The benefits of out sourcing, or lack there of.

Discussion in 'Business & Economics' started by Godless, Aug 7, 2004.

  1. Godless Objectivist Mind Registered Senior Member

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    While surfing the www, for international news n such I stumbled upon this. It struck me as funny, companies claim such benefits has outsourcing the labor out of this country for cheaper labor. They seem to forget that intergrety is NOT CHEAP!!.

    cheap labor

    That'm teach them.

    Godless.
     
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  3. dixonmassey Valued Senior Member

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    Business/capitalism is not a moral category. Appeal to integrity, etc. is futile. Business world is the least dominator world, i.e. the most ruthless, the most greedy, etc. person has an advantage over equally business savvy "nicer" person. Therefore, even if a capitalist is not totally sterile of compassion, he'll play the game according to the rules of the most greedy, the most uncompassionate guy. There is no choice there. That is why civility standards should be enforced on business. Otherwise, the least civil, the least socially responsible guy will always win business rat race.
     
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  5. robtex Registered Senior Member

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    Interesting buy product of outsourcing is where the labor (jobs) is the product will follow. Meaning as jobs diminish here so will consumption of non-essential products and services. Unfortunately for the producing corporations whom are so gainfully enjoying their cheap labor...their new labor will not be able to afford the products and services offered. So while they can mass produce they are making it harder to mass sell.

    A really easy illustration is the retail clothing industry. If you don't already know almost all clothing manufacters are made overseas in sweatshops where workers get pennies on the dollar in compensation. Even Levi's the last of the great american manufacters has closed it last usa plants in exchange for cheap labor.

    The result is that retail sales have hit an all-time low and their is no rebound in sight. Huge companies that were big players in the game like montgomery wards and weiners folded as a result of the retail outsoucing campaign.

    The auto industry which was one of the earlier industries to move outside the usa and use slave-labor (legalized slave labor) has been hurting for years. Find a day outside before 1990 where you get 0 % for 60 months for a new vechile. Financing is how money is made in the auto industry. I auto shopped last month and talked a guy down to blue book value on a used auto. My friend did the same last month. The auto industry is dying cause buyers are moving to cheaper more affordable vechiles to compensate not only for less wage earning jobs but far less job security.

    The tech support industry. The big seller for computers companies in the late 80's and early 90's was the tech support that went with their product. People bought high priced systems.....mainly from dell, compaq and HP gateway because of the tech support that went with it. Not today. Today you get a person who speaks english marginally and or and email correspondance instead. The result. .....people are buying cheaper systems in the stores cause the deal closer--premium tech support is no longer there and they are paying for it. HP and compaq have capitalized on it to a degree and sell a lot of basic systems in stores for very modest prices but they all can feel it to a degree and the prices on computer systems have declined as a result.

    I could go on from industry to industry but I hope you see the picture I am painting.....that picture is if a good percentage of high paying jobs are exported leaving unemployed or underemployed labor ....who locally, is going to buy the product?


    There is one good thing about outsourcing. It is creating a stable global economy but the United States will need to be much more aggressive about exporting those goods and be ready to sell them for a fraction of the cost they could ask in the states and the reason is that the pay scale is so much lower overseas.
     
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  7. Undecided Banned Banned

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    I could go on from industry to industry but I hope you see the picture I am painting.....that picture is if a good percentage of high paying jobs are exported leaving unemployed or underemployed labor ....who locally, is going to buy the product?

    Yes the crisis of capitalism, this was inevitable this is capitalism Achilles heel.

    Outsourcing creates those new markets, throughout the world major centers of investment China, India for instance are becoming huge consumers that will begin to replace the lost wealth from the west. Already these two nations represent 10 trillion worth of capitalization and purchasing power, and within this decade should surpass the US (China alone). America’s economic decline is inevitable, and the world is shifting to new areas of consumption and eventually it may be China who is outsourcing to America!
     
  8. Godless Objectivist Mind Registered Senior Member

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    The article spoke of stolen programs, my post was sarcasm.

    Integrity is not cheap, cheap labor will try and steal ideas for their own benefit. This was the point I was trying to make.

    I'm a capitalsit. I'm always investing in companies that trade in the market, so far I'm doing ok, however one has to know how to speculate. Speculation is; most American companies stocks are at the present moment trading down, it's a see-saw, I constantly study charts, to try and speculate which way a particular stock is going to move, I don't always bet on the up-and up, sometimes I bet on the way down, and still make a profit.

