How does the issues of outsourcing affect us?

[John_Cage]

Well, I like to invest in tech stocks. Bad idea for a student, right?

Nortel crashed and burned a few years back, cost me an arm and a leg, now Intel takes a dip (again). Why?

http://www.businessweek.com/bwdaily/dnflash/content/may2007/db20070515_218119.htm?campaign_id=yhoo

If you answered "the US government", you are right (and may move on to the 200 dollar question)!

It's because the US government won't let the companies be. Let market force dictate where and how the company find thier workers, please. It benefits us all (in the long run). It forces our low-skill workers to work harder and it forces our high-skill workers to work better. "Cracking down" on company's hiring of tempo workers is not the way to help our economy. In fact, if the company REALLY need skilled workers and they are not allowed to hire tempo's from India and China, they would just set their research labs there. That's even worse !!! We would lose all the jobs !!!

I love you, Intel... please RAISE again !

 

[J. Peterman]

The market will find its own level.

There is nothing you can do about jobs being sent overseas. You have to go with the flow to exist in this world. Investing in stocks is not a bad idea, it is how you do it that will determine how you do. The days of double digit returns are gone for now. If you get 8-9% you are doing well today. Nortel was a company that rode the tech wave and when the wave was gone it tried to hang on. Even at this time there is money to be made on Nortel if your are willing to take the chance on buying on its lows and selling on its highs, this is not actualy investing it is speculation.
If you are willing to wait, Intel will rise again. How Intel will rise again is to partnet up with the Chinese or produce their product in China. ( at this time they already produce a substantial part of their products there )
A thousand years ago, China was the most advanced society in the world, when they had gun powder the europeans were still fighting with rocks and clubs. Then came the roman empire and then the british empire. The last super powers were the USA and USSR. Now the world is changing again.
The smart money is to go with the flow.

 

[John_Cage]

lol, what's funny is that the stock raise by like .3 dollars per share in the afternoon.

I agree 100% with you, Peterman. The government should not interfer with the market by limiting outsourcing (either by hiring other nationals or setting up shop in other countries). The long term benefits out-weight the short term losses.

 

[isod1]

Well meaning government regulators should remember that if they knew how to successfully run a business, they would not be working for government. 230 years later, Adam Smith is still just as relevant!

 

[YouVantOption]

The smart money is to go with the flow.

So what, companies listed on Shenzhen, SSE, or HSE? The BSE (Bombay)? Or DIFX (Dubai)?

 

[YouVantOption]

Well meaning government regulators should remember that if they knew how to successfully run a business, they would not be working for government.

Sorry, but this is not a logical statement. Working in government is not a measure of entrepreneurial skills.

Regarding Adam Smith and the suggested libertarian take on business, I'd say that it has been proved repeatedly and starkly that unfettered business does nobody but the stockholders and directors of the company any good.

 

[J. Peterman]

All those that stand in the way of change ..........................

............will get splatered on the windsheild and the wind will blow their bodies away.

 

[pookiebear]

outsourcing will create a less expensive products that we all buy. But the effect will be that since most of the industrialized world now do not create or make anything else this will hurt all those in this industry. i.e Manufacturing etc... This has caused a vaccuum in the economy thus will increase the unemployment etc... What should have happen is that most manufactured jobs are shipped overseas and the population that was doing manufacturing jobs should have been upgraded to customer related jobs and such. Old habits are hard to kill and most people who used to do manufactured jobs are too comfortable with the salaries and the type of work that they have been doing within their families for generations that they refuse to grow with the time and evolve. Much like the dinosaurs if you dont evolve in the business world one will be extinct.

 

[mtwallet]

Outsourcing is like cutting your own throat

Outsourcing these days usually means sending well paying jobs out of the country. What happens then? Yes, the consumer still gets to buy his reasonably priced item. Yes, the company that sells the item makes a tidy profit. And yes, the guy who was smart enough to invest in that company sees a rise in his portfolio. What happens to the people who used to manufacture those items? Gauranteed that some will never work again: Too old, overqualified, underqualified etc. Some of those will collect their pensions. Others will collect welfare. WE pay for that. Of the people who go on to other jobs, many will likely not make the same money. Now what? They lose their homes, can't pay off their credit cards ( 19% interest on Visa/MC/AmEx cards sound familiar anyone?) , and go through other hardships. Every time a company sends jobs to a cheaper source of labour, we decrease the spending power of our population. Everything is related. The more I make, the more I'm going to spend. The more I spend, the more money I put into the economy. The better the economy,....you get the idea.

