Jobs, jobs and jobs. That was the central theme of U.S. President Barack Obama's State of the Union address this year. Not surprising at all because there are 13.5 million Americans who are unemployed today, and the jobless rate, though on the decline in the last three months, is still at an uncomfortable 8.5 per cent. And then, of course, there is the small matter that this is election year in America and the State of the Union address is one of the few opportunities Mr. Obama has to grandstand in the remaining period of his Presidency. It is, therefore, natural that he hit out at the outsourcing of jobs, yet again, though this time his ire was directed mostly against manufacturing companies. The President proposed that companies which outsource jobs should be denied tax benefits just as those that create them in the U.S. should be rewarded. While Mr. Obama's electoral compulsions are defensible, what is not is his understanding of why American companies, especially in the high-tech manufacturing sector, are moving jobs overseas. The simple fact is that it is not just cheap labour that is driving American companies overseas; it is also the availability of trained labour per se, in the required numbers, and the existence of efficient supply chains for high-tech gadgetry. The withdrawal of tax breaks might work if it were just the first reason; unfortunately for the President, this is not the case.
Apple is one of America's most admired companies but almost all its products are manufactured overseas. And cheap labour is not the only reason. As a recent article in the New York Times points out, Apple was forced abroad by the availability of talent, and in the huge numbers that it required. That such talent came relatively cheap was a bonus. While America leads in innovation, the fact is that it lags in producing the kind of trained workforce that high-tech companies need. This is something Mr. Obama has conceded in his address, saying that these companies have twice as many openings as the availability of such workers. Investing in education and training as the President promised will help but that will only be in the long-term. American corporations are competing in a global market and national commitments mean little to them. What is important is efficiency and these corporations will migrate to wherever they can find it in the world. Impeding them in their quest will not help but boomerang on Mr. Obama and the U.S. Preventing outsourcing is protectionism and as the Great Depression of the 1930s showed, protectionism worsens an economic recession. It can only be hoped that such populist rhetoric does not get sanctified as legislation in the run-up to the election.
Keywords: U.S. unemployments issue, Obama administration, Great Depression, outsourcing, protectionism
I agree with the content of editor,because unemployment is spreadind in USA is perplexing the economic strategies of the country and this also serves menance to failure of government as well as its populist rhetoric.now mr obama will have to see other measures to reform and tweak the worst.he should be opstimist to accomodate both overseas and domestic aspects of the business.any further restrictions will do but loss to his image so he should utilize flexible and feasible measure to save the global economy to avert unemployment and crises arising out of it and confidence building measure in the interest of companies to look into the new dimension of investment and investment friendly environment creation.
I largely disagree with your editorial about jobs in the US. The concept of a global economy, interdependence & outsourcing is around 12 years old, especially after the WTO treaty was signed by countries. Let us not forget that "protectionism" is a dirty word for countries like India, which depend on outsourced jobs in a large way. I ask - why do countries not have a right to protect & bring back the jobs home? In this context, why is the proverb 'Charity begins at home', so unacceptable? Would we allow jobs in India be shipped to Philippines or China? If the answer is 'No' then this is just another case of double standards. As for 'Quality workforce unavailable in large numbers', this is simply not true. That is an excuse to hire cheap labour abroad. If we can not create jobs in India without depending on the west, that it our problem. We have no right to cry 'wolf' if the west wants to bring back it's jobs. That's, just the right thing to do for any country.
Outsourcing has been the bane of US for far too long. The balance of
trade with China has tilted so adversely that US is a kind of bonded
to China economically. Manufacturing activities from 'pins and toys'
to power appliances and electronics have moved to China and the other
service related activities are also outsourced with the result there
is a drastic reduction in manufacturing activity within the US
causing acute unemployment situation for its own citizens.
Protectionism is a term shunned by capitalistic ideology; but,
Nationalism is more paramount to a country valuing its freedom and
sovereignty. It is time that US did something different to retain
their capital within their country. US have enough quality labor,
otherwise why unemployment? but,Yes, expensive. The US citizens should
learn to benefit their brethren and opt for their own manufactured
goods irrespective of cost consideration. Protectionism is only if the
State regulates; but citizens can remain Nationalistic.
In a globalized economy, the transformation of economics is very rapid. Economics cuts across national frontiers.Businesses and monies gets transferred in no time. Technology behind all this transformation is not evenly spread. Under these circumstances, it is no wonder that President Obama wants a protectionist economic management for his country's problems. The full impact of this global transformation is yet to be grasped by politicians to enable a level playing ground.
