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Archive for June, 2011

Common Wisdom I Just Don’t Get – Outsourcing

Here's what I don't understand about outsourcing. Perhaps you can help me.

I understand there is a whole world of people that will spend long hours in factories for much less money than North Americans will.

I understand that holding down labour costs makes prices lower because even with the cost of transportation, unit prices for products are lower.

I understand that this allows production companies to keep margins as high as possible with small price increases.

All of the above seems reasonable.

What I don't understand is the long term benefit.

It seems to me that the consequences of outsourcing are predictable. They would seem to be:

  • Fewer jobs in North America
  • More difficulty for those without higher education to find jobs which will allow them to raise a family
    • The 80/20 rule applies here. The 80% were in jobs which required little or no higher education. Those jobs are now scarce and pay even less
  • More difficulty for those with higher education to find jobs
    • Most of those jobs were in professional services or management of some sort. It seems obvious that if the manufacturing is no longer here, the jobs which provided services to those companies which actually produced something will disappear over time
  • Downward pressure on wages
    • If jobs become more scarce, competition will drive the wage one will accept downward
    • I understand that in the last 20 years, the real wages for most families have, in fact, not gone up at all
  • Increased social unrest
    • Should people realize that they will never catch the carrot, why should they continue to operate within the recognized social limits?

Maybe there is an upside but I don't quite see it. Can you help?

Be the first to comment - What do you think?
Posted by Carey Miller - June 12, 2011 at 4:58 pm

Categories: Common Wisdom?, Politics   Tags: