A
common topic regarding the American economy today is the unemployment
rate. From small town coffee shops to Wall Street investment firms,
there is no shortage of finger pointing; one such scapegoat for the
American joblessness epidemic is outsourcing. Today, nearly thirteen
million people in the United States are unemployed (National Bureau of
Labor Statistics), and outsourcing of American jobs is contributing to
this statistic. Also known as “offshoring” or “offshore outsourcing,” it
is the utilization of foreign laborers instead of comparably qualified
Americans. A growing number of American enterprises favor outsourcing,
primarily because of the financial gains it offers. Proponents of
outsourcing allege that it is an amiable proffer for each faction; the
American-based establishments save capital, and create employment
opportunities in otherwise repressed areas of the world. Challengers
disagree, contending that potential employers from foreign countries are
not reciprocating in this multilateral trading relationship, therefore
causing an imbalance, namely the staggering decline in U.S. employment.
Opposing the practice of outsourcing is a form of Protectionism, a tenet
that originated with the founding fathers of this country that was
essentially designed to protect American citizens who engaged in free
trade. Today, lawmakers on state and federal levels are actively
creating legislation to regulate outsourcing for the exact same reason:
to protect American consumers and workers from falling victim to the
manufacturing industry itself. It is within the power of our Congress,
the House of Representatives and the Senate to reverse this damaging
trend by further amending current tax codes, restructuring work-visa
requirements, and creating new laws that mandate a more balanced
approach to our standards regarding foreign and local labor forces.
Governing the outsourcing of American jobs is the first step in
defending the security of American breadwinners and their families.
Manufacturing and Information Technology are two sectors of the job
market overwhelmingly affected by outsourcing. Though both industries
outsource extensively, each has specific ways in which it affects the
U.S. economy and workforces. Likewise, solutions for addressing each
respectively vary. This essay will address both, starting with the
implications of outsourcing from the manufacturing perspective.
Jan arrives at the daycare to pick up her son, Paul Jr. It’s earlier
than usual and she wonders if his nap will be interrupted by her
surprise arrival. Instead of her usual pick-up time of five-fifteen, it
is barely after lunch. But today was no ordinary day. Today, after
fourteen years at the Corning Glass plant, Jan lost her job. Corning,
since its inception in the 1850’s, had employed three generations of
Jan’s family. Apple, Inc. had chosen the American-based company to
supply the glass screens for iPhones, but opted instead to award the
contract to FoxConn, a Chinese-based organization. FoxConn took over
the contract because they could produce the same glass for a fraction of
the cost. Manufacturing the glass in China not only eliminated the need
for costly overseas shipping of the glass, it reduced Apple’s cost of
production by sixty-five dollars per unit (The New York Times). As a
result, Apple took its business to FoxConn, leaving Jan and hundreds
more workers in the small Kentucky town displaced and unemployed. The
practice of outsourcing results in the loss of more than factory-floor
jobs, however; the ripple effect of unemployment and economic decline is
invasive, spreading indiscriminately throughout all levels of the
American economy.
The majority of employed
Americans, eighty-six percent, are now in lower paying service-related
jobs. Only fourteen percent still work in good-producing roles,
including manufacturing. This is in sharp decline from just fifty years
ago, when nearly forty percent of all American jobs were manufacturing
related (The New York Times). This is significant. For every one
thousand manufacturing jobs that exist, another four thousand jobs are
subsequently created: parts manufacturing; transportation; warehousing;
and management positions, all in support of production and assembly line
roles. This is known as the job-multiplier effect (Bivens). The
opposite of this effect is happening today, however. As more
lower-level manufacturing jobs have left this country, people in the
higher paying supporting positions have had to follow suit. This has
created a vacuum of unemployed people, most of which are only qualified
for lower paying service related vocations, such as restaurant staff,
hospital attendants and retail sales. People in the higher level
supporting positions either have to relocate overseas or take lesser
paying service related positions to stay employed here in the U.S.
Outsourcing of American manufacturing jobs not only affects workers on
the factory floor, it impacts the entire workforce.
“Save Money, Live Better” is the well-known slogan of the American
based big-box store, Wal-Mart. The nationwide chain is able to offer
products at much lower price points because their merchandise is largely
imported from foreign suppliers. Not only does the money spent to
acquire their massive inventory go to foreign suppliers, six hundred
thousand jobs required to produce the items are exported overseas as
well (Fischman). Where there once were locally owned retailers for
groceries, hardware and building materials, garden supplies and
pharmaceuticals, now instead are the sprawling new Supercenters,
family-owned businesses left boarded up and vacant (Mitchell).
