Offshore outsourcing has received a lot of press lately, especially in the information technology (IT) area. This is interesting because IT has been responsible for more job losses than outsourcing to date, but I wonder whether outsourcing, which is brought to us because of IT and telephony advances, will eventually cause greater job losses. After all, technology can only speed up the mundane, low end of the job sector, but offshore outsourcing can easily include doctors, lawyers, CPAs, technologists, authors, industrial designers, drug researchers, etc.
Does the average American now need to be so competitive that being a doctor, lawyer, educator or other professional will no longer be enough? How will Americans move up the ladder built by the labor and capital of previous generations if the lower rungs are knocked out and moved overseas?
Most IT spending, which did reduce American jobs, resulted in dollars remaining in the country, allowing those dollars to be spent inside the U.S. economy and taxed to pay for government services. Offshore outsourcing means that the capital is flowing out of the country and away from U.S. taxing authorities.
I'm not for protectionist trade programs, but didn't the U.S. grow its prosperity precisely because it protected its borders and its markets for 200 years? Is global trade just leading us into a worldwide depression when major economic centers collapse and the interconnected whole goes with it? In the U.S., we have regulations that prevent many of those mistakes, but we can't control China, Russia or the European Union from making those mistakes.
But if we must have free trade, we need to see three things to make the playing field a bit more level:
1) Get rid of most regulations regarding employees, including OSHA laws, minimum wages, overtime laws, unemployment insurance, forced health benefits, forced Social Security and Medicare taxes, etc.
2) Remove all trade barriers between those countries (today, proponents say free trade, but then still protect lumber, sugar, steel, etc.) so that if one industry may suffer from free trade, another may benefit.
3) Allow people to cross borders as easily as the capital does.
This would allow Americans to compete better by not being artificially more expensive than an offshore worker. After all, rural Arkansas's cost of living is much lower than New York City's, albeit no doubt still higher than Bangalore, India's. But American workers have an implicit advantage just by being Americans when working with an American firm.
Second, if an American wants to compete for a job and move to Bangalore, then they can give it a try. We might not pick India or China, but we might pick other inexpensive places to live, including tax havens in the Caribbean or sunny places in Mexico or South America. Besides, how many "cheap Indian engineers" would remain at the low wages in dusty Bangalore if they could move to the United States instead? It's as if India and China can win at this rigged trade game because they can trap their people within their borders. Today, a business can move products and capital across those borders far more easily than people can move, so people are at a disadvantage.
Trade should either be free or not, whereas a hybrid approach seems to encourage off-shoring to the detriment of American workers and U.S. tax collection since Americans are not allowed to compete by force of law.