Who is to blame for US outsourcing 39

[EngineerDave]

I bring this up not to start a political war. I am an independent by the way but find myself leaning more towards the conservative side as many engineers do.

Democrats are starting to blame Republicans for loss of jobs due to outsourcing.

The way I see it both Democrats and Republicans are responsible for not securing good trade agreements. It seemed both supported NAFTA heavily in 1992. That is but one small treaty governing trade for North America.

What is the solution. I honestly don't believe any politician will have a solution for such an economics driven problem.

 

[pmkPE]

Politics is the Big Business of Power and Control. Politicians have very little direct influence on what companys do and the effects on the economy other than determing how much taxes anyone person or business pays as well as stimulating the economy through an influx of their own business whether it is military expenditures for equipment or infrastructre improvements such as the Interstate Highway Development. In my opinion most politicians are just trying trying to figure out which "sound bites" will get them enough votes to get into and stay in office.

The following is an article in an "American" forum to promote offshore outsourcing of cad services to a gentleman who is educated at the University of Michigan and now has a business in India doing, you guessed it, selling cad services to US businesses. He states how you should break it gently to those employess that are your friends:

http://www.webpronews.com/it/itmanagement/wpn-18-20040727OffshoreCADOutsourcing.html.

I wonder if this person was accepted by the University of Michigan on a quota basis which resulted in the exclusion of an American?

 

[cudaracer]

Personally I think that outsourcing has alot of similarities to the dockside(trickle down) economic theory. Which makes me believe it favors the Republican viewpoint. It looks like outsourcing is going to benfit only the upper tax bracket by giving them another source of cheap labor. It also appears that the more work that gets off-shored the smaller the middle class will get. As I stated in one of the other topics, off-shoring has taken my job with an engineering firm in the Chicagoland area. I have been out of work for over a month now, after being laid off and re-hired at a lower wage without benefits, and am still looking with no bites yet. One of the main points should be not who started it..but how are WE going to stop it. If there was a way we would get the rest of country to realize the type of foundation for the future we are laying, maybe then we could get enough people to stand up to the companies that are off-shoring the engineering and put a stop to it.
I do however disagree with you pmkPE in thinking that politicians have little direct influence on business. If the policy makers would quit giving the corporations tax breaks and other incentives to companies that do outsource the work, I'm pretty sure it would stop. It still boils down to we the people though..and we will have to stick together, and start being heard by our representatives. If we can get them to understand that we're not going to allow all of the good paying jobs overseas, then hopefully we can get back to work.
Sorry if I seem a little on the doom and gloom side, but I was the first one in my family to go to college and get a degree. I did it because my father was a truck driver amd didn't want me to have to live that kind of life. Now looking back I'm thinking it would have been safer to get a CDL......

Take it Easy...
Don

 

[metengr]

Here is my 2 cents worth;
There is no solution to outsourcing (loss of work internal to a company but is still performed in the US by another company) or off-shoring (work that is eliminated in the US and is obtained over seas). The outsourcing and off-shoring of goods and services is the direct result of the IT revolution and productivity improvements that occurred during the 1990's. This IT revolution enabled underdeveloped countries to begin prospering under a global economy that is still evolving. The world no longer consists of isolated economies and separatist behaviors. We have instant communication allowing us to conduct business transactions, video conferencing and exchange information with the press of a button.

One of two things will happen - either our standard of living in the US will diminish and eventually intersect with the world's standard of living OR we will have another discovery or revolution (not a revolt) that will enable the US to capture the lead.

People like to blame the government and politicians for outcomes that really can't be prevented. Globalization was bound to happen and it did! We live in a free society - there should be no entitlement in the US. I don't want the government to force quotas down the throats of companies for the sake of keeping work here in the US. This approach being proposed by the Democrats will slow our current recovery and result in a severe recession. Those who want job entitlements in the US should live in a socialist society.

Despite current unpopularity with the global economy, I believe we will make the necessary adjustments under globalization and continue to develop innovative ways to further increase productivity.

