The shifting of jobs from the U.S. to other countries and its workers has been going on for decades. We hear news reports of examples of this now and then, but we do not get a good overview of its magnitude. This book, "Outsourcing America," gives us what we are looking for to learn more about the subject. I found it very readable. It flows wells, is full of details, and does not pull its punches. And although the book is pushed by Lou Dobbs in the Forward, I would not let his involvement worry you, if, like me, you tend not to be a Lou Dobbs fan.
In the Preface, the authors remind us that after World War II, Americans did not see much of anything other than prosperity on the horizon. The war was over, the Great Depression was a thing of the past. America was truly on top of the heap, with most of the money in the world, and most of the consumers and the manufacturing. But by the early 1970's, Americans were shocked to find that they were not in charge of their own destiny, as they had wanted to believe. The OPEC oil crisis showed us how vulnerable we were in the area of power. President Ronald Reagan talked a good story, but the truth was that he was growing the size of our federal government and the size of our debt. We were becoming a debtor nation, and we were losing control of our most valuable resources: large American companies, which had seemed to have our nation's interest at heart.
The authors tell us the truth: "U.S. companies are enthusiastically embracing offshoring" for a variety of reasons, including the lower wages found in other countries, plus the huge tax breaks to be gained. They also tell us of the terrible track record the corporations have had in the areas of compensation and/or retraining of workers who lose their jobs because of outsourcing. And they tell us that U.S. immigration and tax laws have actually promoted outsourcing and all its problems for U.S. workers.
The first awareness of major outsourcing came in the form of Japanese imports in the 1970s. Detroit was devastated by the impact, and the reaction of the U.S. business community was twofold: First, it promoted the idea that those American workers who lost jobs to overseas competition quickly would find domestic jobs that were as good or better; and, second, that the largest American companies would participate in what we now call "globalization" for their own benefit and, indirectly, for the benefit of the U.S. and its workers.
The reality is that millions of U.S. jobs have been lost to foreign competition since the 70s and that the majority of those workers have NOT found jobs that were as good or better than the jobs they lost. The reality is that most of our major U.S. companies HAVE done well in their involvement in globalization. Very well, indeed. But this, for the most part, has come at the expense of the American workforce.
Per the authors, outsourcing creates winners and losers, and American workers, for the most part, have been the losers. Companies tell us that they find better workers and opportunities overseas. What they really mean is that the costs of labor are cheaper, and the benefits paid are less. And all the talk about "penetration" into foreign markets is mostly used as a smokescreen. But what are the facts involved here? What do the studies of all this show?
The authors tell us that there have been three major studies done. They poo-poo them all as self-serving and purposely inaccurate. They also point out that the federal government has done little to slow the growth of outsourcing. No statistics are kept by the government, and companies are reluctant to share this information. Per the authors, the federal government has felt little pressure to slow the outsourcing process. Former Secretary of Labor, Elaine Chao, once said, "The stock market is, after all, the final arbiter." And several former CEOs have been upfront with their plans. Jack Welch, former head of GE, once said that GE would outsource 70 percent of its future work. And Carly Fiorina, former head of Hewlett-Packard, was deeply involved in the promotion of outsourcing of domestic work to India. Per the authors, IBM laid off its first domestic worker in 1992.
But it gets worse. American companies use subsidiary companies to hide their involvements with outsourcing and/or their development of new facilities overseas. Even federal and state governments have been found to be using companies that were outsourcing work, instead of hiring domestic workers. And American companies are buying foreign companies to get footholds in other countries. In many cases, their workers overseas travel back and forth from their native country to the U.S., as the demand for their services shifts. Major U.S. companies such as Microsoft have demanded H-1B visas for tens of thousands of overseas workers, claiming that they could not find domestic workers to fill the positions. No proof of these claims has been demanded by the government.
Also of concern is the development of huge foreign companies with business models designed around the exploitation of outsourcing of American jobs. The Indian company, Infosys, is a prime example. Per the authors of this 2008 book, this company, which is listed on the U.S. stock exchange, had a market capitalization of more than $30 billion. The bulk of its work is "designed to service North American and Western Europe markets, not its local markets." And much of this work is not in lower-level jobs, such as telemarketing. Infosys has become a major international IT company that has the resources and track record to be competitive with IBM in bidding opportunities around the world.
In many ways, this globalization of employment is a race to the bottom, as companies are always on the lookout for lower-cost labor and better taxation deals. The authors claim that our current immigration policies have been written, for the most part, by industry lobbyists. H-1B visas allow as many as 120,000 new foreign workers into the U.S. each year, and no one really knows the true number of these workers in the country at any one time. Estimates are as high as 500,000. The federal government does not track the salaries/wages of these workers. The assumption is that they are being paid 40-50% lower than what American workers would be paid with similar work skills. And, of course, these same workers can take work "home" with them, if they or their employer so choose. They would still be employed by the American company. In a well-documented case, Siemens transferred work done in the U.S. from domestic to foreign workers, who earned about one-third of what the domestic workers had been paid.
The book includes much more, including discussions about outsourcing from and into many other countries of the world. In the end, the authors say that "there are no silver bullets, and we don't advocate shutting down offshore outsourcing." They add, "The correct way to think about it is that outsourcing does not have to be a zero-sum game if we install the right policies." Ten recommendations are made and discussed:
1) Acknowledge the problem.
2) Gather the data and study it
3) Reform U.S. Visa policies
4) Review government procurement
5) Develop assistance programs for displaced workers
6) Establish better worker protection
7) Train U.S. workers for lifelong skills
8) Look for ways to better represent the rights of workers
9) Try to maintain U.S. leadership in technology
10) Review U.S. trade policies
The conclusion is that the U.S., and its economy, has its work cut out for it, if the momentum of outsourcing is to be reversed. The companies cannot be trusted, nor can the studies. And the federal government, to date, has not done much to help. One could wish that the book was more optimistic in its outlook, but maybe this shot of realism is what we need to understand the magnitude of the problem of outsourcing. I recommend the book highly.
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