    Undecided you once explained to me the goal of corporations outsoursing, so they can make cheap products and give jobs to up and coming markets, soon Mexico will be making products basically at same labor cost, than the US. When this happens the life in Mexico will raise to almost our level. (this is how I understood what you explained.) However if Americans don't have jobs, we can't afford to buy, so we are heading down on our economic scale.

    I play the bear, and I play the bull, there's no one way to trade, the only way to trade is to make money regardless of what the stock is doing. Companies that have a high labor cost, seem to go down on stock prices, example. Target pays better than Wall-Mart, however Target stock trades at much lower price than Wall-Mart, (W-M BTW is made me some hefty profits in the past) Now is all defence industries, they are on the up, and up, thrown in with a few technologic companies for instance (Dish networks) that's making me a bit of profit. I don't know if these people do outsoursing, however I know the stock rises when labor is cheap, and goes down when the cost of production is too high. (these are just a few small example of what manipulates stock prices) there are many other.

    Godless.
     
  9. Naomi [oxiglycodextrosium] Registered Senior Member

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    Right.

    American workers: Overpowered unions. High minimum wage. This all adds up to more expensive, fickle labor.

    Foreign workers, let's take Indian workers as an example: Lower labor cost. Will not strike at the drop of a hat. Less overpowered unions. This all adds up to cheaper, more dependable labor.

    When the skill of both groups are approximately the same, and when you take a look at the above, it's apparent that the overpowered unions of America are lowering competitiveness of American companies.

    And people wonder why outsourcing is so popular. "Saving American jobs" my ass. It's simple. If you complain and strike all the time, you're going to lose your job to someone in India. If you shut up and work, you're not.

    Odd how people don't get that.

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  10. Pangloss More 'pop' than a Google IPO! Registered Senior Member

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    Also odd how outsourcing is an issue now, and yet was not an issue when it was growing in popularity all through the Clinton administration. Most likely we didn't notice it at the time, because employment was climbing as was the average income. But once the bubble burst, suddenly outsourcing became a great bugaboo. Point being we should have been on this earlier. Karma's catching up with us.

    I see some good, intelligent comments in this thread, which suggests to me that a lot of folks on both sides of the political aisle understand that this isn't just about outsourcing, per se, but about maintaining a competitive economy. I think Kerry has a good idea in offering tax incentives to companies who don't outsource, but aside from the obvious policing problems, I think we need to keep our eye on the ball and make sure that the focus stays on keeping the US competitive with its trading partners.

    For example, Indian labor is cheaper, but if American labor offers a competitive advantage in spite of a higher price, then it'll be chosen. If the American worker doing the same job can do the job more efficiently, produces a better sense of loyalty from the customer he or she is serving, and/or offers some other advantage, then the job'll stay put.
     
  11. dixonmassey Valued Senior Member

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    Considering that only 8% of the American labor force (outside of government) are union members, considering that outsourcing hits non union industries with the same ferocity (if not more) as unionized ones, considering that it takes income of 1000s of union members to make up a salary of a single CEO (there is bunch of other overpaid management leeches in companies), considering that upper management never takes pay cuts to save a company (only severence pay, multi-million pensions and golden parachutes are acceptable on the upper level) your anti-union drivel is very strange. It seems Rush is doing an excellent job on your brain. Greed of employers and employees must be balanced. It's way out of the balance today. Unchallanged capitalism=Ricardo's trap (salary of the workers tends toward their subsistance level provided no outside regulations/enforcement). Good luck in finding enough of cents to buy a bowl a soup in your dream world.
     
  12. Undecided Banned Banned

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    Undeicded

    Undecided you once explained to me the goal of corporations outsoursing, so they can make cheap products and give jobs to up and coming markets, soon Mexico will be making products basically at same labor cost, than the US. When this happens the life in Mexico will raise to almost our level. (this is how I understood what you explained.) However if Americans don't have jobs, we can't afford to buy, so we are heading down on our economic scale.

    Well the goal of corporations outsourcing is primarily for profit, but capitalists have to balance it all out. If wages go down in the US (which is the primary market) and wages don’t go up in India for instance then the crisis of overaccumulation occurs because more will be produced then can be bought. Thus in order for Globalization to work wages will have to come down in the West and to make up for that lost wage here; they have to make it up there. Eventually (who knows how long it could take) the world’s economy should reach equilibrium where wages aren’t the question anymore but pure Ricardan comparative advantage is the determinant of economic progress. Also in order for Globalization to work in a purely liberal sense currencies should be globalized. The West should be deflating and the third world inflating until they reach a synthesis wage, today that wage is $8,200, which means the US GDP per capita (37,800) should depreciate by $29,600 and the Chinese to go up by $3,200.

