paid on some services as well as actual products.

While I'm not sure exactly how it works in the UK...


The basic idea is that if Bob cells widgets made in China in the US, the US govt gets little or no direct revenue from either the manufacture or sale of the widget (though it probably would from the distribution chain). If the widget had been made in the US the govt would have got tax revenue from the business making the widget, and the employees of the widget company and maybe some other sources I'm missing.

If you implement a sales tax, then whether the widget is made in the US or China, the govt gets some money when it's sold.

If this revenue is then used to at least partially offset/reduce the tax burden/cost of business of the US widget company, they can reduce their costs, and hence reduce their widget price to me more competitive with the Chinese widget co.

Or at least that's the basic idea as I understand it.

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[KENAT]

Bob sells, doh.

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[csd72]

so its a subsidy you are talking about rather than a tarrif.

A sales tax or vat can only either be even across the board or as you say would benefit overses competitors rather than locals.

VAT can be claimed back by the intermediate contributors and will only be paid on the value of the final product (in theory).

 

[KENAT]

Subsidy, not really.

The point is to somehow get tax revenue from the 'manufacture and sale' of the widget even if the manufacture is done in another country.

So instead of taxing it during the manufacturing stage, you tax it as the selling stage.

Or more likely just adjust the level of taxation in the manufacturing stage.

This helps level the playing field.

As to ajacks reply, perhaps my question was poorly worded. My query was more along the lines of does having VAT in the UK cause less of the work traditionally done by UK workers to be sent over seas.

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[GregLocock]

VAT is refunded on inputs and payable on outputs. Therefore as you don't pay VAT on the overseas work you couldn't claim any VAT back on it, but when you sell your services including the overseas component to a customer they will pay VAT on the lot.

Typically if you export from a VAT company the exporter can claim the VAT back from the country it is exported from.

As such it doesn't really affect outsourcing much either way, at a first order level.

Cheers

Greg Locock


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[csd72]

Greg,

My point exactly, all this talk of levelling the playing field using VAT is completely misleading.

 

[moltenmetal]

Greg, you're right that the VAT doesn't affect the insource/outsource decision by affecting the price. But davefitz's point was that at least a VAT ensures that the outsourced work creates some revenue for the government in the country where the purchase/consumption of the work takes place. Without a VAT, the buying nation gets nothing out of outsourcing aside from lower prices and longer unemployment lines.

 

[OneDay11]

I am 5 years into my career. Got a BS in the US and ever since I have worked in the US, Europe, and Asia. I definitely see first hand engineering outsourcing and have even had a chance to manage an outsourced team of structural engineers and detailers. This is no joke and if done right, it can be very profitable. Outsourcing has a tendency to go horribly wrong if it is not proactively managed and cultural issues need to be fully understood and taken into account. I am not exactly a fan of it since I realize that ultimately my own job might be at risk. I am not sure how things will be towards the later part of my career but I expect to see outsourcing will be an even bigger deal as we move forward. Focusing on the negatives with regards to job security of western engineers is a bit of a time drain. What can we do to stay ahead? What value can we provide that warrants the higher costs? If there are qualified engineers that can do what I do for a fraction of the cost then so be it. I will have to find a way to adapt.

 

[321GO]

I agree with Stoker's comment(near the top)

Look at these scenarios from the manager's perspective.


devil's point of view:

"Since production is already done overseas why not move the bulk of the engineering also, so they can work efficiently together in the same facility(same language/time zone/culture blabla)!"

"Yeah, they talk about lack of quality and increased risks and stuff but i think they are just scared to lose their jobs!"

"We just need some 'goones' here to manage all this stuff, I'm sure the one's we are letting stay feel special and 'elected'!"


I don't think it is all that bad though if you are willing to adapt to such changes in a constructive way.

 

[321GO]

"i liked the engineering reply to (i think it was) Jack Walsh's justifiction for out-sourcing engineering (something like "i can get 10 engineers at $10/hr, why would i want 1 at $100/hr)"

I don't

A valid point like that needs recognition like it or not. Denying such a fact doesn't help the 'engineers case' only makes it worse

 

[FeX32]

"i liked the engineering reply to (i think it was) Jack Walsh's justifiction for out-sourcing engineering (something like "i can get 10 engineers at $10/hr, why would i want 1 at $100/hr)"

This is the attitude of the ignorant and money savers.
It's too bad they don't realize that for the most part (Aus ect. not included) that engineer at 100/hr is worth 20 of the ones for 10/hr.



Fe

 

[cranky108]

Do you as an engineer care more about projects located near where you live, or do you care more about projects 2000 miles away?

If it's close to you, would you not want it to work safely, and correctly? If it's 2000 miles away, would you care as much?

I've seen this when I worked in two states at the same time. The closer to home projects seemed to work better.

 

[csd72]

I have been to many of these countries where the $10/hour workers live and I have seen the low value they put on life safety in those cultures.

 

[321GO]

I've seen pictures of foundry workers on flipflops, boss kept ordering, customers kept buying, despite their 'high obligation to quality and moral standards'

Yeah such working conditions are a shame but the market is more than willing to accept so what can you do about it..

 

[ajack1]

There seems to me three possible solutions to the problem.

1 Provide goods or a service that are high end or location specific that people will pay good money for.
2 Convince the local work force that they would like to work six ten hour days a week for $10 with little or no health care or cover.
3 Convince everyone in the country (or at least enough to make it viable) that they would like to pay $100 for something they can currently buy for $5.

Simples.

 

[321GO]

You forgot the most obvious solution:

4. Drain ocean so no shipping can take place

 

[GregLocock]

"I have been to many of these countries where the $10/hour workers live and I have seen the low value they put on life safety in those cultures"

Yes the health and safety regs in the USA are pretty appalling. You do realise 10 bucks an hour is twice the US minimum wage, typically?

True story - a friend of mine visits the USA to see some mines. He goes to the locker room and dons his standard Australian safety gear. The foreman asks him to take it off and wear their stuff as his will cause discontent.

Cheers

Greg Locock


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