Do you really think that outsourcing really saves money? Do you honestly think that all the savings are passed on to the consumer? If they were, the CEO's of these companies wouldn't get multi million dollar bonuses. How much money are you going to save manufacturing touques in Mexico, Taiwan, or wherever, when they have to be shipped thousands of miles to the sales market? Shipping prices have skyrocketed over the last year or so because of fuel prices. Many manufacturers only outsource to escape enviornmental regulation. Head to the Texas/Mexico border if you don't believe me.

Outsourcing within your own country, while not as bad, has its own pitfalls. Did you realise that the airport security staff across Canada make less than the janitorial staff at the same airports? How safe do you feel now? The less you pay, the less qualified people are going to be that are willing to work for you. I would rather pay an extra $20 per flight if I know that the people responsible for my safety are at least from the deep end of the gene pool.

 

[joelcairo]

Head to the Texas/Mexico border if you don't believe me.

I would rather pay an extra $20 per flight if I know that the people responsible for my safety are at least from the deep end of the gene pool.

Everything you say makes sense.

2 comments: 1. Some of the best times of my young life were spent heading for the Texas border. 2. Unfortunately politicians are from the shallowest part of the gene pool.

 

[Big Daddy]

I support outsourcing 100%

I support outsourcing. I think that it is the best business decision that corporations can make. Outsourcing is proven to have two major impacts. First, outsourcing increases national wealth. Second, outsourcing increases wealth of corporations. Both factors first and second are related to each other. Higher wealth of corporations translates into higher wealth of stockholders and high corporate taxes paid by corporations to the government. Higher taxes are also paid by shareholders and CEOs of the corporations to the government. Higher tax collections from the rich corporations and shareholders does lead to lower tax collection from the middle class.

Middle class wins in two ways. First, without outsourcing the tax paid by everyone will increase. Second, taxes collected from rich corporations and shareholders allow government to fund social programs. Stopping outsourcing is killing prosperity. Opponents of outsourcing often assume that CEOs and politicians are stupid. CEOs and politicians are driven by cost-benefit decisions and if outsourcing is bad, it would not continue.

Outsourcing increases global demand. Countries that accept outsourcing contracts become richer, which in turn increases their internal demand for products. Increased demand puts inflationary pressure on wages which reduces the wage gap between country that is outsourcing and country that is accepting the outsourcing contracts.

Not all countries are same. China is using its outsourcing riches to increase its military size and dominance. India's outsourcing money is going directly to the population, which has increased its middle class and global demand. Higher middle class in India is directly helping western corporations and many corporations (Walmart, KFC etc.) are entering India to tap its middle class wealth. The cost advantage that India had in terms of salary is slowly eroding. Chinese cost advantage is retained due to Chinese devaluation of money and China's reluctance to allow outsourcing money to benefit its society. Chinese increased military equipment demand may be helping Russia.

I think that the opponents of outsourcing are often lazy people who think that it is their country's job to make their life easy for them. In capitalistic society, goals to increase national wealth always trump any socialistic goals to improve job security at the expense of improving national wealth. Killing outsourcing is a sure way to poverty.

 

[mtwallet]

Big Daddy, I agree with your opinion that the wage gap between some countries overseas and North America has shrunk. I also agree with you about the increased size of the Indian middle class. I read an article recently about how many Indians are moving back to their homeland for that very reason. I won't argue with you about China, because I don't know enough about it. After that though, I couldn't disagree more.

Outsourcing hurts our national economy because the money simply leaves it. If I spend $5000 for a ski vacation in Vale instead of Mont Tremblant, Uncle Sam reaps the benefits, not Ottawa.

Outsourcing only helps the corporate headquarters of the country where the work is done. General Motors Canada can make a killing off the new Impala (#5 selling car in North America), while GM as a whole takes a beating on the US stock exchange.

CEO's and politicians are driven by cost benefits to themselves ONLY! ACE Aviation Holdings took a $34 million loss, while paying CEO Robert Milton an $11 million bonus. I know through an insider, just how much maintenance work ACE outsources to other countries. That's why 700 people are about to lose their jobs permenantly.If you owned some of the stores/restaurants where these people spend their money, you might change your mind about the fastest way to poverty.

In a capitalistic society, the goal is to improve PERSONAL wealth, screw everybody else.

I am not lazy, and the only person responsible for the quality of my life, is ME.

 

[Big Daddy]

In a capitalistic society, the goal is to improve PERSONAL wealth, screw everybody else.

Then why blame CEOs?

 

[John_Cage]

Then why blame CEOs?

That's right...

But let me expand on that a bit:

Yes, I understand that inevitably someone have to suffer for those jobs being sent to China and India. It's a zero sum game (in a way, overall wealth increases but percentage-wise it's zero sum).

