| | Offshoring : The Worst Is Yet To Come As a definition of Offshoring I suggest “the transfer of work performed by American and Canadian employees to offshore contractors and the subsequent dismissal of the affected employees in the United States and Canada.” In recent months we have noticed that “Information Telephone Operators” have absolutely no knowledge of North American geography, and while their English is good and they are polite, they speak to us from many thousands of kilometers away. But the offshoring of this kind of work is only a small portion of what is a growing trend. Some time ago there were confirmed newspaper reports that IBM was laying off 4700(!) computer programmers and contracting out the work overseas. The Economist takes the position that we are “hysterical” about offshoring. I would like to recommend that highly respected periodical to ask one of its crack reporters to check on the dismissed programmers a year after their dismissal to find out if they are employed and at what jobs and for what salary. Just two hours’ drive from Montréal lies the town of Montpelier, the state capital of Vermont which has a population of about 8000. The largest non-governmental employer is National Life of Vermont, a life insurance company with a payroll of 900 employees. The Barre Montpelier - Times Argus reports that the work of 158 employees has been contracted out overseas with the justification that this move will enable the company to stay competitive and provide jobs for the remaining 742. By my calculation, the dismissed employees make up about 16% of the company’s workforce. Assuming that National Life is an unusually small life insurer, and that the “skills and responsibility mix” is different in larger enterprises, and that only 12% of the work can conveniently be offshored, this leads to a potential dismissal of 191,152 employees nationwide. According to the Statistical Abstract of the United States there are 1,596 000 employees, excluding salespersons and agents at insurance offices. According to a lengthy feature article in the Boston Globe on Nov. 2, 2003, it was estimated that 295,034 jobs would be offshored by 2005 with a predicted total of 3.32 million by 2015. Since then, Forrester Research, the firm which did the research, has now dramatically increased its forecast to 800,000 jobs for 2005. What is wrong with our sharing our prosperity? Actually, we do not do nearly enough, as the column “America, Canada, the Generous” argues. But we are talking here not about capital outflows which create jobs and improve infrastructure, but of a process of robbing Peter to pay Paul. Most of the jobs being offshored are reasonably well-paid and provide good working conditions and significant benefits. Employees of fast food restaurants do not have to fear offshoring, nor do garbage collectors working for private contractors. The idea that a “job is a job” is completely false. When interim censustakers interview a sample of the population to find out details about current employment, those who respond that they are self-employed are counted as being at work, when in fact the revenues which they generate may be less than what they would receive from welfare. Also, a full-time job with benefits is worth a great deal more than a contract for a year to perform certain work, which evaporates at the end of the contract. Pundits, including the very much overrated Allan Greenspan, suggest that we have to be at the “cutting edge” of technology, always a step ahead of the competition. Interestingly, the number of “cutting edge” jobs is never mentioned nor the number of employees here capable of performing them. What is forgotten, is the fact that Indian engineers and Chinese scientists are every bit as good as our own, despite the fact that a majority of their countrymen and women are not highly educated. A more interesting argument in favour of offshoring is that history is repeating itself. For example, when factories were built in great numbers in Lancashire and Bohemia, “cottage” workers could no longer compete and became unemployed. However, the factory jobs were so numerous that the former cottage workers were easily absorbed. When the automobile and the truck became the standards for transportation after World War I, millions of persons producing harnesses and buggies, raising and training horses, growing fodder for them and working at similar activities became unemployed. But automobile and truck manufacturing led to the creation of an abundance of jobs in garages, filling stations, motels, on highways, and as highway police. The horse-related occupations became a distant memory very quickly. Information technology (IT) looked for a while like the “automobile” of the present era, but the trend now is to export a growing number of these jobs offshore and that is precisely why there is such an outcry. The persons who make the economic decisions are increasingly ensuring that history does not repeat itself. In the arguments for and against Offshoring, I have also noted an absence of concern about our negative balance of trade that is running at an annual rate of about 500 billions a year, the equivalent of the Gross Domestic Product of the Netherlands. When thousands of offshore employees in India and China have to be paid, foreign currencies have to be bought which clearly increases our negative balance of payments. In this respect, the Canadian economy is different, since the export of natural resources produces a trade surplus. Offshoring is clearly a part of Free Trade and any doubts raised about it immediately brands a critic a “Protectionist” which is nearly as bad as a “Liberal.” Obviously, Free Trade was very beneficial for European developed countries and can be advantageous elsewhere as well. Free Trade without governing wages, working conditions and environmental standards in the producing countries, rewards low standards and the suppression of trade unions. It is, however, perfectly acceptable to societies which value only the rewards to corporate officers and major shareholders. Some older readers of Ripostejournal may remember the formerly ubiquitous cigarette company slogans such as “I would walk a mile for a Camel” which promoted a brand of cigarette with a large Dromedary on its package. And then there was LS/MFT – “Lucky Strikes Means Finer Tobacco.” For our current brand of Free Trade I would like to suggest FHB/FSA “Forget Human Beings - Full Speed Ahead.” Unfortunately the solution to the problem of Offshoring and its negative effects on our two societies is not easy to find. The first step, however, is to recognize that a problem exists’. | | |
