To slash labor costs, U.S. companies are moving not just assembly-line tasks but also, increasingly, service and back-office jobs like accounting, and high-tech functions like computer programming, to low-wage worker pools in places like China, India, and Indonesia. So long as the overseas staff speaks good English and does the job, the reasoning goes, U.S. customers don't much care whether the people who take their telephoned catalog orders are sitting in Boston or Bangkok or Bombay.
But the crushing effect of offshoring - as outsourcing is sometimes called - on those who've lost good-paying jobs is obvious. As magazine put it in an article last year: "America's pain, India's gain." magazine asked, "Is Your Job Next?"
Little wonder offshoring has become a red-meat issue for angry trade unionists and their supporters. After his victory in the Iowa caucuses last month, Democratic presidential candidate John Kerry railed against federal tax incentives to companies that outsource jobs. "We are not going to give one benefit or one reward to any Benedict Arnold company or chief executive officer who take jobs and money overseas and stick you with the bill. That's over," he said. (The name of Benedict Arnold, a general in the American war for independence who switched his allegiance to the British, is a common epithet meaning traitor.)
Addressing a crowd of industrial union members in Washington recently, Tom Daschle, the Democratic leader in the U.S. Senate, blamed outsourcing for what's been called the jobless recovery from a recession of two years ago. During that time the U.S. stock market has rebounded, but two and one-half million manufacturing jobs have disappeared.
"George Bush says the economy is creating jobs. But let me tell ya," said Tom Daschle. "China is one long commute. And let me tell ya, I'm tired of watching jobs shift overseas."
But it's not just disgruntled Democrats who are worked up. In the generally conservative Farm Belt state of Indiana, Republican senator Jeffrey Drozda championed a bill that passed, 39 to 10, recently, that would prohibit the outsourcing of state contracts to overseas firms. Instead, Senator Drozda says, unemployed or under-employed Indianans should get the jobs.
"It does state in the bill that all work under the contract must be performed in the United States," he said. "And at least eight other states are looking at doing the very same thing because this is what I deem a national crisis."
The offshoring issue smoldered without exploding for years, Senator Drozda says, because it was always assumed blue-collar workers thrown out of work could retrain for sophisticated, highly paid technical and service jobs. Now many of those jobs are moving to India and Pakistan and China as well.
Just ask Laird Carmichael. He's executive vice president of a company called International Outsourcing Services. It has headquarters in Indiana, runs a large assembly operation on the Mexican border in Texas, and spreads $250 million in manufacturing and data-processing work each year to centers in Mexico, China, France, and Slovakia. Mr. Carmichael describes himself as a red-blooded American whose customers are doing what comes naturally in a capitalist system - outsourcing in order to keep costs down - however and wherever they can.
"I've watched companies that I've done work for in contract manufacturing that, had they not done some portion of manufacturing outsourcing to a lower wage base, would have gone out of business, given their competitors," said Mr. Carmichael. "All of this is coming down to providing businesses and consumers with lower-priced products. And I'm an optimist. I think people in the United States are continuing to change and evolve. Despite all the rhetoric you hear, nothing's black and white, and people are evolving into higher-paid jobs."
Economist Marvin Kosters at the American Enterprise Institute think tank agrees. When a company like Delta Air Lines can save $15 million a year by moving its basic reservations operation to India and the Philippines, he says, the result is a more efficient U.S. economy with greater output, lower prices, and satisfied customers. He says resourceful Americans will develop new kinds of jobs to replace even high-skills positions that are moving overseas.
"Ten years ago, we would never have dreamed that we would have so many people working in information technology, right? Ten years from now, we don't exactly know where the job expansion is going to occur," said Mr. Kosters.