 

[Tobalcane]

In my opinion, it comes down to profits that the company can make. And who is the President of the company trying to appease? That would be the stock holders and the board. Which is funny, if you own any mutual funds or stocks, you are contributing to the problem. Everybody wants their investments to rise. But back to my point, if the CEO wants to turn a bigger profit for the fiscal year so that he can get his 15 million dollar bonus, that means he has to take it out from overhead. That means that employees will be cut loose and then he will get the same function/services from a cheaper source. And where can you get cheap labor doing the same thing? That’s right, from over seas. Capitalism has its ups and downs. Don’t get me wrong, capitalism is what made this country great, buisness is business. But I think we are going to see a downward trend of buying in this country because the unemployment rate will start to rise. That is where the politicians will step in and realizes how bad the practice of bleeding out work out of the USA can affect the economy. At that point the politicians will bring in the tax tariff to target receiving/sending services over seas. This will force the companies to hire within the country and give the USA economy a boost. It has to get worst before it gets better.

I guess to answer the question; the people to blame would be the CEO/President of the company. They made a decision to lay off their own people and send the work over seas. They are the ones who start the ball rolling for this action to start.


Go Mechanical Engineering
Tobalcane

 

[2dye4]

For many years now the only route to profit has been cost
reduction. As most manufactured items and services move
into the commodity class there is only one way for
corporate profits to continue and this is cut costs. The
interesting thing is where this all ends. People loose jobs
and buy less then companies reduce prices in a frantic
pace to stay afloat. Some companies fold and release more
workers then even less is purchased. Positive feed back
for us engineering types. What happens when there is
excess capacity world wide and not enough people making
enough money to afford discretionary purchases.
The class of people who contribute something are going to
loose out. Witness the squeeze on doctors. They are not
making the money they use to and their fortune will
continue to erode.
The new mentality for earning money is
"What can I take from someone" instead of what can I
contribute for a wage.

 

[GregLocock]

Jeez, I hope you guys continue to outsource engineering work, otherwise I'll be out of a job.

Mind you it was the same in the 80s when we did work for the Americans, and the Koreans, and the Japanese and the Germans and the Malaysians.

And the nineties when I did work for the British and the Americans and the South Africans and the new Zealanders.

And now I do work for the Indians, the Chinese, and the Americans, the Poms, the Germans, and the South Africans.

It's called global trade, fellas, it's always existed and hopefully it always will.


Cheers

Greg Locock

 

[moltenmetal]

The race for the lowest price is a race to the bottom and we all end up losing. We also all participate in our own demise, both through our investments and our own purchasing patterns. It's an inevitable result of capitalism's value system. Businesses are algorithms that maximize profit and don't consider outcomes beyond this unless they can be quantified in dollar terms. The results are entirely predictable.

You can counter-lever against this tendency with taxes and tarrifs and direct this revenue toward social spending to redress the impacts somewhat, if your government has a mind to do that, but the effect is ultimately limited by the fact that trade is a two-way street. There's always someone who'll lobby the government NOT to implement those tarrifs because they're depending on the low import prices, or because they're depending on sales to the same country and worried about countervailing duties. Add to this the fact that capital is mobile and there's always somebody else who wants the jobs and economic growth desperately enough to cut taxes or even take money from the public purse and use it to subsidize industry. And even if you wanted to try it, an effective tarrif system for services provided over the Internet is just about impossible to imagine.

Inevitably, some of the developed world's economic resources will trickle away toward the developing world. That's a good thing for the developing world, in the short term. In the longer term, the only way the developing world will be able to sustain its industrial capacity is through increased local consumption as the developed world's purchasing power evaporates with the high-paying value added jobs it loses. Unfortunately, that's bad for the planet. If consumption patterns in India and China move toward the Western model, with these countries' massive populations it's doubtful the planet can avoid choking in its own filth- especially when you consider the lax environmental regulatory conditions under which much of this third- and second-world industrial development is occurring.

What galls me is the profiteering and selective application of tarrifs in the developed world. We still have huge tarrifs against products from the very poorest countries (i.e. the ones in Africa with no buying power and hence no political clout), and even where there aren't tarrifs the lion's share of the profit on items like clothing and agricultural products is going to parasitic distributors and retailers who add little value. The manufacturing jobs go offshore, but only a small fraction of the benefit follows. The majority of the profit generates wealth for a select few in the western world, and our tax structures ensure that it contributes virtually nothing toward dealing with the societal tragedies that result from the export of jobs. It's the middle class who suffers, because the jobs that are leaving are the ones that underpinned their way of life.

