If you’ve considered outsourcing, then you’ve probably either thought of this argument or heard it from someone else – maybe someone you spoke with when you mentioned you were about to start outsourcing.
“But when you outsource, you’re taking jobs away from someone in our country!”
The answer has 2 equal parts…
In all honesty, most arguments of “outsourcing takes our jobs” are ill-considered and not really thought through. Most come from little knowledge or understanding of economics – or of how to outsource effectively.
Given that you can hire a highly-skilled and dedicated full-time Social Media Manager for $300 to $500, do you really think someone local in our country is going to work much for that money?
Chances are, to get a decent full-time Social Media Manager (I’m only using this job as an example) working for you locally, you’re going to need to put a zero on the end of those figures – ie $3,000 to $5,000 per month. So that is ten-times the cost to hire locally!
So if this ‘job’ position which you have just opened up in your company is paying a rate of say $400 per month full time, are you going to find anyone locally to fill that position?
Is It Really A ‘Local’ Job?
Probably not. So it is not really a job that is taken from anyone locally.
But you will be able to find someone to fill that role if you outsource to the Philippines.
The whole “outsourcing kills jobs” rhetoric, besides being a little ill-educated, is overlaid with a massive amount of emotional politicizing.
It is easier for politicians to say that globalization is to blame for our crappy jobs market, rather than to say we are not competitive or up to speed, that we have a skills deficit (that we’re not training our own people enough in the right areas) or that in fact, technological advances are more to blame than anything else.
Its much harder to blame technology, because who do you go after? Who do you attack?
In fact, from a recent special edition of The Economist, in a detailed analysis of global inequality and equality, here is a direct quote…
“Politicians in search of a scapegoat find it easier to blame globalisation than technology for the widening wage gaps in rich countries, and some studies of America’s wage dispersion conclude that around 10-15% of the widening wage gaps can be explained by trade. One analysis by David Autor at MIT and colleagues, suggest that in manufacturing the impact of trade with China could be much bigger. But most economists reckon that technological change plays a far bigger role.
The OECD, in a big cross-country analysis, concludes that “skill-biased technological change” is one of the main determinants of the rich world’s wage inequality. On average, it finds, globalisation – as measured by a country’s trade exposure and financial openness – has no significant impact.”
What does all that mean in plain language?
It means that the advances in technology in the last 50 years are more the root reason for wage differences, rather than globalization directly (although the 2 work hand-in-hand).
So the next time that someone complains that “outsourcing takes our jobs”, you can give them a more informed rebuff that actually, technology is more to blame for wage and job changes, and that people need to adapt.
How My Dad Got Killed
Here is a very personal example of mine – from my late father. He was an architect. His bread-and-butter work was designing houses. He was an old-school technical drawer, using a big drawing board and sliding ruler and some other big technical drawing equipment.
Then back in the 70’s and 80’s, technological advances in the shape of Computer Aided Design (CAD) came along. My dad wasn’t much of a wizz on computers. He chose not to adapt to the new technology, and the new industry swept past him (he was lucky enough to be financially independent by then and about ready to retire anyway). The stress of it all damn near killed him.
Due to the technological advances of CAD, designing a new house could be done quicker and cheaper by computer. This meant he would have to charge less, to compete and still get the work.
Were he younger, he would have been faced with a simple choice…
- Refuse to adapt and have less and less work
- Adapt and retrain in how to use CAD
- Change job entirely to something new
Luckily he was able to go for the “Retire” option. But this gives you a clear example of how technology impacts jobs. It wasn’t a cheap ‘immigrant’ who took his job. It was technology.
Technology is faceless, so it is much harder to blame and get irate and emotional about. So politicians try to get us all worked up and emotional when trying to blame ‘immigrants’ or outsourcing for the weak job market or the fact that they haven’t been effective in encouraging the jobs market (for instance by making it easier to hire skilled people, and to fire ineffective people).
The Truth Is Much More Complex.
By outsourcing, you are benefiting your own business, ultimately paying taxes in your own country however you need/have to,thereby benefiting your local economy.
Plus you are helping the global economy by helping the nation country where you are outsourcing to.
The net effect of outsourcing on the country to which you outsource to is that their economy improves and their local wages rise. Look at the wage increases in China and the Philippines over the last 50 years – they have steadily grown.
Think bigger. Zoom out and up from where you are right now. We’re all on the same big ball called earth.
Certainly in the early stages of outsourcing for any growing company, the bottom line is this…
You could not afford to employ someone locally because of the much (often ten-times) higher wages, plus the tax and social security costs and headaches of directly employing a local person, so it wasn’t ever a ‘local’ job.
So no, outsourcing is not taking any local jobs. It’s about YOU benefiting by growing YOUR business using globally-sourced people, building up your team so they can run your business for you, so you can focus on higher-level tasks.