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Outsourcing America: The True Cost of Shipping Jobs Overseas and What Can Be Done About It / Edition 1

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Overview

One of the most controversial topics in the news is the outsourcing of American jobs to other countries. Outsourced jobs have extended well beyond the manufacturing sector to include white-collar professionals, particularly in information technology, financial services, and customer service. Outsourcing America reveals just how much outsourcing is taking place, what its impact has been and will continue to be, and what can be done about the loss of jobs.

More than an exposé, Outsourcing America shows how offshoring is part of the historical economic shift toward globalism and free trade, and demonstrates its impact on individual lives and communities. In addition, the book now features a new chapter on immigration policies and outsourcing, and advice on how individuals can avoid becoming victims of outsourcing. The authors discuss policies that countries like India and China use to attract U.S. industries, and they offer frank recommendations that business and political leaders must consider in order to confront this crisis—and bring more high-paying jobs back to the U.S.A.

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Editorial Reviews

Choice Magazine
"Ron Hira (Rochester Institute of Technology) and Anil Hira (Simon Fraser Univ.) provide a balanced, comprehensive, and easy-to-read analysis of the outsourcing of American jobs to other countries. Though outsourcing has positive and negative consequences on the American economy, its extent and impact have not been clearly measured. The authors discuss major reasons they believe companies are moving jobs overseas: cost and salary savings, better or unique talent in countries such as China and India, tax incentives, access to emerging markets, immigration policies, and corporate strategies that no longer include workers. They recommend acknowledging that a problem exists, gathering outsourcing data, reforming visa and trade policies, adopting more pragmatic approaches to government procurement, supporting displaced workers, and training workers for the new technological economy. Several statistical tables and numerous corporate outsourcing examples are included. Appendixes define outsourcing and analyze key outsourcing studies and legislation."
The Public Register
"Here are many reasons why this book on overseas outsourcing is worth reading. Not the least of these is its interesting and rationally stated analysis of outsourcing’s impact on the U.S. economy."
Publishers Weekly
Two Ph.D.s weigh in on globalism's hottest button. In the Hiras' preface, they note that "Ronald Reagan made most Americans feel proud because he stood for American values, including supporting democracy and free markets abroad." That kind of giant, unexamined assertion does not bode well for a work purporting to be analytical, and this book is best read as a polemic. The economic arguments are legitimate, but following the CNN anchor's foreword calling for a moratorium on outsourcing, the two economist authors give subtle and not-so-subtle cues throughout, starting with the subtitle, that they find the practice dubious at best. Yet, in a refreshing change from the spate of protectionist conservatives calling for the end of outsourcing, the Hiras (they are brothers) offer a worker-friendly set of prescriptions that include adequate notice, legislated relief for displaced workers and-hold on to your desk chair-Canadian-style socialized medicine. A decidedly mixed bag, this book contains surprises. (May 26) Copyright 2005 Reed Business Information.
Library Journal
If there is one word that terrifies American workers today, it's outsourcing. Ostensibly a new way for companies to cut costs, outsourcing is expected to move millions of jobs overseas in the next ten years. Outsourcing experts Ron Hira (public policy, Rochester Inst. of Technology) and Anil Hira (political science, Simon Fraser Univ.) have written an excellent book that brings clarity to this troubling subject. While providing a thorough summary of both pro and con arguments, they don't buy into the premise that outsourcing is either inevitable or necessary. They also demonstrate that it is very much a part of the whole globalization and free-trade debate, with mixed results for all trading participants. The authors acknowledge that while most studies seem to promote the positive effects of outsourcing, there has been very little discussion of the long-term consequences for the U.S. economy. Additionally, with companies overstating the gains and observers raising privacy concerns about sending medical records abroad, serious questions have arisen over the benefits of outsourcing. Given the ongoing debate, readers need a well-reasoned and sensible book like this to help them understand what outsourcing is and what it is not. Recommended for larger public libraries.-Richard Drezen, Washington Post/NYC Bureau Copyright 2005 Reed Business Information.
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Product Details

