Abandoning America: The Outsourcing Infection
21 February 2005
21 February 2005
Abandoning America: The Outsourcing Infection
John Doe loses his job. Jane Doe is a victim of identity theft. The United States economy
is in the red. The common denominator of all is the upshot of outsourcing in America today. The
festering of this infectious outsourcing is increasing job loss for Americans, it is increasing
security threats for citizens, and it is increasing the national trade deficit in the World Market.
Joblessness due to outsourcing is much more widespread than projected. Companies that
outsource are not replenishing job sources within the United States. Scores of companies are
outsourcing to foreign countries promoting more import buying than selling of exports lending to
the deficit problem. Personal data that is processed in foreign lands initiates potential theft and
terrorist risk. Policies need to be set in motion and imposed that will protect American jobs,
prevent financial and terrorist related activities posed by identity theft, and restrict the
exploitations of the Free Trade Agreement.
Outsourcing is a word that tastes gritty to many Americans. The mere mention of this
word draws a distinguishing line between employers and employees and between large and small
businesses. A good look at outsourcing can determine whether the way outsourcing is conducted
is beneficial for Americans—or just a bad tasting residue left from a spoiled economy.
Defined by the dictionary; outsourcing is the “practice of subcontracting manufacturing
work to outside and especially foreign or nonunion companies” (Merriam-Webster Online).
Outsourcing was implemented to help redistribute employment for service workers, hold down
consumer prices, and make businesses in America more viable. Outsourcing is not something
new and has been practiced by corporate America for decades. Concerning current events of
outsourcing; this definition barely begins to elucidate the magnitude of repercussions this
“disease-like” contagion is spreading in the business arena today.
In the 1990s outsourcing became more concentrated when America faced a recession.
Corporations began restructuring how they operated and economic growth returned near the end
of the 1990s, helping American companies regain their competitive strength as they cut costs by
widening the sectors of outsourcing (Corbett, qtd. in Amazon). Moving into 2000 has shown that
the previous good results produced by outsourcing have now ultimately backfired; the evidence
that outsourcing is flinging the economy into a recession—as ordinary people flounder to find or
keep a job and pay bills—is emerging. Forrester Research notes that in 2005, 830,000 jobs will
be given to foreign workers. In addition, two economists from University of California
investigated employment at risk finding stunning consequences concerning outsourcing; results
show 14 million Americans may lose their jobs if outsourcing is continued (“Outsourcing: A
Brief Timeline”). These statistics indicate poor job conditions for Americans directly linked to
outsourcing. That is a lot of John Doe job loss.
One glowering security issue of outsourcing is identity theft. Typically, many call-center
jobs that are now outsourced to foreign countries have access to personal information such as
credit cards, social security numbers, bank numbers, addresses, and phone numbers. The New
York Times best captures the problem.
A leading bank regulator, the Federal Deposit Insurance Corporation, warned in
June  that increased corporate outsourcing of call-center tasks and other
jobs overseas had heightened the risk of identity theft.…During those 12 months,
the report said, businesses and financial institutions suffered about $48 billion in
losses because of identity theft, and victimized consumers paid more than $5
billion in out-of-pocket expenses to regain their financial identities (“Can Identity
Theft Epidemic Be Stopped?”).
These statistics indicate expensive security problems related to outsourcing. That is a lot of Jane
Doe victims of identity theft.
Regarding trade, outsourcing can be good for economies; it utilizes another nation’s
resources, but if the trading is disproportionate, not enough exports or too many imports, that
country will suffer economically. For the past twenty-five years America has been buying more
from other countries than it has been selling. This has placed a strain on America’s economy and
pushed her into a trade deficit. Outsourcing has further compounded this problem. As the various
sectors of outsourcing increasingly move their businesses into other countries, fewer products are
being made in America to sell to other countries, reducing the amount of exports that help
maintain a trade surplus. Cheap labor in foreign countries generates products that can be
purchased by consumers in America at reduced prices, and then these products become an
overabundance of imports made by foreign workers and purchased from other countries. This
breach between imports and exports has caused the United States to borrow from other countries
and sell them more American assets to finance this underperformance. The foreign debt in 2001
reached 22% of Gross Domestic Product (GDP) with a trajectory of 40% GDP within five years
according to Jeff Faux, Political Economist and Founder of Economic Policy Institute (EPI).
