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Is outsourcing outrageous?
One of the biggest bogeymen in thecurrent campaign is outsourcing. During the primary fight, Barack Obamaand Hillary Clinton pounded the drum about the damage done to Americanworkers by outsourcing and outdid each other in promising to stop itthrough tax policies and renegotiating trade agreements.
Obama still inveighs against it in his stump speech, as he did on June27 in his Unity, N.H. rally with Clinton. "We can keep giving taxbreaks to companies that ship jobs overseas, or we can give taxbenefits to companies that invest right here in New Hampshire," Obamasaid.
On other occasions, as in a June 11 speech in northern California, thepresumptive Democratic nominee is less dogmatic about free trade andoutsourcing, acknowledging that globalization has irreversibly made theworld a more competitive place. His solution is to make Americanworkers more competitive in this environment, through education and fostering innovation.
Obama still inveighs against it in his stump speech, as he did on June27 in his Unity, N.H. rally with Clinton. "We can keep giving taxbreaks to companies that ship jobs overseas, or we can give taxbenefits to companies that invest right here in New Hampshire," Obamasaid.
On other occasions, as in a June 11 speech in northern California, thepresumptive Democratic nominee is less dogmatic about free trade andoutsourcing, acknowledging that globalization has irreversibly made theworld a more competitive place. His solution is to make Americanworkers more competitive in this environment, through education and fostering innovation.
No one can argue with that - it would certainly helpthe economy. And yet John McCain is derided by his Democratic criticsif he suggests that outsourcing and globalization are good for theAmerican economy. He is essentially saying the same thing as Obamawithout demonizing outsourcing or the companies that practice it theway that the Democratic candidates (think of John Edwards) have beenwont to do.
A chief executive who recently outsourced his customer call center tothe Philippines and his IT help desk to India says the main reason wasthe much higher efficiency of those service providers - resulting inhuge savings for his customers and his shareholders.
Lower wages were not the motivating factor. Anyone who outsourcesabroad because of lower wages is being short-sighted, he says. Rather,for him, it was the performance of the provider on quality metrics likepercentage of calls answered within 30 seconds - much higher than thein-house operation at the company.
When he visited the call center in the Philippines, this manager foundthat employees invariably had a college education, and were motivatedin their work because the service provider offered them a career pathbased on their performance. By contrast, in the U.S., call centers areseen as a dead-end job and plagued by high turnover that is verycostly.
Why don't American companies offer the same efficiency at a callcenter? Well, this chief executive suggests, tax and regulatorypolicies in the U.S. can make it difficult for entrepreneurs to startup businesses. Also, it's hard to find people qualified and willing todo this kind of work.
By the way, this American company didn't get any tax breaks forshipping these jobs overseas. The savings were operational, and thedecision was a simple business decision - the company's customers andshareholders, and so ultimately its employees, benefited from higherquality at lower cost.
This is the kind of competition that will force American companies andAmerican workers to be better. Tax incentives like those proposed byObama may lead to some job creation, but not jobs that can be done moreefficiently abroad. By the same token, some of the tax increasesproposed by Obama - such as increases in the capital gains tax as wellas higher income and social security taxes on high earners - may notfacilitate business startups and job creation.
This is what happens when you let political rhetoric interfere witheconomic analysis. McCain, for all his professed ignorance ofeconomics, seems to have grasped the basic facts of trade andglobalization, while Obama, in his efforts to counter Clinton andEdwards, has gotten it only half right.
This is not the issue that will decide the election, but the winner maynot decide the issue, either. When this chief executive, who is anObama supporter, visited his call center provider in the Philippines,they asked whether an Obama victory would mean he would have to cancelhis contract. No, he told them, that's not the way our system works.
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