What I am against is this: Government trying to CONTROL company in an effort to stop or at least disencourage outsourcing. Every man have the right to make his/her life better. The CEOs see outsourcing as a better option for them (as the investors), so why couldn't we do what capitalism meant for us to do? Yes, some workers WILL be affected, but he/she CAN and is ALLOWED to do whatever he/she is willing to do in this situation (learn a new trade, work harder, come up with creative and inventive strategies...). To limit outsourcing is to say: "OH, one of you had found the Ace, but you aren't allowed to play it, cause your opponent would lose and he's not going to be happy about that!"

Just to clarify, I am not talking about getting cheap labor from south of the boarder, that has issue of its own. I meant like getting high tech help from overseas. India and China are providing high tech resources, manpower and capital that's unobtainable anywhere else. The shear power of their large population makes them a freaking gold mine waiting to be discovered and brough to light.

 

[player_82]

We are becoming an economy of buyers and service providers, but the bottom line wealth comes from the export of commodity's oversees and Canada the US and other western countries are losing this part of the equation. If all the mean of production go to china and India and suddenly the Chines government decides to keep all that machinery western countries are going to have a hard time. Even western Engineers are having a hard time, because china doesn't like to hire western know how. They accept the western Engineers the first three years, once they get a Chinese to know how its done they fire the westerner. We can't all be MBA graduates? The means of production and commodity goods are the lowest common denominator in wealth production. Indian doctors are offering westerners the same services as western doctors at cut throat rates... I see major economic problems in 10-15 years. Until the people in suits staying at there desks in hight rise office buildings see there jobs also in danger... I'm afraid nothing is going to happened and the gap between the rich and the poor will increase exponentially.

 

[metoo4]

To me, it's a simple decision if I was in power:
So Big Company, you want to outsource outside the country? Fine! By the way, all loans and subventions you ever had are now fully refundable 100%, immediately, with interests, and you must pay salaries of the peoples you are laying-off here, for the next 5 years. After you're done, you can outsource whatever and wherever you want. Oh! One last thing: remember all the stuff that you used to build here and you sold here? Now that it's built outside the country, we will now put a 100% tax to importation on all these goods. Now, you're free to outsource.

Too bad it isn't as simple as this...

The only peoples winning with outsourcing outside the country are the peoples who have lots of money. I find it abominable that companies are ran by and for stock holders instead of being ran to produce a quality product while balancing good financial health and community health. Stock holders should have no say on the operating mode of a company. You invest in stock, there's a risk you might loose it all so, live with it. Now, stock holders dictate an "acceptable return" they want and all is geared towards this, rather than being a productive entity, both finantially and community-wise. Companies are now "forced" to increase profits no matter what so, cut in staff and quality are made, in the name of immediate financial gain.

Shure, making money is always a goal in a company but, when the main goal is making more-more-more money while ignoring quality and the human aspect of the business, then we have problems.

Not too long ago, a high executive of a well-know big Quebec company, who have a presence in all eastern Canada, responded to an agressive investor who demanded higher returns in a way I really liked. He basically told him he preferred to plan on long term health, customer's fidelity and support rather than immediate financial results. This company is expanding steadily, without bursting at the seams. Shure, expanding faster and "cutting on production costs" (read layoffs), as requested by the investors, would make more money quicker but, on the long run, the company will remain more stable, while growing in an organized manner, the way the Management is running it now.

With outsourcing outside the country, there's also another point who's swept under the carpet: the cost to the planet. All these goods who are built far-far away have to be brought back. The costs on paper might be lower overall but, this travel generate pollution. This isn't negligeable yet, since it doesn't affect Big Company's bottom line, they don't give a damn.

It's great to pay less for a product but then, if you don't even have the money to buy the product, even at the reduced price, it's still too expensive and, as a consumer, I didn't gain anything. You need a job to make money. If your job is transferred to la-la land, you're screwed. Again, the only ones gaining are the ones who have money.

 

[Big Daddy]

I have been studying outsourcing topic for some years. It is fairly complex to draw quick conclusions. An all encompassing understanding has to consider immigration, political structure, labor skills, economics and social issues.

Outsourcing will reduce immigration to the north america, which is a reason to celebrate because that will reduce the supply of workers here. I remember in the late ninties a lot of North American software workers were complaining that corporations are abusing certain visas and that was getting them fired. Today, immigarants are going back to their home countries because the jobs are outsourced to their home countries.

Political structure is where outsourcing becomes a problem. As some one pointed out earlier, China will use its communistic policy to voilate intellactual property rights, learn western ways, and even spy and steal military secrets. While China is doing this, the question is what will it acheive in long run? Does China wants to dominate the world militarily? If it does it is a wrong goal in todays world.