Faux further compares the rate of Argentina at 50% GDP when their economy collapsed because
of their external debt. Faux goes on to say that the handwriting is on the wall and the United
States cannot keep expecting to buy more products than it sells without catastrophic results.
Dan Griswold, Director of Center for Trade Policy Studies at Cato Institute, disputes that
the trade disparity means our economic growth is slower, that our manufacturing output has
fallen, or that unemployment is down (“Bad News on the Trade Deficit Often Means Good News
on the Economy”). He “tries” to equate past times when the GDP, manufacturing, and
employment grew during times the deficit was shrinking. This argument is difficult to support
when he blatantly includes statistics in a separate article he wrote from the U.S. Bureau of the
Census report on the true situation. “For the calendar year , imports of goods into the
United States exceeded exports by $484.4 billion. When that figure is combined with an overall
surplus in services of $49.1 billion, the 2002 deficit in goods and services was $435.2 billion, the
largest in U.S. history” (“The U.S. Trade Deficit and Jobs: The Real Story”).
The rate our trade deficit is escalating with the inclusion of outsourcing is an indication
something is terribly wrong. According to Trade Economist Josh Bivens (also from EPI) the debt
reached $665 billion at the end of 2004. That is a lot of increased foreign debt.
It is understandable that conveniences do contribute to the desire for companies to want
to outsource. Businesses are interested in outsourcing because it provides a reduction in cost,
improvement in efficiency, and expertise sources (“Outsourcing”). Although each offer
intelligent reasons for this practice, the effect still causes distress on the working American and
on the economic standing of the United States on a global scale.
Reflections on the following give insight into the need for policy reform, policy
enforcement, and new policies that protect both the residents and their motherland from the
devastating infection caused by outsourcing.
1). A business perspective will say the reduction in cost for corporations simply cannot
be argued. The “average wages for employees [in India] are 20-35% of that of their American
counterpart” (“Brains Abroad – India Job Outsourcing”). American workers cannot compete
with the meager salary an Indian worker receives of $500 dollars a year (“Outsourcing: A Brief
Timeline”). Auto insurance alone typically costs triple that in America per year and residents
must meet the cost of living. The sad facts are that the more outsourcing is continued, the more
workers are forced into taking lower wages as they are replaced by foreign workers or their
institutions ship overseas.
Forbes magazine repudiates that outsourcing is hurting American jobs and that jobs are
created from outsourcing. “Forbes touts a recent study commissioned by the Information
Technology Association of America that found that the off-shoring of IT services and software
led to the creation of 90,000 U.S. jobs last year.” However, the same Newsmax.com article of
April 14, 2004, listed RadioShack as adding only 300 jobs in Texas and Juniper Networks
adding only 45 jobs in California for the year while Veritas was to hire 175 workers (Limbacher
and et al.). These figures indicate very “little” new job growth from outsourcing.
After the North American Free Trade Agreement (NAFTA) took effect on January 1,
1994 trade deficits exploded from $30 billion deficits in 1993 to $85 billion in 2002, increasing
the deficit 281%. The result was job loss in all 50 states and the District of Columbia. Jobs
gained by NAFTA exports amounted to 794,174 and jobs destroyed by NAFTA imports
amounted to 1,673,453—twice as many jobs were lost (Scott). None of this is “very efficient” for
the American worker. These job conditions exemplify the trade inequality in full force.
Strategies need to be developed that can protect the American paycheck from disappearing.
2). The pressure to keep shareholders happy and to keep business competition matched
during the Internet-economic boom of the late 1900s was the driving force that pushed
companies to find more workers for less pay to maintain higher efficiency in product output.