  • ISBN-13: 9780814409893
  • Publisher: AMACOM
  • Publication date: 4/30/2008
  • Edition description: Revised
  • Edition number: 1
  • Pages: 288
  • Product dimensions: 6.00 (w) x 9.00 (h) x 1.10 (d)

Meet the Author

Ron Hira (Rochester, NY) is a recognized expert on outsourcing, and the only person to testify twice before Congress on its implications. He has appeared on national television and radio, and has been widely quoted in The New York Times, Time, Newsweek, The Wall Street Journal, Financial Times, and other publications.

Anil Hira (Burnaby, BC) is a specialist in international economic policy and trade issues. He currently teaches at Simon Fraser University in Vancouver.

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Read an Excerpt

What Outsourcing Means for America

The cover of the February 3, 2003, issue of BusinessWeek showed a man in a business suit hanging on for dear life to cargo that was going to be shipped overseas. “Is Your Job Next?” the headline blared, followed by this disturbing preview of the article inside:

A new round of GLOBALIZATION is sending upscale jobs offshore. They include chip design, engineering, basic research—even financial analysis. Can America lose these jobs and still prosper?

This story started the debate over whether transferring good jobs to cheap overseas locations—outsourcing, or more specifically, offshore out-sourcing—is good for America.

The debate raged in relatively small circles until nearly a year later, when President Bush’s chief economic adviser, Dr. Gregory Mankiw, flippantly answered a reporter’s question as to whether outsourcing was good or bad, “Yes, it is probably good for America in the long run.” That’s when the story hit the front pages of nearly every major newspaper in the country. The reaction was swift and divided. The elites in corporations, policy circles, and newspaper editorial boards unequivocally and resoundingly supported Mankiw’s assertion that exporting high-paying U.S. jobs is a good thing, while most “average” Americans reacted in just the opposite way, with grave concern about the consequences of outsourcing for themselves and their children’s futures.

Who is right, and why is there such difference in opinion about whether this is good for America? Unfortunately, the public debate has been drenched with innuendo presented by both sides as unassailable natural laws and sensationalism. This has made it nearly impossible to explore the positive and negative consequences of outsourcing and what we should do about it.

The problem isn’t so much that outsourcing is happening as howit is happening. In this book, we investigate outsourcing by presenting the full set of facts—what we know and, more important, what we don’t know about how it is affecting America’s economy, jobs, national security, and future.

Outsourcing Cannot Be Ignored

As the twenty-first century moves through its first decade, Americans have begun to notice a growing trend in their economy: the accelerating loss of jobs to overseas workers. Whether it’s called “outsourcing,” “offshore outsourcing,” “offshoring,” or some other term,1 it’s a phenomenon that cannot be ignored. The media have started to highlight the devastating impacts on individuals and communities, and some politicians have begun to pay attention. But the trends indicated by the facts and figures are truly alarming.

. What does the future hold? We are at just the beginning of the outsourcing phenomenon, or as some experts like to put it, “the outsourcing tidal wave.” It will only grow in scale, scope, and speed by dragging out to sea many good-paying U.S. jobs with it. Experts at the University of California have estimated that a staggering 14 million white-collar jobs— nearly one in nine of all U.S. jobs—are vulnerable to being outsourced. These are high-paying jobs, with more than half of them paying above the average salary of $31,720. A 2004 report predicted that approximately 3.5 million white-collar jobs and $151 billion in wages would move overseas by 2015, with 830,000 jobs leaving by the end of 2005.

. What types of jobs are involved? A wide array of jobs have already been shipped overseas, including call-center operators, information tech nology, accounting, architecture, newspaper reporting, medical and legal services, and high-level engineering design. One report estimates that 2.3 million U.S. jobs in banking and securities may move overseas. Another study predicts that 700,000 customer service and corporate back-office jobs will move from the United States to India by 2008. According to one outsourcing CEO, any work that can be sent over a wire can be sent offshore. As a result, highly sensitive information on personal finances and medical records is being handled offshore.