Ironically, Wal-Mart employs more Americans than any other company, one
million, seven thousand people (Blodget) which is a fact their savvy
public relations firm has fervently capitalized upon. What they
conveniently fail to mention, however, is that for every job Wal-Mart
“creates,” 1.4 American jobs are lost as existing businesses are forced
to downsize or close (Neumark, Zhang and Ciccarella). It would shock the
average Wal-Mart consumer to know that by shopping there, they are
contributing to one of the worst attacks on the economy the U.S. has
ever seen. “Save Money, Live Better” is at best an enigma. Wal-Mart in
reality is the antithesis to living better; saving money in the short
term is extolling serious long term economic consequences (Goetz). The
less aware the consumer is kept, the better off Wal-Mart becomes. For
reducing the quality of life for millions, perhaps a more accurate
slogan for Wal-Mart would be “Save Money, Live Destitute” or “The Less
You Know, The Better We Live.”
Wal-Mart is
not alone. Many additional big-box conglomerates are profiting using
the same tactics: outsourcing the production of and importing foreign
made merchandise; paying lower wages and reducing health benefits of
American employees; and taking full advantage of government subsidies
and loopholes in existing tax codes. Other similarly subsidized
retailers such as Home Depot, Bass Pro Shops, Super Target, and Borders
Book Stores also reap enormous fiscal benefits due to property tax
rebates, free or discounted tracts of land, and financial backing for
site preparation and on-site infrastructure (Mattera, Philip, and
Purinton). These companies are given government money on the premise of
creating economic growth, but in reality, there are more people on
Medicaid and food stamps in communities with these big-box stores than
there are in areas without them. The average Wal-Mart worker, for
example, requires $730 a year in taxpayer-funded healthcare and $1,222
annually in other forms of assistance, such as food stamps and
subsidized housing (Dube and Jacobs). The United States government must
put an end to these corporate subsidies and tax cut incentives. The
intent of these codes was to stimulate economic growth, but as
statistics have clearly shown, the companies taking advantage of state
and local loopholes are using them to fatten their own corporate bottom
lines. The people these laws were meant to help are actually suffering
because of them, ending up worse off than they were before the big-box
stores came to town. “Save Money, Live Better on Public Assistance.”
Aside from American joblessness and economic decline stateside, there
is another perspective on foreign outsourcing that warrants concern, and
that is the toll it is taking on people outside of this country as
well. People in less developed areas of the world vie for positions
with American employers. Competition is fierce, and workers are willing
to endure conditions that would be unthinkable in the U.S. in exchange
for pay that is a fraction of our own minimum wage. American-based
companies like Dell, HP, IBM, Motorola, Nokia, Sony, Toshiba and Apple
have openly admitted that Chinese manufacturing facilities’ efficiency
and lower operational costs makes them more attractive than their
American counterparts. Human rights groups, however, in both China and
the United States have cried foul, citing numerous occasions where
inhumane working conditions have led to exhaustion, injuries,
fatalities, mental breakdowns and numerous suicides (Chan). Winning an
American contract for Chinese companies like FoxConn is literally like
winning the lottery. Factories are run twenty-four hours a day, seven
days a week, with military precision and force. Plant Managers at
FoxConn know how to satisfy the demands of the American buyer;
production must be at the speed of innovation itself. This burden is
then transferred to the millions of Chinese laborers, where abuse and
coercion are accepted as part of the job. This is all done to please the
American buyers in hopes of winning the next contract, and the next,
with little concern for the human toll being taken. It is a common site
in industrial towns like Longhua and Guanlan in the Shenzhen province
of China to see suicide prevention nets surrounding FoxConn employee
dormitories (Chan).
