Day: February 13, 2018

Overview To say that we live in a global economy has become a clichéd adage, the benefits of which tend to go overlooked as we grew more dependent on and used to them. Dr. Mark J Perry, economist and professor, states in his article, “Every time you buy groceries and clothes, use the services of a dry cleaner or a car wash, or eat in a restaurant, you are outsourcing. Just like a business, you compare the cost of producing those items or performing those services yourself, to the cost of acquiring them from others.” Another leading economist Luke Froeb, writing for the Managerial Econ blog said, “Will someone please tell the president that outsourcing is only trade…and that trade makes both parties better off. To see this, ask why we outsource banana production to Costa Rica. We could grow bananas domestically, in green houses. We don’t because it is much cheaper to grow bananas in Costa Rica.” Outsourcing is basically the trading of services, and offshore outsourcing extends this trading to a global platform. In December 2008, NBC News and the Wall Street Journal conducted a poll where they posed a pertinent question for all Americans, “Do you think the fact that the American economy has become increasingly global is good because it has opened up new markets for American products and resulted in more jobs, or bad because it has subjected American companies and employees to unfair competition and cheap labour?” While most Americans seemed and continue to be wary of the “immigration of labour force and emigration of GDP” issue, that is a rather skewed and narrow approach towards outsourcing especially in 2018, for reasons that shall be subsequently discussed in greater detail. For now, taking erstwhile US secretary of Housing and Urban Development Alphonso Roy Jackson’s words as our starting point, we shall talk about the paradox of corporate and social responsibility that lies at the crux of outsourcing, and things that are very easy to miss when you’re condemning what is destined to be the future of work. According to Jackson who worked under Republican President Bush, “Where the work can be done outside better than it can be done inside, we should do it.” As an indispensable business tool today, offshore outsourcing has become a gift that keeps on giving ever since its inception in the early days of the LPG (Liberalization Privatization Globalization) model era. But today, a challenging paradigm presents itself every time the economy is struck by a financial recession, regardless of whether that depression is causally related to trade. There is a marked tendency to shift the blame outside the purview of one’s own country; a diversionary tactic that makes people focus on external factors rather than the failures of their OWN legislative and financial institutions. This is how outsourcing has become the universal scapegoat for any decline in a nation’s GDP rate or the number of jobs created (by a first world country) for its countrymen. Future of Work With globalisation and the internet revolution, the world became smaller and more open to carrying out economic operations overseas. As the non-feasibility of managing all aspects of business became apparent to corporations, outsourcing presented itself as an alternative that could solve a lot of logistical and quality issues. It enabled them to avoid bottlenecks by allocating peripheral and even core functions to human resources located outside their immediate reach and for good reason. Take a moment to consider this: You now have at your disposal—a resource pool you don’t need to monitor or train, already equipped with a specific skill set that fit the requirements and most importantly, is ready to work for less than employees on the payroll. More importantly, you get to work with the talent which is specialized and can be used from project to project, thus ensuring agility and flexibility in workforce planning. The realisation dawned on business powerhouses that in order to be truly global corporations, they needed to engage and involve people from all corners of the world in the production process. Lee Kuan Yew, the longest-running prime minister of Singapore[1959-1990] who is also responsible for the nation’s meteoric rise from a third world to a first world nation, used outsourcing as a stepping stone and always endorsed it as a crucial foreign policy for any country to prosper in a neo-liberal open economy. “If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business” Perry agrees, “To survive, firms have to operate as efficiently as possible, and this requires them to consider all possible locations for producing goods or providing services at the lowest cost. The result is lower prices for consumers and greater overall output. The process indeed displaces some workers (almost always temporarily) but that should not blind us to the overwhelming benefits everyone derives from encouraging trade and the economic prosperity it yields.” What about the loss of jobs due to outsourcing? Business Week recognizes the fear and doubts enshrouding outsourcing even today— “Workers’ fears have some grounding in fact. Outsourcing companies and recruits have always had the benefits of global labour arbitrage to rely on. The prime motive for most corporate houses to jump on the offshoring bandwagon has been to take advantage of the huge wage gap between industrialized and developing nations.” Unemployment is a global problem irrespective of developed, developing or under-developed economy; and the priority to provide employment to the native labour market directly contradicts the ethos of outsourcing foreigners for cheaper labour. Multinational companies now face the paradoxical problem of choosing between social responsibility (of adding to the nation’s GDP) and corporate responsibility (to reduce their operational costs through outsourcing). The argument against outsourcing exploits to its advantage the (visible direct) reduction in the job creation rate and the increase in layoffs across certain industries and sectors in the U.S. A fair share of the blame is placed on the practice of purchasing labour overseas instead of at