Is Offshoring Good?

The head of an Indian consulting firm and a high-tech-union president face off on the effects of offshoring and globalization.

Ashok Soota

Cofounder and managing director of MindTree Consulting in Bangalore, India

Marcus Courtney

President of WashTech/CWA, a Seattle-based union for high-tech workers

Resolved: Offshoring is good for America.

Soota: Globalization and technology enable every nation to sell globally and source globally. This is not without transitional pain. The pain is equal for a small retailer in India edged out by a global giant and an American whose programming job may go to Bangalore.

But no nation is as well-equipped to take advantage of the emergent phenomena as the United States, because it is a champion of free markets and has a large immigrant workforce with global connections. And Americans are by nature more adaptive, a strength that provides timeless resilience.

Courtney: But there are consequences for that shift. The drivers of the global economy are focused on lowering wages and benefits of U.S. employees. Our high-tech industry has seen little job growth in the more than four years since the recession. If outsourcing is so great, why aren't more jobs being created?

Offshore outsourcing weakens our technological competitiveness. Moving work overseas only to reimport the resulting products and services just increases our trade- and balance-of-accounts deficit. And by the way, tech workers in India are not immune to these forces. More and more Indian companies will offshore their work to gain additional competitive advantage.

Soota: I disagree. The drivers of the global economy are focused on two things: selling to and servicing the global customer, and reducing the total cost of business. One part of that may be wages--and if so, it is not a one-country issue. As you rightly point out, Indians will be affected, too, if their pay is disproportionate to the value they add.

In all this, though, what is the fundamental truth? By nature, "value" is migratory. Once, India was known for textiles--but the power loom killed the homespun industry. Now that power loom must compete with international imports. Pick any industry, and it will prove to you the migratory nature of value.

Courtney: Since January 2005, we have tracked more than 103,000 offshored jobs. Since these are only the ones reported in the news, the real impact must be greater.

I know of many tech workers who have lost jobs. Those who find new work get paid less. Offshoring is a zero-sum game because jobs created in India mostly serve the U.S. market. And the movement of more R&D offshore ultimately affects investment in the United States: Why invest in the high-cost center when you can go to the low-cost one?

Soota: The issue has to be seen at a micro level and a macro level. At a micro level, one must empathize with anyone who loses a job because of offshoring or obsolescence. But at a macro level, jobs lost in one part of the economy are replaced by gains elsewhere. A McKinsey study shows that the U.S. economy gains $1.14 for every dollar of offshoring spent in India.

Here's an example where offshoring leads to U.S. jobs. Venture capitalists today require that product design be distributed across continents. The result? R&D dollars get stretched. Projects that would fall "below the line" because of engineering costs become viable. So offshoring is not a zero-sum game. It is to the advantage of free enterprise, hence to the advantage of the United States.

Courtney: Globalization requires that we have social imperatives outside of market forces. If the onus is to constantly update and re-skill, then we need policies around that imperative. As you point out, opening markets up for competition in India creates opportunities for large multinational corporations. But there's a profound question of equity if those multinationals are the only winners. Workers, communities, and the environment should be, too.

Read the full text of this email debate.

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