Outsourcing has become such a part of American life that everybody gets the joke in the Discover ad that features a frustrated customer calling to complain about a bill from some other company and “Peggy” on the other end of the line is actually a guy with a foreign accent.
As frustrating as it can be to deal with a computer problem with a “Peggy” thousands of miles away, I get mad at politicians who smugly decry outsourcing.
Companies don’t “send jobs abroad” because they are unpatriotic. They do it because the same politicians who are decrying their business practices have created an atmosphere that is hostile to business, adding taxes and hiring mandates that make it increasingly difficult to do business here.
Now, however, there’s another reason not to get hot and bothered about outsourcing:
Most people treat outsourcing as a zero-sum game-one foreign worker replaces one American worker. But this is not how the dynamic global economy works. In 2007, Matthew Slaughter, an economist at Dartmouth’s Tuck School of Business, published a comprehensive study of the hiring practices of 2,500 U.S.-based multinational companies.
He found that when U.S. firms hired lower-cost labor at foreign subsidiaries overseas, their parent companies hired even more people in the U.S. to support expanded operations. Between 1991 and 2001, employment at foreign subsidiaries of U.S. multinationals rose by 2.8 million jobs; during that same period, employment at their parent firms in the U.S. rose by 5.5 million jobs. For every job “outsourced” to India and other foreign countries, nearly two new jobs were generated here in the U.S.
Those new U.S. jobs were higher-skilled and better-paying-filled by scientists, engineers, marketing professionals and others hired to meet the new demand created by their foreign subsidiaries. Todd, the American call center manager transferred to India in “Outsourced,” keeps a framed picture of an executive suite back home on his desk-a reminder of the more prestigious job he is working towards. That job is more likely to be created because of the call center in India.
This is from an excellent piece in today’s Wall Street Journal byWilliam Cohen, former U.S. secretary of defense, is CEO of The Cohen Group, a business consulting firm. Next time you hear a politician playing the demagogue on this issue, remind him or her that (a.) politicians should stop trying to run businesses, because, left to their own devices (b.) businesses will find practices that allow them to grow, which is good for folks at home.
Protectionism may save a congressman’s job. But it probably won’t help the rest of us.
This may help explain why the voters are now looking to elect people with some business experience.