Obama misconstrued: President Obama has not opposed outsourcing. The past three and half years of record of his Presidency speaks for itself. The President in his address only indicated giving tax concessions to corporations that create jobs in the country rather than outside. To justify outsourcing that there is no talented labor available in US is farfetched. It is all about corporate greed. Hiring people cheap abroad and evading stringent labor laws protection, including minimal wages, given to workers in the US.
Apple was forced abroad by the availability of talent, and in the huge numbers that it required - that is only miniscule correct; major reason like 99% for outsourcing is labor costs cut and clear as crystal; labor costs in china and other asian countries like India, Indonesia, Thailand, Pakistan, Bangladesh is 90% and more cheaper and that's the one and only reason Apple, all auto cos from GM,ford to Toyota,Honda,Volkswagen,BMW, Benz etc etc make cars in asian countries
and make huge profits like more than 75% on each car on the cost of manufacuring each. High tech for Apple,auto cos. etc are required at R&D which is NOT in abundance in china or any of the above mentioned countries but cheapest labor is. So that's the the MAIN reason this outsourcing has been taking place since 1980s when china just came into the world scene as an excess labor force. Now that costs are slowly increasing in china etc. the west is trying to get new labor markets like Mynamar, african countries etc.
I am surprised the op ed writes found time to analyze Obama's speech and
to write a commentary on it. The op ed writers should have given equal opportunity to what Obama's detractors are saying in the Republican primaries. Finally the analysis should have compared how the US fares against China, Europe, India, and Japan, and offered some lessons learned for the local context.
According to Subra Suresh, current director of the National Science Foundatio in the US, as quoted by T.L Friedman and Michael Mandelbaum in their book "That used to be US", 80% of our IIT graduates used to migrate to the US in the 1970s and it has come down to 16% in 2009. Is this due to good job availability in India or is it due to any lowering of quality of education in IITs?
Outsourcing played a major role in the uprising of Indian and Chinese
economies, but this result is merely because of dictator rule that is followed in these private firms(which are outsourced the work from US) especially towards the labor right- workers are made to slog, working
day and night 24X7 to deliver what the Americans call cheap and
efficient. This might be due to willingness of Asians to succeed- >emulating the quality of say American lifestyles, but this cheap labor
will be non existent once the income levels of the masses in these
countries rise. In such a scenario a country less dependent on
outsourcing related jobs and more on jobs created by internal
consumption patters seems more future ready.
Even though the editorial touches upon the fact that there is a shortage of Skilled labour that can come in handy while making profits, America also has one more big disadvantage. The competetion. If it is not going to outsource its jobs to china, india or brazil its western European counterparts are going to do it which are as industrialised and definitely have a serious shortage of manpower when compared with the size and reach of operations across the world, thus gaining on the fact that they are going to get skilled labour at a less wage which is going to make their products much more competetive than the American products. Thus Outsourcing is a bitter pill that America has to swallow for its good and has every right to dislike it. Sorry America, protectionism simply wont work.
Outsourcing works both ways. While cost is the main criterion, availability of a large pool of resources is another factor which is why India and China have outsourced jobs. Body shopping is another thing that takes place as the host country does not have enough of talent. MNCs have gained enormous profits through outsourcing and today face threat because of counterfeit products. Whenever manufacturing is outsourced the recipient country gets the know how for free and soon imitation products appear that grow big to be a force. An example is the high speed trains that China is building and offering to the world. This is how Japan grew though from a pool of talent that had good knowhow. Once shipyards in the UK were big but gradually moved East. One day the reverse may take place. Obama should try to fix economy instead of lamenting on jobs.Jobs are created when companies prosper and in USA they are prospering on cheap labor, tax credits, payment of low taxes by creative accounting.
These talks are just rhetoric of an incumbent president trying to win
over the middle class who got slammed by the neoliberal economics of
the last 30 years. I do not think a president of US can or will
control offshoring of production or services. There are three simple
reasons none of which is lack of skilled labor or taxation policies. 1. The Chinese yuan is cheaper than the US Dollar by around 6 times, Indian Rupee by around 50 times and the life of a third world laborer is even cheaper.2. The politicians have to spend millions ($730 million for Barack Obama in 2008 !) to get the attention of the distracted population. Only the corporations (which by the way are legally "individuals" and there is no cap of campaign contributions by an individual) can handle that kind of money. 3. The social disease of consumption. The population want more of everything and they are not willing to pay more for anything!
