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December 08, 2003

The winners and losers in offshore outsourcing


Some interesting extracts from New York Times' coverage of a roundtable discussion on the topic of job migration:

Stephen S. Roach (managing director and chief economist of Morgan Stanley):

Over the September to November period, employment has turned up, but many of those jobs came from the temporary hiring industry. These are service jobs, contingent workers without benefits and significantly lower pay scales. We're getting the G.D.P. growth, and by now any recovery in the past would be flashing green on the hiring front. This one isn't.... This is a profoundly different relationship between hiring and the business cycle. And I think these jobs are, by in large, lost forever....

...This is classic election-year posturing by a Congress that is basically responsible for the problem itself and doesn't want to admit it. We have trade deficits with China and Japan because Washington is running the most reckless fiscal policy we've seen in the United States since the late 1960's. They are the problem. It's not the Chinas and Japans and Indias of the world. Moreover, there are a lot of assumptions being made, especially by political leaders, that the rapid growth of Chinese exports and production is the smoking gun of the threat to traditional sources of job creation. About two-thirds of the export growth China has realized over the last 10 years has come from Chinese subsidiaries of multinational corporations headquartered in Japan, the U.S. and Europe and their joint venture partners. These are our companies. It's us; it's not necessarily them....

...In the future there are two roads. One is to look backward and hang on to what we think we're entitled to. The other is to recognize what has made America. Our virtues lie in a flexible and open, technology friendly, risk-taking, entrepreneurial, market-driven system. This is exactly the same type of challenge farmers went through in the late 1800's, sweatshop workers went through in the early 1900's, and manufacturing workers did in the first half of the 80's. We've got to focus on setting in motion a debate that pushes us into new sources of job creation rather than bemoaning the loss. There are Republicans and Democrats alike who are involved in this protectionist backlash. They're very vocal right now, and they need to be challenged.

Diana Farrell (Director of the McKinsey Global Institute, McKinsey & Company's internal economics research group):

There is an assumption by protectionists that these jobs are going somewhere else, and all this money has been pocketed by C.E.O.'s who take it home. A little more sophisticated version is: It's being pocketed by companies in the form of profits. One step further and you say those profits are either going to go as returns to the investors in those companies, or they're going to go into new investment by those companies. Those savings enable me, if I am an investor, to consume more and therefore contribute to job recreation, and if I am a company, to re-invest and create jobs. That's important because I agree that we are migrating jobs away, some of which will never return, nor should they....

...We will require different services, medical devices, all kinds of things to support an aging population. Fifteen years ago, you would not have been able to fathom many of the jobs that exist today.

M. Eric Johnson (Director of the Center for Digital Strategies at the Tuck School of Business, Dartmouth College:

It's all about innovation and productivity. As long as we maintain those two engines, we'll continue to have a very high standard of living. Out in the Bay Area there are plenty of folks who would love to create a little bit of protectionism around their I.T. jobs, but we are far better off letting a lot of those jobs go. Low-skill jobs like coding are moving offshore and what's left in their place are more advanced project management jobs.

Click Here to read the full article titled "Who Wins and Who Loses as Jobs Move Overseas?"