Who’s driving the outsourcing phenomenon? U.S. companies are enthusiastically embracing offshoring. Company managers and executives are being told that offshoring is an “imperative,” and if they want to keep their jobs, they must outsource. Many companies have employed programs to accelerate the process that they euphemistically call “knowledge transfer,” whereby they force their U.S. workers to train foreign replacements. The U.S. worker is then laid off after his or her knowledge has been extracted. Venture-capital firms are forcing their start-up firms to outsource as much work as possible. Venture-capital-funded start-up firms are recognized as the lifeblood of future innovation and a major reason for Silicon Valley’s success. If these jobs are outsourced, what are the implications for future innovation? And the response from "American" universities has been nothing short of remarkable. Rather than focus their vast resources, intellectual and financial, on helping American students and workers respond to outsourcing, they have instead pursued business opportunities. They have embraced outsoucing by creating research institutes, really consulting shops, to help firms more effectively ship jobs overseas. They are working hand in hand with corporations to improve management practices of shipping high-level work overseas. And they have begun to build campuses and programs in low cost countries to serve workers in the outsourcing sectors of those countries. So, the universities, which are heavily subsidized by U.S. taxpayers, are undercutting American workers in the pursuit of their own profits just as multinational corporations. In fact, Cornell University, an Ivy-League school and land-grant institution, has declared itself a "Transnational University" in its mission statement.

Can the United States compete with low-cost labor abroad? Wages in developing countries such as India and China are 10 to 20 percent of comparable U.S. workers, and there is a nearly endless supply of educated underemployed workers in those countries. And it is much cheaper to live in a developing country. For example, the cost of living in India or China is one-fifth that of the United States. Wages in those countries will not reach parity with those in the United States for many years, maybe decades. Many other developing countries, such as those in Eastern Europe and Latin America, are trying to emulate India’s success, adding even more competition for U.S. workers.

Will the United States be out front in the next technological revolution? Not necessarily. Many of our best and brightest students are not majoring in technology disciplines because of the fear of offshoring. For example, computer science enrollment dropped by 20 40 percent in the between 20013– 064 academic years. This threatens America’s future ability to innovate. The next generation of innovative jobs easily could move overseas as India, China, and other low-cost countries attract high-level research and development work. So, the expectation that the United States will generate the next wave of innovation in biotechnology or nanotechnology is just blind faith. No one knows when those jobs will appear and, more important, how many of them will be captured by other countries. China is the number two producer of scientific papers on nanotechnology, a field that is considered on the cutting edge. And companies are expanding their research facilities in low-cost countries much faster than in the U.S. General Electric employs more researchers in India than America.

Can displaced U.S. workers find other jobs? The track record for the reemployment of displaced U.S. workers is abysmal. The Department of Labor reports that more than one in three workers who are displaced remains unemployed, and many of those who are lucky enough to find jobs take major pay cuts. Many former manufacturing workers who were displaced a decade ago because of manufacturing that went offshore took training courses and found jobs in the information technology sector. They are now facing the unenviable situation of having their second career disappear overseas. And no one can point to the logical replacement occupation of the future, the way that information technology once served for manufacturing.

Can’t the government help? The U.S. government is actively pursuing policies that accelerate outsourcing by undermining U.S. workers’ primary competitive advantage over foreign workers: their physical presence in the United States. The government has a guest-worker policy that enables companies to bring cheap foreign white-collar professionals to America to work on-site, replacing U.S. workers. The process also accelerates outsourcing as the United States transfers knowledge to foreign workers. Many then go back to their countries and compete with U.S. workers from there. Even more ominously, the U.S. Trade Representative, the chief U.S. representative for negotiating trade agreements, wants to make this process even easier through the World Trade Organization and trade agreements.

