Outsourcing benefits the U.S.

Prof Gene Grossman of Princeton University believes sending certain jobs overseas is beneficial to the US economy, helping the private sector gain a comparative advantage and efficient production.

In a lecture at the Faculty of Economics at Chulalongkorn University.Prof Grossman said outsourcing became a hot topic, particularly during the 2004 US presidential election, because it involved job losses among white-collar workers.

However, he believed the activity would affect only low-wage workers such as telephone operators, medical transcriptionists or payroll clerks because the high difference in pay in the US and developing countries. The average hourly wage in 2003 for a telephone operator in the US was $12.57 (503 baht) while it was under $1 (40 baht) in India.

Jobs of high-wage workers such as accountants, financial researchers and analysts are still safe in America, although only in the short run.

''In the longer run, the question is whether the US will continue to be powerful in education, technology and maintain its macroeconomic climate,'' he said.

The reality and logic of outsourcing is obscured by a lot of populist, uninformed clap trap and media created scare mongering.

Diana Farrell, director, McKinsey Global Institute, summed it up pretty well when last year she said, “People in the US are looking at it as a job issue. They are not economists and therefore, they don’t necessarily see the whole picture. What’s going to happen is that offshoring is actually going to benefit US businesses even more than India.”

That sentiment was echoed by Daniel Grisworld, associate director, Centre for Trade Policy Studies, Cato Institute. “People don’t understand what a great opportunity offshoring is for US companies. Apart from huge savings, it allows US companies to concentrate on their core competencies and the people (in the US) can move on to higher paying, more creative, more value generating jobs.”

More details: The Bangkok Post