Another sector of
American workers displaced by outsourcing is those in the field of
Information Technology. This type of outsourcing, known as Business
Process Outsourcing, or BPO, impacts the American workforce differently
than manufacturing related outsourcing, but is perhaps more readily
noticeable to the public. American based call centers and
customer-service related jobs, thanks to advances in telecommunication
technology, are very easily replaced with BPO centers in other parts of
the world. Companies wanting to provide twenty-four-hour support to a
world-wide customer base might have call centers in several different
time zones. At face value this sounds like a reasonable justification,
but opponents argue that with multiple shifts in a twenty-four-hour
period, American call centers could provide the exact same level of
support. In reality, the true motivation to outsource is cost: it is
much cheaper for companies to hire people overseas than it is to employ
Americans, largely because of the minimum wage requirements in this
country. In less developed areas of the world like the Philippines,
Guatemala, Mexico and India, people are willing to be paid much less per
hour than most Americans, just to have a job in an air-conditioned
cubicle for an eight to twelve-hour shift. Additionally, employers of
overseas workers are able to hire people without having to provide them
with health or retirement benefits, another savings in the overhead
costs of operation. Since fifty-five to sixty percent of the overhead
costs of running a call center is man-power, this is a significant
amount of capital to be saved (Outsource2India.com). Coupled with the
tax breaks the U.S. Government currently provides, these factors add up
to a profit boosting incentive few American companies have been able to
resist (Ali). Among those currently outsourcing their call center
operations are Convergys, Equinox Corporation, American Express,
American Airlines, and U.S. Airways, to name a few. Imagine a
customer’s surprise when calling the 800 number for American Express
client services and getting a call center agent who is obviously in
another country. The formidable cultural gap and accent barriers have
resulted in an onslaught of consumer complaints and a backlash against
overseas call centers. A BPO firm in India, Delhi Call Center, fields
millions of calls per month, most of which come from America. Delhi Call
Center’s creative solution to the backlash has been to extensively
train young Indian recruits on “how not to be Indian.” The successful
graduates of the program have learned from weeks of accent training
tapes, the study of English intonation and memorization of American
holidays. The agents are required to adopt American names to use when
identifying themselves to customers, to make themselves (and Delhi Call
Center) more palatable to American callers. Those who do not make the
cut are sent away, said yet to be cured of their MTI, or “mother tongue
influence” (Marantz).
Millions of Indians
apply for these BPO positions, the average pay for which is about
twenty-two thousand rupees per month- around two dollars an hour, or
five thousand dollars per year (US Department of State). Many Indian
call center agents see this as their opportunity to escape poverty and
enter India’s middle class; they will opt for threadbare living
conditions, ration their own food, and send their paychecks back home to
waiting families. Not only are American companies taking jobs away
from U.S. citizens, to make matters worse they are taking advantage of
the people in India who are so desperate for work that they willingly
accept such conditions.
In Manufacturing and
IT alike, American corporations’ motivation to outsource seems to share
some similarities. Both do it for the money. Replacing American jobs
with foreign labor may benefit large American corporations by reducing
overhead costs and bolstering profits. According to the McKinsey Global
Institute, for every dollar the United States spends overseas, we get
back $1.12 (Ferrell). The investment dollars do come back to America,
but it’s in the form of corporate profits, leaving the American worker
paying the ultimate price for someone else’s short term economic gain.
It is this unscrupulous greed that is at the heart of many problems,
both locally within the United States and globally as well. These acts
against humanity, regardless of the degree of abuse, can be stopped.
The United States government has the power to mandate regulations and
standards that could make significant changes for all.
Regulating the outsourcing of American jobs is the first step in
protecting the interests of American breadwinners and their families.
Lawmakers on state and federal levels in the United States are working
tirelessly to pass legislation, standardizing the practice in hopes of
protecting the millions of Americans displaced and unemployed. One such
code is the Appropriations Bill H. R. 2673 which became Public Law No.
108-199 in January, 2004. Public Law 108-199 began in the House of
Representatives as H.R. 2989. It was amended by Senators Craig Thomas
and George Voinovich (Congressional Record), and the measure became law
on January 23, 2004 as a part of the Appropriations Bill H.R. 2673.
Public Law 108-199 is an Administrative Law, which means it is enforced
by the executive branch, and meant to regulate international trade,
manufacturing, pollution, and taxation. This particular measure is
groundbreaking in that it disallows government funds to be used to pay
for contracts that employ people or companies outside the United States
to do government related work. While Section 533 of Public Law 108-199
targets a very small percentage of the American workforce, the enactment
of this mandate set precedence for future Protectionist legislation.