And here’s another thought to ponder: While private companies are spearheading the outsourcing movement, they are not alone. Federal, state, and local governments are outsourcing government services, raising the question of whether it is right to use tax dollars to create jobs offshore while there are so many unemployed people in America.

What Actually Happens with Outsourcing

Contrary to popular belief, understanding the impact of offshore outsourcing doesn’t require any formal economics training. Most economists assume the following idealscenario when thinking about outsourcing.

Before Outsourcing After Outsourcing

U.S. workers do tasks A, B, C. U.S. workers do tasks B, C, D.

Offshore workers are idle. Offshore workers do tasks A and some of B.

In this scenario, U.S. workers were doing tasks A, B, and C and offshore workers were idle before the outsourcing occurred. After the outsourcing,

U.S. workers no longer do task A, but have moved on to a new task, D. And instead of being idle, offshore workers are now doing tasks A and some of B. So, in the ideal scenario, U.S. workers remain fully employed but the mix of tasks they do has changed because of outsourcing. Offshore workers are now fully employed with tasks A and B. This is what one hopes will happen.

There are two important problems with this scenario. First, the presumption is that the U.S. workers who were previously doing task A will easily be reabsorbed into the workforce by doing tasks such as B, C, and D. This is what economists refer to as the “adjustment” process. Unfortunately, the practical problems with adjustment are substantial. For example, let’s assume that task A is computer programming, which is increasingly moving offshore, and task C is nursing, which is in high demand in the United States. Is it realistic to expect computer programmers to easily become nurses? The track record for adjustment is terrible, and there are no resources to facilitate the adjustment process.

The second problem is whether the new mix of tasks B, C, and D is better than tasks A, B, and C. Does the United States have a better set of jobs after outsourcing? No one really knows. It is important to note that many of the jobs being outsourced are very high paying jobs, and they are not being replenished with better jobs. In other words, task D has yet to appear. Plus, developing countries are targeting high-wage jobs for their own citizens. So, even in the ideal scenario there are major disruptions and uncertainties caused by outsourcing as U.S. jobs are destroyed, and there is only hope that those workers find better jobs. Reality, of course, rarely follows the ideal scenario.

