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Offshore Outsourcing Is a Jobs Killer

Outsourcing has been with the world for thousands of years.  The sale of food, tools, and other goods from one community to another is a form of outsourcing. If you don't grow your own food then you outsource its acquisition. Outsourcing is a necessary facet of every business and it is practiced by every company because nobody can do it all.  Offshore Outsourcing as practiced by American corporations, or as it is simply called, Offshoring is simply anti-American.  It happens when the business believes it is so important that the workers and the country in which it is franchised, no longer matter.  

There were US companies in the 1800s and 1900s who were vertically integrated and thus, they did it all.  Rugged individualism was the credo of the day, and if you could not do it all, you could not compete.  These companies took care of their own production, mining, manufacturing from raw materials, while they built finished goods, shipped the goods, sold end products in their own stores. Many of these companies even went so far as insuring themselves; handled their own bookkeeping and taxes; had their own lawyers etc.  Some even designed and built their own buildings as it was viewed as the proper way to expand their enterprises.  To do that, they required a major diversity of talent.
 
Eventually, in American History, it no longer was a matter of pride that a company did it all.  It became very difficult to have all the talent required in one business and so companies began to concentrate on what are called their core competencies.  For example, furniture manufacturers began to get their wood from loggers rather than maintain their own forests. Other manufacturers began to bring in raw materials that were in a more finished state from contractors -- steel sheets rather than iron ore.  This is how it began.
 
As service companies began to emerge, the manufacturing companies found it more productive to do business with these firms and gain a number of other services.  Firms could never be the best in specific areas that were adjunct to their core businesses by relying only on in-house expertise.  In the industrial revolution, there was a large growth in the service sector as manufacturers began to purchase needed skills. This was the first form of outsourcing.
 

Companies needed insurance services, architectural and engineering services, legal and accounting services, and many others. At this time in the U.S., the companies performing the outsourced work were almost always located in the U.S., and most often in the same city, just like their customers. Therefore it was not against national interests to outsource parts of the business to domestic firms. 

Corporate Globalization Takes Outsourcing Offshore
 
As the economy became more global as fast ships and large airplanes and fast voice and data communications channels, and information technology innovations were established, this permitted people and goods and information to be moved rapidly from country to country. Because of these advances, it became feasible to move activities that were once done on-shore in the U.S. to a foreign country, off shore. This process is known as offshore outsourcing or simply as noted previously, "offshoring."
 

At first it was an experiment but the ingredients of success were in the cards.  As relationships were formed in developing countries, it became easier and easier for the next company to do the same thing.  Facilitator service companies emerged who would set up the whole offshore deal for any company that did not know how to get it done. In the beginning of course, the outsourcing channels were not greased as well as they are today.
 
Companies of today, who are ready to outsource no longer have to do the work themselves. They outsource to "facilitator companies,"  such as IBM,  to gain the outsourcing / offshoring expertise. There are many such firms that are now in place to expedite the entire process. For the US companies that employ such offshoring avenues, it does help that they write their checks for offshoring to companies such as IBM so that it does not appear to the uninformed that they are un-American. Yet, they are un-American and IBM is un-American and it is time we call them and other companies out and show them all for what they are. If its such a good deal for everybody then nobody should be embarrassed about it. 
 
In the last twenty to thirty years, the notion of offshoring has become as commonplace as outsourcing on-shore had been and it has gotten more and more positive press in the business community.  Corporations are not created to provide benefits to employees or alms to the poor. They are created for one purpose-shareholder profit. Offshoring therefore has become very popular, especially in large companies in which business titans and needy stockholders believe their company is as modern and as profitable as the times permit.  Additionally, the big consulting firms have been recommending offshoring as a solution for bad American management for many years now.
 
In some ways offshoring has become a corporate management status symbol besides a way of doing business.   Companies that have decided to stay American are belittled sometimes by their elite peers and industry moguls for not having taken their businesses overseas.  Another little told secret is that even though the corporate miffintiffs would argue against this premise, offshoring provides little benefit for the sending country. 
 

Low Tech --  First Jobs to Go 

The first types of products to be manufactured overseas were the low-tech items such as toys, shoes and apparel goods. Eventually, higher value items like high-tech components, computer chips and wafers, and consumer electronics began to appear. There are no televisions or VCRs or DVD players  made in the U. S. today but who knows that?  Apple Computers and iPods, iPads, iPhones, Apple Watches, and even new models of everything are all made in China.  How does that make you feel?  

The iPad et al may have once been designed in the United States, but Apple's money-spinning products are manufactured in the high-tech factories of east Asia. Asia expects a big uptick thanks to Apple. India is also booming because of US jobs brought there by big name US corporations such as IBM, HP, Microsoft, Apple, and others. Welcome to America? 

How Did We Lose the Stimulus' Green Jobs & More? 

Over 20,000 green jobs have been shipped to India.  As far back as 2008 with billions of stimulus dollars, American companies and Obama cronies took the money and ran. They used the stimulus money to create jobs in India, and elsewhere. Congress and the President simply winked..  No it isn't fair.  They argue that there are jobs from green in America but they admit that those jobs are low-wage installation and construction jobs.  Though you may think India is where the cheap, low-skill jobs go, this is not true.  For the green jobs, India has gotten the very good and the high paying jobs.  