Another U.S. Bill, H.R. 3596, was introduced in December 2011 and is
currently in Congress now. It has been coined the United States Call
Center and Consumer Protection Act (Bishop). This proposed legislation
would make companies that outsource ineligible for federal grants or
loans. Proposed by Congressman Tim Bishop (D-NY), this Act would enable
the United States Department of Labor to monitor organizations that
outsource jobs outside of the U.S., preventing them from receiving any
grant money for a minimum of five years. This mandate targets companies
that receive millions of dollars in tax incentives to open U.S. based
call centers, only to relocate the operation overseas shortly
thereafter. Additionally, the Bill would make any call center operation
failing to disclose its offshore location to the Labor Department
subject to ten-thousand dollars a day in penalties. So far the Bill has
as many as one hundred six lawmakers as its co-sponsors (Epstein).
Congressman Bishop has been quoted as saying “Taxpayer dollars should
not be supporting companies that choose protecting their bottom line
over protecting their customers” (Deccan Herald).
In the Global Market today, the technologies afforded to American
citizens may have changed, but the fundamental ideas of Protectionism
still apply. Just as technical knowledge and innovation have evolved,
so must American policy in order for this country to fully embrace and
profit from these advancements, responsibly. The first economic policy
ever implemented in the United States was Protectionism, in which as
defined by Webster is “the theory or practice of fostering, or
developing home industries by protecting them from foreign competition
through restrictions on foreign competitors.” Clearly, this call for
regulation and standards is not a new one. James Madison, George
Washington, Thomas Jefferson and other of our founding fathers believed
that it is wrong for industry to succeed at the ultimate demise of the
consumer, and in parallel, the American worker. Abraham Lincoln was
strongly opposed to Free Trade, arguing in defense of a greater concern:
our moral economy. If the relationship between corporate profits and
the welfare of American consumers and workers were balanced, both can
coexist. The current state of financial crisis in the United States can
be reduced by reforming the current tax codes and mandating minimum
standards of employment for American corporations who wish to outsource
parts of their businesses.
There are numerous
organizations that have been put into place over the years to regulate
fair trade; some believe strongly that free trade benefits everyone
involved. Others claim, as I do, that under the current system of
checks and balances the wealth generated by free trade is amassed by a
miniscule percentage of the population. This unfair distribution of
wealth is adding insult to the injury of unemployment, and has led to
recent uprisings of groups like the well-known Occupy Movement. As
things stand now, the “ninety-nine percent” bears the burden of
sacrifice while the wealthy one-percent enjoys the spoils. The rich are
getting richer; so rich in fact that Apple, Inc. alone profited
$400,000 per employee in 2011 alone. How? On the backs of the
misfortunate millions without work in this country, and with the lives
lost in China because of abusive and inhumane working environments. A
quote from a
New York Times article sums it up best: “Given
Apple’s prominence and leadership in global manufacturing, if the
company were to radically change its ways, it could overhaul how
business is done. ‘Every company wants to be Apple,’ says Sasha Leshnev
at the Enough Project, a group focused on corporate accountability. ‘If
they committed to building a conflict-free iPhone, it would transform
technology’” (Duhigg and Barboza). The crux of the problem, however, is
that Apple, nor any other American manufacturer for that matter, are
obligated to run their operations based on ethics. The language spoken
by the corporate elite is: dollars. “Money talks.” And who knows the
language of the dollar better than the United States Government.
Eliminate tax breaks for companies that outsource their labor. Reduce
or remove the subsidies and land grants for employers who chose to use
foreign labor instead of qualified American workers. The argument that
Americans are not adequately skilled to perform goods producing
functions is an outright fallacy. Perhaps one of the downfalls of our
domestic workforce is that we are too attached to things like forty-hour
work weeks, and owning our own homes rather than living in cramped
dormitories where we can be called to the factory floor at any hour of
the day or night. Not only are these conditions unacceptable to American
workers, they should be unacceptable to everyone. It is our
responsibility as a nation to draw the line, and make a distinction
between doing well, and doing wrong. Profiting at the expense of other
human beings is an unequivocal wrong. Knowing it is happening yet
choosing to do nothing about it is equally as wrong. As a country, we
have the technology, the manpower and the mind power to find an amicable
solution and it’s going to have to start with our legal system. Rules
need to be set for those who can’t seem to rule themselves, starting
with the large corporations.
There is an adage
that says “the rising water lifts all boats.” If the rising water is
success, and all boats are all people, I fear that without proper
standards and regulations, that same water can also fill all lungs. With
government regulation, determination and fairness, the economic ideal
of this adage can be achieved. Without it, we’re drowning. We’re
drowning at the speed of innovation.
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