Corporate outsourcing from the United States to Asian and South American economies has recently become one of the major issues of debate among policymakers and trade unions in the United States. More and more, company CEOs, especially in the hi-tech sector, are turning to low-cost alternatives in Asia, such as in India. They argue that by creating more jobs in low-cost locations, companies are able to maintain their competitive edge, which in turn reduces costs for American customers. This argument notwithstanding, labor groups in the United States have long protested the trend of offshore outsourcing. Besides fear of job losses, unions have often questioned the skill levels of foreign workers. The anti-outsourcing lobbyists also predict that such actions would further delay a revival of the U.S. economy.
That India has become the preferred destination for software development and business process outsourcing is evident from the number of companies that are ready to shift a number of coveted white-collar jobs to India. The Indian government and the thousands of educated unemployed people in that country look upon job outsourcing from the United States as a golden opportunity for economic growth. According to a recent report by IT analyst Gartner, it is estimated that India’s revenue from business process outsourcing will grow from slightly under $1 billion in 2002 to $1.2 billion in 2003 and will represent 66 percent of the offshore outsourcing market.
So, is the average American IT worker’s job seriously in jeopardy? How real is the risk? Contrary to many reports and analysis, the National Association of Software and Service Companies claims that Indian outsourcing saves U.S. jobs. According to the association’s latest estimates, the “IT enabled service and BPO is likely to touch $142 billion in 2009, against the current cost of $532 billion for these services. The difference of $390 billion represents the net saving the U.S. economy can expect from outsourcing.” In spite of the huge savings, are jobs being created in the U.S. economy? “US banks, financial and insurance services have saved $6 billion to $8 billion owing to IT outsourcing to India. Helped by these savings, companies have prevented layoffs and instead added 125,000 more jobs,” NASSCOM says
Nonetheless, people are still losing jobs and more and more unemployment benefit claims keep pouring in. Globalization may be the culprit. With national borders and barriers of distance and time dwindling fast, the yawing disparity in income among equally qualified staff in the two countries becomes more evident. The average computer programmer in India is paid $ 20 as wage and benefits for one hour of work compared to $65 for an American, who has a comparable degree and experience, Ernst and Young reports. Moreover, an average technical employee sticks to one job for nearly three years in India — more than double the Indian average.
Such revelations induce more and more companies, on the lookout out for new and innovative cost-cutting modes, to hunt for greener pastures in countries such as India. The concept of outsourcing may be new, but the United States has always been open to the idea of hiring foreign professionals. Labor unions and politicians, who think outsourcing is detrimental to the economic health of the United States, also opine that the importation of foreign talent takes away American jobs and reduces efficiency. These groups are trying to impose government and legal restrictions on outsourcing and the importation of professionals.
India traditionally has accounted for the bulk of H1-B visas issued over past years – almost 50 percent. Efforts to pass a bill eliminating the H1-B visa and regulating the outsourcing of IT-related jobs are options being explored to stop American jobs from moving into alien hands. However, this would amount to a virtual closing down of the U.S. economy in the realm of the service sector. When opportunities in knowledge-based industries are expected to grow significantly, such a decision will hurt the U.S. economy. Instead, planners and CEOs could explore options by way of which wages could be rationalized on a long-term time scale based on economically comparable variables such as consumer price index and the like. That could significantly reduce the threat of job loss while maintaining laissez-faire in the U.S. economy.