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Offshoring: Opportunity or Threat

December 24th, 2003 · No Comments

NYTimes takes a look as seen as from the US of the new trend to outsource business processes and services to lower cost countries:

The short answer is that the trend is real, irreversible and another step in the globalization of the American economy. It does present a challenge to industry, government and individual workers. But the shifting of some technology jobs abroad fits into a well-worn historical pattern of economic change and adjustment in the United States.

In an information economy, technology services are an “input” in the same way that steel, glass and rubber are parts of a car. So reducing the cost of technology services curbs inflation while improving efficiency and productivity. A recent study by the McKinsey Global Institute estimated that every dollar of costs that United States companies move offshore yields a benefit of $1.12 to $1.14 to the American economy, mainly from cost savings and steering workers toward jobs that add more value than those replaced.

The difficulty of finding good jobs for workers, however, is a thorny policy issue…Research groups and academics have suggested forms of wage insurance, either publicly financed or privately financed by the companies that benefit from offshore outsourcing, to soften the blow for some transition period.

“Wage insurance is worth considering because technological change is so rapid,” said Robert B. Reich, a professor of social and economic policy at Brandeis University who was secretary of labor during the Clinton administration. “It would spread the costs of economic change over a much larger pool.”

Tags: Emerging Markets

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