While the US suggests that high speed rail is impractical, more stimulus money and other taxpayer dollars were given to China to build, and operate a high speed rail system in California. The Chinese government  will be working with the State of California and General Electric to help Gov. Brown get these lines built and operational.  American taxpayers are paying.  At least the work will be done in the US but the US has no skills in the rail area so Chinese engineers will be brought to the U.S.  Ironically, 150 years ago, low-wage Chinese workers were brought to America by the railroads for the back-breaking work of laying track and setting up the US rails system.  

China is not just interested in building trinkets any more.  The Chinese take pride in the fact that they are a big exporter and they are the pioneers in bullet trains traveling 220 miles an hour. What happened to American business pride?  This environmentally friendly technology has permitted China to race past the United States in the last few years.  Now that the President has shut down NASA, other than for his Muslim Outreach program, and the US is officially out of the Space Race, China and Russia will be taking our astronauts to the space station and back.  The truth is that US firms have fought so hard for profits, they have hurt the US in its ability to be a real player on the world's high tech stage.  This does not help America.   

The new green jobs coming from the US to India include  engineers, strategic business management, and major support technicians. These folks are the innovators and are the ones designing the innovative environmental friendly solutions.  If you are in India, you can get some good US jobs such as sustainability engineers, marketing and business development executives, data center management engineers, utilities and electric engineers and quality specialists. In the US, don't expect too much. American corporations with the help of the government have sold you out.  Expertise in the future will be something that US companies buy from overseas.  No, it is not good for America. 

Pittston PA Plant Abandoned 

Even the analog television faceplates, which were once made by Owens-Corning and later Techneglas in Pittston Pennsylvania are now made in Korea. So, discrete manufacturing was the first activity that began to move to offshore destinations in the corporate quest for significantly lower labor costs. I must ask you as a reader, if there is anything about American workers losing their jobs because American corporations found a "cheaper way" that you find admirable?  Yet, these corporate economic traitors are protected by our government with endowed rights and privileges to do business in the United States regardless of whether our people benefit? Why is that? It surely is time for that to change, and as you will see in the later essays in this section, I have a plan that means business. As A Congressman and later as Senator, I will help put get that plan passed. And, for US workers, it means good jobs. 

Nobody really shows the costs but with energy costs sky high, think about the cost of shipping today. Do you think there is much savings for products made in country X if the product must be shipped back to the US?   You are right. The wage rate really does not make up for all of that.  For products that otherwise would be shipped across the world, however, US companies make a lot more money and save on taxes by doing business outside of the U.S.  Maybe it is time to send in some replacement players for these corporations while we wholesale clean out both chambers of Congress and the Executive Branch.  

Some argue that India and other countries create a better college graduate prepared better to engage the workplace. As a long-time professor, I see grade inflation as one of the things that is destroying our ability to teach students in our major universities. Student evaluations force professors to give more As than anything else. So, other countries not focused on making sure Johnny gets an A even if it is not earned, produce bette engineers and technicians. So, yes, US education from K-12, and from Bachelor level to PH.D.,  all must improve so America again can be the best in all it does.  

The Corporate Income Tax Is the Jobs' Real Bad Guy  

The real culprit causing greedy US corporations to turn their backs on America is the corporate income tax.  Just look at the balance sheets of American corporations who do lots of work overseas. These companies have figured out how to stiff the US corporate tax system by doing business in foreign countries, and keeping their profits without declaring taxes. They gain on taxes and on labor arbitrage.  

The jobs are not about to come back for lots of good reasons.  Companies make too much money to ever decide to help the home country without big change in the U.S. tax system and the way corporations and their executives are treated in the U.S.  While the government thinks they are nailing corporations with excessively high taxes (35% just at the federal level), corporations are showing they have more might than the US government. They simply pack up their bags, their plant, and a few of their people, and they take a quick and permanent trip overseas mostly to avoid the sting of American taxes. Then, they donate to congressional and presidential campaigns so nobody gets the idea of shutting down the profit spigot just to help American citizens.  

Jobs will not come back without major change.  Right now, once a company sets up shop in a foreign country, it is a sign of management failure to come back to the US. Management would always decide that 500,000 regular employees should be fired rather than one manager.  It's a culture thing.  Top managers protect top managers. I point that out so that we all have little sympathy for American managers who ship jobs overseas. 

IBM Offshoring Example
 
Today's poster child for treating workers poorly is the IBM Corporation.  IBM has fired as many as 200,000 employees and has shipped many, many jobs overseas in the last twenty years. Plant sites such as Endicott, New York are decimated as is Rochester Minnesota and other huge hallmarks of IBM's onetime relationship with its American host.  Today IBM and even Microsoft and especially Apple the biggest tech firm in the world, could care less about America and Americans. 
 

What IBM executives, such as their chairman Ginny Rometty have been doing for years is dumping experienced and expensive people, who work in expensive countries (US) and moving their jobs to low cost countries, using the cheapest resources available there. IBM has decided that the US is an expensive country. Ask them at their next stockholders' meeting. Insult to injury is when the replaced IBM employee must go to the foreign country to train his replacement.  

The IBM company is pushing everything that can be offshored overseas as fast as it can.  If the Chinese built a high speed rail over the ocean, IBM would be its first customer.  Additionally, since IBM got so good at stiffing its own workers, it has made a business out of it.  IBM makes a ton of money helping other "American" Corporations do the same thing.  Thank you IBM!

By the way, I have a new book available on www.bookhawkers.com. It happens to be called Thank You, IBM.

 

To further explore the Offshoring dilemma and to pick up a few really good solutions to keep jobs in the US, please continue with the essay titled:  Bringing Back US Jobs from Off Shore."