This is analogous to the cause of working conditions in the “sweat system” of the late 1800s and
early 1900s. The return of subcontracting work out by outsourcing depicts similar patterns of
oppression and abuse on workers. The very conditions Americans fought so hard to eradicate are
in jeopardy. The organizations that outsource work to foreigners abate the workplace rights,
reducing wages and benefits by shifting the control from employees to executives. It makes the
common worker easily exploited because he or she is expendable and weakens his or her
bargaining position. Outsourcing creates ambiguity which allows the institute to evade
employment and labor laws driving down standards for all workers. This obfuscation of liability
reflects upon the worker and produces low moral. Moreover, the organizations of unions to
protect the worker are diminishing because there are many loopholes in this “sweat system” type
of higher efficiency (“Living Wage Policy in an Era of Outsourcing”). Policies need to be
revisited to ensure the rights and work conditions of employees are sheltered.
Section 482 of the Internal Revenue code levies taxes (in theory) on every transaction
between American operations and foreign ancillary aspects, but more often than not these
outsourced companies are not paying taxes to the United States or to the countries they have
moved into. Conglomerates find ways of inflating the prices paid to their foreign subsidiaries
making the foreign profits look bigger and thus they evade taxes on both sides of the border
(Dobbs, p 61). This puts the burden on the purse strings of hard working Americans to pay taxes
for hospitals, roads, and schools. Certainly this is the drawback of a flimsy outsourcing rule and
stiff enforcement should be mandated on corporations come tax time.
3). As for expertise, India is now producing 300,000 college graduates with engineering
degrees per year which is about six times that of American graduates (“Outsourcing: A Brief
Timeline”). Granted foreign workers are intelligent, but using them to replace American
graduates reduces the ambition of students to pursue a college education, weakening the strength
of the nation. Employment rates for young college graduates age 25-35 declined 3.4 percent from
1989 to 2003, clearly marking a feeble labor demand for newly sprouted workers (Bernstein).
Additionally, a “new discrimination” for Americans to brood over has appeared with the
anomaly of insourcing jobs from other countries. Senior News Editor, Kate Evans-Correia, wrote
in May 2002 that Guy Rich, Senior Systems Engineer at Integrated Digital Systems said he knew
of numerous colleagues having difficult times finding work because of H1-B visa workers. These
foreign workers are granted visas taking the scarce American jobs available. Purportedly
powerful lobbying groups are manipulating lawmakers with false employment statistics that
benefit the key players of the IT world, like Microsoft and Sun. Rich faced this problem himself
when bidding a contract in Nebraska. The hiring manager told him if he could not decide a good
rate he could get an East Indian to do the same job cheaper. This has the odor of discrimination
toward the American workforce. American workers need policies that prevent job displacement
A worse scenario is the threat created by these “expert” foreign workers who are not held
accountable for the same work ethics that American workers are. In an article from “Offshoring
Medical Work Saves Lives” the shortage of radiologists and the extreme need for sophisticated
scans for prompt diagnosis brought doctors at Altoona Hospital in Pennsylvania to utilize
outsourcing as a method of solving problems. Saving lives is indeed critical, but what about the
security of those files sent with personal data to medical transcribers in other countries? How
qualified are the technicians to review those medical records? There is no guarantee on the
security of these files or on the use of qualified consultants, “But even when the spotlight was on
medical transcription, there were concerns regarding the security of transfer of patients' vital
medical data, and the quality of service delivered by offshore consultants” (Offshore
Outsourcing World). Perhaps this seemingly positive information on outsourcing is not so
Further security matters brought to light are the mounting costs worldwide to consumers,
businesses, and government organizations costing $221 billion in losses for 2003 and escalating
at a 300 percent velocity, which may reach $2 trillion by the end of 2005 (Gonsalves). As far as
security evils this points to less beneficial factors where the pocket is concerned: unreliable
accountability of foreign experts and unfair bias toward Americans as they get pushed aside for
“cheaper expertise”. A course of action that eliminates this type of outsourcing is called for not
only to protect the properties of Americans, but the very well-being of the state. Access to
American identities by terrorists has already proven deadly given the recent 9/11 horror.