There is two types of outsourcing that needs to be seperated. The first type is outsourcing white collar jobs and the second is outsourcing blue collar jobs. Outsourcing of white collar jobs is less of a threat. Software jobs fall into this category. Even though India and China has a large population, white collar jobs will employ educated part of that population (which is significantly less number). These educated people are going to ask for higher salaries and salary gap between east and west will be reduced. Blue collar jobs, such as manufacturing, farming etc., are typically outsourced to China and not India. Blue collar jobs is where labor abuse takes place because significant % of population is available to do these jobs at lower wages. However, China with its 1 child policy will soon see higher percentage of its population as too old for these jobs.

The economics literature is clear on how nations compete. The most productive nation is the most prosperous nation. When compaines compete in a nation it is a zero sum game. When nations compete it is the productivity that makes a nation competitive. Government intervention, socialistic and communistic policies will make a nation less productive and less prosperous. While China can accumulate wealth using currency devaluation etc. its population is not going to be prosperous. For prosperity, China will have to open its economy. I just don't understand what China is trying to acheive in a long run?

As a society outsourcing benefits all of us. I am estimating that over 110 million North American workers have their retirement accounts that contain stocks and bonds. We don't want those accounts to lose money. This indirectly means that we want corporations to make money. Outsourcing is one way corporations can make money. With baby boomers close to retirement and ready to cash in on their retirement accounts and increasing young middle class in the rest of the world to invest in stocks, stock market crash is less of a threat today.

The North americal financial institutions are filled with intellectual people, if these people did not want to do anything for outsourcing then it has to be good for us.

 

[John_Cage]

Alright, I got time... Allow me to restate my thoughts on the matter.

Well, I understand that outsourcing will not benefit the blue collars anytime soon; but that's not what I was stating (originally). From the article I included, you will see that I am against government CONTROL of something that (to me) seems like a right. A right to compete. Why can CEO do as they please? Why are the government sticking their head where it's not merited. It's NOT LIKE people are dropping dead left and right... Some people lost money, jobs... some people gained money, jobs... Big deal. Zero sum, remember?

The case here with Intel was that Intel stocks dropped a lot due to Government excising control over their outsourcing policies (btw, this is no longer a problem, Intel stock rose like little Johnny before action-time since I started the thread). Lots of high tech companies are giving out "work visa" basicly. They hired over-sea worker (China, India) who has the skills that they need. The workers come to US/CA and they work here... So no humans were harmed... We are talking about a few key job positions, a few technicians or researchers; it's not the same as closing down a 200 workers factory. This benefits high tech companies a lot, due to the free sharing of technology, knowledge, skills... etc. The END justifies the MEAN --- by a HUGE margin. Outsourcing a few programming job or whatever to a few foreign nationals and our market (the whole US/CA economy) benefits as a whole.

Example:
Town A needs water from a river, and they usually have 20 workers going up and down the hills bringing water in for the whole town. A neighboring town B has a technician who has a water pump and water pipes... This technician could easily free up 20 men's productive power in town A simple by going there and helping them. SURE, you "could" look at it as 20 men losing jobs... BUT you can also look at the town A as a whole. Now, town A DIDNT lose any production power by losing those 20 jobs (because they still get the water through the pipes without the workers). In fact, they GAINED 20 workers who can now benefit society in a different way. Maybe they can increase food production instead (abeit, they will have to retrain, blah blah blah). The point is, it's benefits overweight a few individual's losses. When the going gets tough... we all know how it goes. The 20 workers will (or are supposed to) "suck it up" and "tough it out". Go through some training and be useful in other ways. The alternative is not have the technician over and NEVER gain that technology, never PROGRESS !!! It's about the progress !!!

 

[Big Daddy]

John Cage, it is well proven that governmental controls are bad for businesses. The fact is majority of the people in this world are average, and would like to suggest equal distribution of wealth. Unfortunately, majority of the people do not like to believe that they are average.

People with talent and skill want to be rewarded and like freedom. These people will only work hard when they are rewarded. Equal distribution of wealth discourages skillful workers from working hard. Any governmental control is usually a move towards re-distribution of wealth so that "average" person wins at the cost of talented person.

I personally feel that CEOs make a lot of money, but I am willing to live with that fact as opposed to having government intervene and set a salary for a CEO.

I think that politicians in North America have a hard job to do. On the one hand they recognize that outsourcing is good for the economy, whereas on the other hand they have to get the votes from "average joes" who are willing to elect leaders that would put governmental controls. I have to give credit to them on the way they fool "average joes" and get elected. After that nothing changes in terms of policy.

 

[J. Peterman]

If the government gets involved .................

..............and puts duties on products to slow or stop imports. That might start a world depression. There will be tarrif wars all over the place and prices will go up for all your goods.