It is seen that USA ( and to a certain extent, China) are trying to use their economic status and money power to pursue an agenda that conflicts with the principles of free and fair international trade. Now the latest announcement is that the Obama government wants to restrict imports from China as also from India and some other countries. How such a step will make the American manufacturing more competitive in relation to lower costs in other countries is not clear. In sum, the restrictive agenda of Obama government will derail the process of free international trade and create tensions. .
Your editorial is based largely on truth, but it seems to belittle the US as a country, when you speak of non availability of talent, in the huge numbers.. Let us face it - India has the right to feel visibly threatened because a large part of the work force does outsourced work for companies in the US. That highly skilled workforce in huge numbers is not available, may be true, but more importantly it is cheap to produce goods in third world countries like China or India. My question is this - why should India not develop jobs for it's own welfare, instead of looking to the west for employment. Do we have the courage to introspect and ask ourselves this question?
What you might have missed in the speech is the part about a "level playing field." Many low cost products from places like China come with hidden costs that bother Europeans and North Americans greatly. For instance the scandal over lead paint in toys sent to the U.S. This hit right around Christmas-time a couple years ago. It made people wonder what other products might be tainted. I was the purchasing manager for a large agency in California years back. We had a mandate to buy 10% recycled products. Any computer related products were troublesome because of heavy metals and chemicals. We found a toner cartridge recycler in Guiyu, China. "Recycling" meant kids used tooth brushes to clean out toxic powder for $1.50 a day. Clean water is trucked in. Local water is toxic. Allowing Dow to pollute Bhopal because they fled U.S. environmental standards is another example. Look at the New River in Mexico: Asian and US corps made it glow. If you trade, don't sell out your environment.
What is of relevance to Bharatam is the re-think on the manufacturing base. While reaping all the negatives of a 'planned economy', none of India's 5-Yr Plans paid any attention to developing a value of quality in (any) manufacturing. It is essential to start putting in a quality manufacturing foundation; it may already be late.The 'Knowledge Economy' is never going to engulf all of India's ballooning population. At the lower end of the normal-distribution 'bell-curve' the populace is now paying a very heavy price for its Nehruvian Socialism. The predominant middle-class although large in population cannot sustain the entire nation if all India can show for is its IT. It is simply unsustainable. India is neither Switzerland nor Singapore in economy/size, nor can it afford to comment on the US's musings--politically necessitated or otherwise.
Time for this publication to recommend and sustain a public political debate to put what's in India's best interest. Forget the others.
Withholding government subsidies or other largesse to companies that outsource (manufacturing or software) jobs would increase the cost of making the end product at a foreign location. Simultaneously subsidizing the manufacture of same product if it was made in the USA reduces its cost to the consumer. This would encourage companies to manufacture in the USA. At the moment there is not be the trained labor force and infrastructure needed to turn out say, ten million IPADs a year, but let us not forget, the USA was a manufacturing powerhouse to the world a few decades ago, and President Obama’s policy seeks to regain some part of that lost business – even if it would take a decade or two to reverse the losses.
The US President is absolutely right to focus on 'jobs' - LIVELIHOOD MATTERS! I wish the PM's of other countries (including the UK) would do the same, rather than pandering to economic 'game theorists', and others, who may have lost sight of the fact that in the end it is all about people's welfare - and that too the masses, not just your pals.
Adding to article, one more point - US Employee has culture of working exactly 8hrs and they are strogly guarded by Labors Rights. Whereas, offshore like -India, labor wont mind working an hour extra or coming on holiday for work. Specially in Automibile industry where holiday season is in fact a peak season. Labor rights issue here in India, are yet to pick up. Reason is simple - we missed Manufacturing revolution under socialist regime - so we missed associated laws, awareness and culture of labor rights.
I disagree with the editorial strongly. You article fails to mention about how Iphone and Ipad are manufactured in China while mentioning the article about Apple in Nytimes. "Supervisor wakes thousand people in the middle of the night and gives biscuits/refreshments and guides them to assembly lines for manufacturing iphone". >Is this the way companies compete. I have worked with MNC's for 15 years. There is a limit to outsourcing. I hate MNC's behaviour of outsoucing anything and everything just because they get the best possible product. If everything had to be done in a machine like precise way, we will soon lose out the power of HUMAN TOUCH ! For the records, I am an Indian working for a MNC and has been benefited by outsourcing. But I wanted to blow my whistle that all is not well with this type of outsourcing without heart and soul. Obama is right in his jobs rhetoric. Hopefully he succeeds.
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