Witnessing family, friends, and fellow employees being reduced to part-time status,
suffering lay offs, or losing a job themselves is heartbreaking for Americans. As big corporate
giants take up outsourcing Mom and Pop businesses are failing at an alarming rate and people
are dazed that their long-term, secure jobs are evaporating. Educated, qualified professionals are
scrambling to get hired—anywhere. Outsourcing shows no signs of adding jobs to the American
portfolio. But it does show great profits for Business Process Outsourcing (BPO).
Michael F. Corbett’s book, The Outsourcing Revolution: Why It Makes Sense and How
to Do It Right, remarks that BPO is a $6 trillion global industry involving thousands of
companies. Corbett elaborates that outsourcing is one of the fastest growing industries. The
reason for this, he points out, is that formerly uncompetitive companies are now in the competing
arena because outsourcing is at the center of rapid commoditization, knowledge-driven
operations, competitive advantage, and outside specialist activities that create this new ground of
competition in the global marketplace. Corbett says, “Far from being bad for businesses or their
workers, outsourcing is one of the most important and powerful forces available for building
successful companies, creating economic growth, and generating and enhancing jobs” (Corbett,
qtd. in Amazon). According to 2004 figures, company success, economic growth, and job
enhancement may not include anything on American soil. There were staggering profits from
foreign countries’ yearly services to American companies who outsource to them. India is
leading at $9.5 billion profit margins, Ireland at $6 billion, Israel at $2.6 billion, the Philippines
at $1 billion, and Russia at $800 million (“Outsourcing: A Brief Timeline”). Profits of other
countries soar. Abandoned America’s trade debt ratio enlarges and her people remain in jobless,
underpaid, and/or exploited situations while awaiting the time bomb of identity theft terror.
Conditions of job growth are bleak on native soil. Lay offs and company closures besiege
the poor and middle class because of outsourcing. This matter has so agitated Americans that
vigilantes are speaking out. Renowned receiver of The Man of the Year Award 2004 from The
Organization for the Rights of American Workers, Lou Dobbs explores the impact of
outsourcing on American workers in his book, Exporting America: Why Corporate Greed Is
Shipping American Jobs Overseas. He lists over 800 major American companies either sending
American jobs overseas or choosing to employ cheap overseas labor instead of American
workers (167-96). In four months that figure rose from February 2004 at 150 companies equating
to 162.2 companies a month abandoning America (“Lou Dobbs Lists Outsourcing Giants”).
Dobbs shares examples of job loss in the past few years; a) New York – 10,000 jobs gone,
Carrier plant closes, b) Pennsylvania – 132, 000 jobs vanished, evaporation of manufacturing and
high tech positions, c) New Jersey – 7,000 jobs moved out, embroidery outsourced to foreign
countries, and d) 96 % of clothing production is no longer done in America. If that is not taking
the shirts off American backs think about the figures Dobbs mentions from Forrester Research,
“$151 billion in wages will be shifted from the Unites States to lower-wage countries by the year
2015” (Dobbs, 8-34). That is a lot of lost American wages going to foreign workers.
The odium of outsourcing can best be demonstrated by out-of-work Americans—
themselves. In Spokane, Washington Terry Luding explains results of outsourcing on his
retirement plan after working for his company 27 years. His former company filed bankruptcy
after he was forced into early retirement; the government took over the pensions making him
lose his healthcare benefits. Nancy Stockton of Springfield, Missouri (Fasco employee, 32 years)
now gets paid half of what she used to earn after her job was shipped out to Mexico in 2002
(Rescue American Jobs).
In The New American, January 26, 2004, an article called “Losing America’s
Livelihood” sums up in one sentence the malignancy of outsourcing on America if left untreated,
“The U.S. is headed for Third World status unless we change government policies that are
driving U.S. businesses offshore, destroying jobs and putting entrepreneurs out of business”
The outsourcing infection grows and America “is” getting abandoned. The cure resides
within the authority of her people to honor and defend her by promoting reformation policies—
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