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Table of Contents

Contents

Foreword by Lou Dobbs ix

Preface xiii

Acknowlegments xvii

Chapter 1: What Outsourcing Means for America 1

Outsourcing Cannot Be Ignored 2

What Actually Happens with Outsourcing 5

The Outsourcing Debate Is Misleading 6

Is Outsourcing Inevitable? 7

The Potential Impacts Are Far-Reaching 8

Why Outsourcing Is Fool’s Gold for Companies 9

What the U.S. Can Do About Outsourcing 10

Conclusion 12

Chapter 2: Outsourcing in a Larger Context 15

Free Trade Is Not Really “Free” 16

The Effects Can Vary Greatly 16

Understanding Historical Developments 18

Trading Jobs for Competitive Advantage 19

How Other Nations Handled Trade Competition 20

Conclusion 22

Chapter 3: The Public Debate on Outsourcing Is Misleading 25

What Experts Say About Outsourcing 26

Open Proponents of Outsourcing 30

Critics of Outsourcing 35

Conclusion 41

Chapter 4: Outsourcing of High-Wage Jobs 43

How Much Outsourcing Is Happening? 43

How Outsourcing Snowballs 48

A Lack of Government Monitoring 52

The Upward Trends in Offshore Outsourcing 54

Offshore Outsourcing in Other Developed Countries 59

Where the Jobs Are Heading 61

Chapter 5: Why Companies Are Moving Jobs Overseas 67

Reason #1: Cost and Salary Differences 67

Reason #2: Domestic Outsourcing as a Strategy 72

Reason #3: Better or Unique Talent Overseas 75

Reason #4: No Penalty for Destroying U.S. Jobs 76

Reason #5: U.S. Tax Incentives 80

Reason #6: Technological Change 81

Reason #7: Access to Emerging Markets with Proactive Policies 85

Reason #8: Easier with Experience 86

Reason #9: U.S. Immigration Policies 86

Reason #10: Corporate Strategy That No Longer Includes Workers 88

Conclusion 90

Chapter 6: The Far-Reaching Effects of Outsourcing on the U.S. Economy 95

The Long-Run Impacts on Economic Efficiency 96

The Impacts on U.S. Labor Demand 100

The Impacts on Types of Occupations and Education 109

The Threats to U.S. Technological Capacity 116

Conclusion 121

Chapter 7: The Human Face of Outsourcing: The Impact on Individual

Workers and Communities 125

The Immediate Impact on American Workers 126

The Long-Run Impact on American Workers 129

The Impact on Individuals 130

The Impact on Communities 135

The Indian-American Community: A Special Case 140

Conclusion 142

Chapter 8: How Our Dysfunctional Immigration Policy Fuels Outsourcing 147

Introduction 147

Some Immigration Basics 148

How Guest Workers Promote Outsourcing 150

Three Fundamental Design Flaws in the H-1B Program 151

Shutting Out the Best and Brightest 162

What We Should Do? 163

Chapter 9: How Developing Countries Attract American Jobs 167

Why Software Companies Move Overseas 168

Outsourcing to India 170

The Rise of Indian Software 173

The Indian Diaspora Brought High-Tech Home 175

Why Bangalore? The Development of the Indian

Software Cluster 176

The Indian Government’s High-Tech Policies 177

An Overview of China’s Proactive IT Policy 181

The Implications for Other Developing Countries 184

What’s Down the Road? 186

Conclusion 187

Chapter 10: Outsourcing in Europe and Canada 193

Introduction 193

Europe Is on Fire 193

European Outsourcing: The Irish Miracle and the

Eastern Frontier 195

Canada: Keeping Quiet—for the Moment 197

Light at the End of the Tunnel? Why Offshoring

Does Not Have to Mean a Race to the Bottom 199

Chapter 11: Ten Policy Recommendations 205

1. Acknowledge That a Problem Exists 207

2. Gather the Right Data to Study the Problem 208

3. Reform U.S. Visa Policies That Encourage Offshore

Outsourcing 210

4. Adopt More Pragmatic Approaches to Government

Procurement 211

5. Overhaul Assistance Programs for Displaced Workers 213

6. Establish Better Protections for Workers 215

7. Train the Next Generation of Workers to Have Lifelong

Marketable Skills 218

8. New Institutions Are Needed to Represent the Interests of Workers 220

9. Maintain Our Technological Leadership 221

10. Institute Trade Policies in the U.S. National Interest 223

Conclusion 227

Appendix A: Defining Outsourcing 231

Outsourcing 231

Offshore Outsourcing 233

Offshoring or Offshore Sourcing 233

On-Site Offshore Outsourcing 233

Insourcing 234

Global Sourcing 235

Best-Shore, Near Shore, All-Shore, etc. 235

Appendix B: Analysis of Key Outsourcing Studies 237

ITAA Study 237

Mann Report 238

McKinsey Report 241

Appendix C: Legislation Introduced Related to Outsourcing 243

Federal Legislation 243

State Legislation 246

Bibliography 247

Index 263

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  • Anonymous

    Posted May 15, 2014

    To daunte

    Really no " i dont want to go"

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  • Anonymous

    Posted May 15, 2014

    Raelene

    ( mutters something and wipes the blood off her dagger )

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  • Anonymous

    Posted May 14, 2014

    Cyrus

    Yells from the hall. "I said lovebirds!" The knife flies back and pierces her leg. "Don't throw anything at me ever again!" Disappears.

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  • Posted February 8, 2011

    An excellent book on reality

    I used some of Drs. Hira's literature to support my dissertation and was amazed at the depth of information these professors was able to locate, especially from our congressmen and senators.

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  • Anonymous

    Posted October 20, 2009

    No text was provided for this review.

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