 

[davefitz]

Well, it looks lke everyone has their own unique viewpoint on an issue that effects at least half the populace directly. Funny that neither party is discussing this as a negotiable item for the November elections.

For one thing, I think there is an economic theory that the best way to sustain long term economic growth is to spread the wealth around; if you increase the stratification of wealth then not only do he poor get poorer but the wealthy don't do as well either. This is true not only on a national level but also internationally as well, and as long as the intelligentsia have a pet theory that is not countered, then modern "liberal "politics will let it play out that way.

Another effect is the basic elementary economic notion that , if open trading between nations is good overall, then there is no basis for not allowing nations to compete economically on service jobs that can be easily shifted overseas.

And finally, the way most modern democratic republics have evolved, only organized interest groups are heard by the policymakers and legislators, while the vast majority of the unorganized electorate are not heard. Perhaps the rationale is that they are heard indirectly via the interest groups that depend on the electorate's support in some way. In any case, since corporations are officially and legally "persons" with the same legal rights as individuals, and since it is in the interest of these "persons' to submit an organized lobbying effort to minimize their overhead by shifting high paying service jobs to low wage countries, the practice will grow in an unbounded manner until we are all at the same wage level.

 

[Tobalcane]

“Funny that neither party is discussing this as a negotiable item for the November elections.”

Well I don’t think it is on their radar screen yet. The escape goat for today’s high unemployment rate is the technology big bubble bursting and company scandals (Enron syndrome). In a way, it is the politicians best interest to “look away” for awhile until the hurting companies regain there footing in the market place. It all comes down to money and profit. Once the hurting companies are back in the black, the politicians will swoop in like a super hero and proclaim that “out sourcing over seas is bad and hiring our own is good”.


Go Mechanical Engineering
Tobalcane

 

[CanEngJohn]

The only person you can truly blame for outsourcing is yourself - the consumer.

If you were willing to pay top dollar for the products made in America so that companies would have what they felt to be the desired profit return there wouldn't be a need to outsource.

Buy products made in America with American materials and don't buy anything outside of that and your outsourcing problem goes away.

Anything else is just a complication of the issue and trying to point to something that isn't truly a root cause.

BTW, similat to GregLocock, I don't mind American outsourcing in the slightest.

 

[Maui]

I believe that WalMart is now the largest retailer in the United States. They achieved this success by offering consistently low prices, and management aggresively promotes this idea in their ad campaigns. The end result is that peolple love to shop there. The next time that you shop in one of their stores, check to see where their products are manufactured by looking at the labels. You will have difficulty finding ANYTHING that was made in the United States. So if the goal is to buy American, maybe you shouldn't be shopping at WalMart at all. Whether or not you are conscious of it, you are making a decisive statement when you lay your money down.


Maui

 

[zdas04]

We need to all get used to a global economy - it's only going to get more global with time.

If you can hire a qualified individual in Indonesia for $30k/year to do the job of a $60k/year person in the U.S. and the result is the same, then you'd be stupid not to do it. There are tasks that can be packaged for a remote performance. Other tasks cannot be successfully packaged and have to be done here (it is hard to drill a Wyoming Coalbed Methane well in Bangladesh).

The interesting thing is that just a few years ago I would have written "... qualified individual in ... for $10k/year to do the job of a $55k/year ...". Nothing inflates wages like the presence of work. So you start pumping money into a poor economy and the people making the good money spend it. They spend it in stores and buck up employment in the retail industry. They spend it on stuff and buck up manufacturing industries. In a pretty short time, the differential across markets shrinks to the point that wholesale job exports stop making economic sense.

I am absolutely convinced that in this century the world will make the same sort of progress the west made in the last century. Within the next 100 years it will be as common for an Indian firm to use U.S., Canadian, or Australian tech support as it is today for a U.S. firm to use Malaysian tech support.

Exporting jobs is an economic aid program that has a heck of a lot more chance of success than any government program ever has.


David Simpson, PE
MuleShoe Engineering

http://www.muleshoe-eng.com

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips Fora.

