Some critics of job outsourcing worry that President-elect Barack Obama may de-emphasize his commitment to get business to stop sending jobs offshore

In the Wall Street Journal Real Time Economics section, we read the following:

“Their reason: Many of the 17 members of Mr. Obama’s Transition Economic Advisory Board are leaders or directors of big companies that have a long history of moving work overseas.
“The upshot is that the Obama folks haven’t taken the issue of white-collar outsourcing very seriously, in part because his advisers are either doing it or don’t believe it’s a real problem,” says Ron Hira, assistant professor of public policy at Rochester Institute of Technology and author of “Outsourcing America.”

Foreign outsourcing is a hot-button issue for many U.S. workers. Mr. Obama said during the campaign that “unlike John McCain, I will stop giving tax breaks to companies who shift jobs overseas and will start giving it to companies who create good jobs in America.” Under the current rules, U.S. firms don’t have to pay high U.S. taxes on overseas earnings until they “repatriate,” or bring home, the money.

A transition aide said Mr. Obama’s position on gradually ending the deferral of taxes hasn’t changed. The aide said the economic advisory board represents diverse opinions.”

http://blogs.wsj.com/economics/2008/12/09/outsourcing-critics-worry-about-obama-advisers/

Outsourcing in itself is not necessarily a bad thing...

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The shift in labor from not only an industrial base to a knowledge base and the impact of the global information network have converged to impact the U.S. market in ways that we have only begun to comprehend. Many well intentioned people, without understanding, are trying to solve gunshot wounds with a Band-Aid. Outsourcing in itself is not necessarily a bad thing and trying to stop it is like trying to save the Titanic with a bucket brigade. Actually, outsourcing (contracting someone who does it better, quicker, cheaper) makes sense for non-core competency needs like IT and accounting for those who are not in those businesses. I agree with Ron Hira that Obama's advisors do not see "white-collar" outsourcing as a serious issue because they are already engaged in those activities and are profiting from not raising the alarm for the American people. Ironically, the internet has made these jobs the easiest to move to another country, requiring the least amount of investment to establish and maintain.

Please understand that thousands of "white-collar" jobs are moved to India, China, and the Philippines every month. All that is required is an internet connection and a hole in the firewall. The business case from a cost perspective is also good. Hire 2 people at 25 percent of the current staff salary, and you can achieve similar productivity numbers for less money.

Health care just become more affordable...

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Most people do not know that their X-rays are being read in India (see New York Times article http://www.nytimes.com/2003/11/16/business/yourmoney/16hosp.html?ex=1229403600&en=c091bdba850a191a&ei=5070). If we can outsource a doctor, and with surgical techniques being developed in the fields of Iraq where doctors can operate 3,000 miles away, why would we pay a doctor in the U.S. $250,000 a year when one in India can be obtained for$ 30,000? Health care just become more affordable. Most corporate taxes are done off-shore with review happening here. Therein lies in the cheaper part of the equation. Economic reality forces outsourcing companies like Tata, EDS, Infosys, HP, Accenture, etc. to use the lowest cost resources to make the business case viable. This also allows for these companies to have an even more dynamic resource pool with less investment required.

People have never been the most valuable resource, only the most expensive. That is why this country needs to change the equation, not just through regulation but through a framework that will minimize the regulatory overhead while making resources in the U.S. more attractive globally.

In Europe, where they are using data privacy as a barrier to moving jobs out of the European Union, there is a lever that regulators are pulling in order to erect barriers to job migration. This is only marginally successful as it limits new jobs from entering. It is seen as a barrier to entry and a high cost for doing business there. It has also proven to be very costly as we’ve seen in the challenges Airbus faced requiring government intervention and thousands of layoffs to avoid bankruptcy.

Unfortunately, this country is still working with a 1960's model...

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Unfortunately, this country is still working with a 1960's model (at best) for employment, education, benefits and financial structures. What we need to understand is the difference between our options, capabilities and the framework that was established then and the one we will have to navigate in the future. In order to change these factors the U.S. needs to overhaul its education system, its tax law and regulatory structures to reflect standards and adequate measures. Increasing investigators for the FDA, OSHA, and EPA would be a first step in that framework. Neither party has been able to put a comprehensive plan together which is not dominated by special interests and contribution management.

On the other side of the equation, employers need to look at the changing dynamics of the workforce, as well, if they want to stay competitive in the global marketplace. Industry numbers vary but the cost to sift through the applicants and identify the correct skill set, bring that person on-board, and train them in the variations of the company is high, ranging from 38 to 150 percent of the employee's compensation. This new framework will need to support the changing dynamics of the workforce while providing a more reliable basis for handling things like healthcare, retirement savings, and the move from an employer/employee model to the buyer/contractor model we are seeing more and more today.

This requires changes in HR hiring and payment practices, as well as security and other aspects of adding a new worker to the business. People are still the most expensive aspect of a business, and those costs need to be managed in a fundamentally different way, as with 6 billion entries into the job market (and growing), the old question of finding the right employee becomes a matter of math and the willingness to cycle through them and manage costs.

There is no loyalty expended upon a company...

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The outsourcing firms have a revolving door in countries like India and the Philippines as people are readily available and change jobs just as soon as they are able to update the resume. There is no loyalty expended upon a company that is not going to expend loyalty to them. Turnover rates of 20-40 percent are not uncommon, so do not plan to get to know the people you are working with well. Unless companies both outsourcing and those who are globalizing their workforce are able to begin to reverse these numbers, the migration off U.S. shores will continue and there will be nothing the government or business will be able to change in order to reverse the trend. As we are already seeing with some European Union companies off-shoring to America.

Auto Bailout Agreement Remains Elusive

In his article for BusinessWeek (businessweek.com) titled Auto Bailout Agreement Remains Elusive, David Kiley writes:

"A loan package to bail out the teetering U.S. auto industry is heading toward a vote this week in Congress. But at the close of business on Dec. 9, the Senate, the House of Representatives, and the White House were still short of a compromise that could win passage."

The bailout of the big three automakers has been a topic of much debate in the news. It is interesting that 7 trillion is going to bail out financial institutions while 29 billion is being heavily debated. I also find it interesting that the loans from the federal reserve have gone unmentioned until recently, and that neither congress nor the president has had any say in the matter. A private group otherwise known as the Federal Reserve has been lending to other insiders in the financial markets. While the money is there, the question is how is this money being accounted for and who is making the lending decisions? Especially when playing with taxpayer money.

I also found a striking difference between how the bailout is being handled. The CEO's of the big three were testifying in congress. Where is the CEO of AIG or Citigroup? The larger bailout is being handled outside of the media and in the back rooms of capital hill, while the big three are a distraction and a side show to the entire situation. The executives have also made themselves very good targets, by using the company owned private jets. While perfectly legitimate and probably more cost effective than some other methods of transportation, they did not manage the press well. Especially for a group looking for taxpayer money.

The bailout process has sharply illustrated all of the things that need to be corrected in how the federal government manages funds, the role of the federal reserve, and the use of the media on both sides. Most will tell you that a bailout is necessary, but no one can tell you why, or how it is structured. Not even at a high level. This is just demonstrating that we are facing more of the same with the desire to throw money not solutions at a problem.