26 March 2004

Take any of the multitude of stories swirling around the offshoring debate. In just about every one of them is a story like, ”She was making $110,000 in San Jose, but now someone in Bangalore is doing her job for $20,000.”

There’s an old trick for uncovering root causes, but it isn’t getting much use in the political realm of offshoring debate. Asking ”why” five times might begin to uncover some of the thinking that this country is going to have to do to properly assess the offshoring issue.

Here’s an example:

  • Q. Why are companies offshoring? A. To increase profits.
  • Q. Why does offshoring increase profits? A. Because the same or a similar job can be done cheaper.
  • Q. Why can an offshore job be done cheaper? A. Because the workers work cheaper.
  • Q. Why do the workers work cheaper? A. (your answer here)
Please understand that even this exercise has some flaws in it. First, we need to pay closer attention to the realities and the illusions of the word ”cheaper.” We also need to understand whether or not the ”same or similar job” really is the same or similar. Are we compromising? Are we settling for a lesser job because the work is so much less expensive? Have our standards for quality dropped?

Assume for a moment that the quality is at least as good – maybe even better. Is the work really cheaper? Is the fact that one of our domestic workers takes cell phone calls at 2:00 a.m. factored into the equations? Often those (remaining) domestic workers are the ones who are guiding and proofing the work done overseas. Have we factored in all the costs?

When Bangalore’s Starbucks parking lots are lined with SUV’s and luxury automobiles, where will the cost differential be? Will the drivers of those vehicles be dealing with federal, state and local tax burdens on income, cars, tags, real estate, capital gains and inheritance? Will their employers be facing minimum wage laws and workman’s comp coverage and Medicare and Social Security and …?

Someone needs to be evaluating the offshoring situation without a political motive. Don’t confuse a patriotic motive and politics. We should be concerned that our fellow Americans are losing their jobs without a clear way to replace them with comparable opportunities. Some of that is happening. It is not completely clear how much, because so many of the studies have been politically-oriented, funded or slanted.

We should be very careful about believing that some form of government intervention (protectionism) can solve this problem – if it is a problem – before we understand whether that same government intervention in years past caused the problem.

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