The Plural of "anecdote" is not "data"

 

[ScottyUK]

I find it vaguely amusing listening to the contributors in the US contemplating the demise of their manufacturing industry. We Brits are in certain respects envious of the US, which at least has a manufacturing industry to worry about! The bulk of US utilities are US-owned. Your government imposes unlawful import restrictions on European steel to protect US steelworkers jobs. You pay next to nothing for gasoline. You guys don't have it so bad!!

Have a look at British industry, if you can still find any bits big enough to see from 4,000 miles away. Struggling? I can find few enough bits of British industry that I can recognise from my own childhood, not to mention the ghosts of the great engineering companies from my father's and grandfather's era. The problems you are seeing are no different to what is happening all over the Western countries.

Globalisation is collectively our own fault to a large degree: we sold our technology to the upstart nations and pocketed the profit; our companies went to the East for cheap labour and we bought the products; we shut down our polluting industries to move the mess onto some third-world country; our oil companies - and the US is the chief offender - set up shop all over the world to drill for the black gold to feed our vehicles; and so on.

None of those things could have been done without the western nations wanting more for less. Does the old phrase 'reap as ye sow' strike a chord?

And finally, to quote Bruce Springsteen,

"They're closing down the textile mill, 'cross the railroad tracks.
Foreman says 'these jobs are going boys, and they ain't coming back'"

A star for the first person to get the album and track title!



----------------------------------

If we learn from our mistakes,
I'm getting a great education!

 

[Boathouse]

I had been involved (in my last company) heavily from a technical point of view with outsourcing engineering tasks to other countries. The top level management view was that an overhead rate of $15 USD per hour against our internal rate of $100 USD was a no brainer BUT what they didnt consider was that for evey hour of design and development we used from (in this case) Taiwan we had to hand hold for an equivalent hour thus the rate was $115 per hour. The rate of rework was high and had not (over three programs) reduced by any great amount.

Another draw back was that we were essentially training foreign workers whilst laying off our own, thus leaving a widening experience gap that in 15-20 years will be crippling.

Imagine a war in Asia for instance that would sever our ties to that particular area and there would be no one at home with the relevant experience to pick up the work.

I believe this is a dangerous path to tread without back-up.

My real point, after this tome, is that the savings associated with outsourcing to "third world" countries (couldnt think of a less demeaning description - my apologies) are not as they would first appear.

Enough said, I will dismount from my soapbox

 

[CRG]

Who is to blame for US outsourcing? I am when buy products that are imported or designed outside of the USA. I can afford to buy domestic, but I like to get the best value for my dollar. Apparently, most other Americans like value too, including other people making comments here. My recommendation is if you don’t like outsourcing, spend your time trying to find domestic products instead of shoping for value.

 

[QCE]

Who is to blame for US outsourcing?

It is those damn poor people in other countries. Shame on them working for low wages.

We have got to put an end to this!

 

[Boathouse]

The products I am referring to are gas turbine aero engines and the technology and expertise to install them in aircraft, helicopters, tanks etc.

Once this experience is left to die out and/or exported then we will no longer have our lead in these fields. I nor anyone I know, will ever buy one of these products but they represent a massive export base for this country.

I left the UK for the USA many years ago precisely because engineering was being swapped out for a service economy - well guess what, if we dont produce saleable goods, then there will be no one with money to but those services.

I can't fault the logic of "spreading" the wealth but we need to keep our core competencies (sp?) in some fields at least to allow continued growth for this great country.

In reference to your last comment, I actually do hunt out U.S produced goods where at all possible since to me (in my tattered mind) it still represents the quality I require. This is getting harder to do and I am very fortunate to be able to spend more for some items to get that "Made in USA" tag.

As a side note, when I became a U.S. citizen, a neighbor gave me an American flag for the front of our house...it was made in China!!

 

[SLTG]

Outsourcing is part of an economic cycle. Now, you outsource parts to Taiwan, Korea, etc. When those countries standard living start to increase, they too will outsource it to another third world countries.

SLTG

 

[CRG]

QCE, perhaps I was too quick to blame myself for outsourcing. It is all a mater of perspective.

Your comment made me laugh out loud.

Thanks for your extraordinary insight.

CRG