    Pangloss

    For example, Indian labor is cheaper, but if American labor offers a competitive advantage in spite of a higher price, then it'll be chosen. If the American worker doing the same job can do the job more efficiently, produces a better sense of loyalty from the customer he or she is serving, and/or offers some other advantage, then the job'll stay put.

    The only way the US can ward off outsourcing is by high productivity, if an American can do the work of 20 Chinese workers then there is no need to offshore. If Americans want to maintain her wage advantage then she needs to pump up the volume on productivity side. The problem becomes the more productive Americans get at their job there will still be higher unemployment. It’s a double edged sword.

    Oh I found out what is America’s comparative advantage industries:

    Revealed comparative advantage
    Non-electronic machinery 1.46
    Miscellaneous manufacturing 1.32
    Electronic components 1.32
    Transport equipment 1.28
    Chemicals 1.15
     
    Last edited: Aug 15, 2004
  13. Pangloss More 'pop' than a Google IPO! Registered Senior Member

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    No, that's not correct -- there are other issues besides productivity. Remember: Businesses are driven by the bottom line. Yes, sometimes managers get caught up in the popular craze of the moment, but they generally are quickly taught otherwise by competition.

    Just to give an example, 60 Minutes ran a story a couple of months ago about a tech company that had decided at some point that it had to offshore its programming department. It didn't work out so well, so they tried a different approach: Hiring American programmers for 40k instead of the 80k they were paying before. Voila, back to normal. (Makes perfect sense, really -- programming is getting easier, so why should it pay what it used to pay?)

    In fact there are articles all over the Internet about companies not happy with the quality of the work they're getting with outsourcing/offshoring, and are looking at bringing that work back in-country or offshoring it elsewhere. Point being that quality is an issue, not just productivity.
     
  14. Undecided Banned Banned

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    No, that's not correct -- there are other issues besides productivity. Remember: Businesses are driven by the bottom line. Yes, sometimes managers get caught up in the popular craze of the moment, but they generally are quickly taught otherwise by competition.

    It is true that there are other factors apart from productivity, but it is the most important one of them all. I will quote from my economics book about high wage countries competition with low wage:

    It’s really just that simple…American industry during the past 100 has done just that. Raised wages above their real value, and now it is idiotic for a corporation to remain uncompetitive for no reason.

    Hiring American programmers for 40k instead of the 80k they were paying before. Voila, back to normal.

    You know why, because now those Americans are being paid appropriately not outrageously like during the .com years. Their wages are more in tune with their productivity, so only reinforced my point.

    In fact there are articles all over the Internet about companies not happy with the quality of the work they're getting with outsourcing/offshoring, and are looking at bringing that work back in-country or offshoring it elsewhere.

    At lower wages…but there are many articles which discuss that outsourcing is more popular then not with most companies.

    Point being that quality is an issue, not just productivity.

    They are essentially the same thing Pangloss…

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  15. Pangloss More 'pop' than a Google IPO! Registered Senior Member

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    (shrug) I'll go along with that.
     
  16. robtex Registered Senior Member

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    Actually, outsourcing is one of a two part labor cost reduction program in many industries. The other aspect is H1B visas. These are extended work permits that allow workers to come to the united states and work without attaining citenship. The technology industry was the first to really capitalize on the idea of importing less expensive labor and the bush admin from what I remember, worked hard to make it an option for business.

    But the idea has been around for a while before the creation of the H1b visa's with migration work. I lived in northen california...north of sacremento for a while and while i was there i knew a guy who was a manager at a fruit packaging company. He said they would bring in workers from mexico for the picking season have them work the fields and than they would be done until next year. many of them were here on temp visas and returned the next year when season was there again.

    i didn't ask specfics but i am guessing that they were paid min wage or less for their manual labor.

    I am guessing (cause I don't know for sure) that the H1B program will keep growing largely because companies can look like saints for keeping production in the United States and H1B visa holders don't have to advertise their status making the labor concept largely invisible to the american citzens competing for their jobs.
     
  17. dixonmassey Valued Senior Member

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    There is a limit on how many H1B visas can be issued each year. I guess, 160,000 (or so) H1B visas can be granted each financial year. Corporate world has come up with way more powerful and theoretically limitless visa program - L1 visas (so called intra corporate transfer visas). That means that if an American corporation has a branch outside of American borders (or if an American company is a branch of a multi-national corporation), it can bring folks who work for that corporation internationally to work in the USA. No limits here. Globalization (one-sided, at least) of the work force has arrived.
     

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