Outsourcing The American Dream


Ashok Bardhan and Cynthia Kroll of the University of California
at Berkeley estimate that in July 2003 between 25,000 and 30,000
IT (information technology) positions were outsourced to India.
According to the Bureau of Vital Statistics, since 2001 “more
than 500,000 people in IT professions in the United States have
lost their jobs.” The website of the nationally syndicated
business program “Lou Dobbs Tonight” lists over 300 outsourcing
U.S. companies. 

figures are just the beginning. A study of 400 of the nation’s
top 1,000 companies concluded that by 2006, between 35 and 45 percent
of current full-time IT jobs will be sent overseas. Using Bureau
of Labor Statistics data, Bardhan and Kroll estimate that of the
almost 128 million workers in the U.S., 11 percent—or just
over 14 million individuals—are at risk of having their jobs

positions will follow the millions of manufacturing jobs already
lost, only at a more rapid pace. As Matthew Slaughter of Dartmouth
College notes, “IT work will move faster because it is easier
to ship work across phone lines and put consultants on airplanes
than it is to ship bulky raw materials across borders and build

lower labor costs are the primary rationale for this job exodus.
While telephone operators in the U.S. earn an average of $12.57
an hour, in India they make less than $1.00 Payroll clerks take
home less than $2.00 an hour whereas their counterparts in the U.S.
average $15.17 an hour.

Business Week

reports, “Soon,
offshore accountants may do everything but on-site audits.”
Medical billing may become the first occupational category to all
but disappear. 

outsourcing advocates contend that shipping jobs overseas is a way
of redistributing wealth from rich to poor countries, a potent mechanism
for creating a democracy-oriented middle-class in developing countries.
However, the reality of the situation belies such “noble”
intentions. Between the late 1970s and late 1990s, the CEO to workers
salary-ratio in the nation’s top 100 corporations increased
from 47 to 1, to approx- imately 1,000 to 1. 

will happen to U.S. workers sacrificed to outsourcing? Job- slashing
corporations argue that displaced workers will secure employment
in the next wave of economic development. They claim that just as
agriculture was supplanted by manufacturing, which in turn gave
way to the computer information revolution, today’s corporate
casualties will find employment in the coming stage of eco- nomic

it’s far from clear what that next economic phase will be and
when it will occur. Few experts anticipate the materialization of
a “white knight” industry to save the day. If such an
enterprise does become reality, how long before newly created positions
are sent abroad, the cycle repeating itself? Data indicate that
when people change jobs as a result of global competition, their
wages typically decline, at least initially. For too many outsourced
workers, “retraining” for future employment will be a
simple matter of learning to say, “Would you like to supersize
that order?” 

and Kroll speculate that surviving outsourced occupations could
face a “downward adjustment of salary and wages” making
them internationally competitive once again. In this scenario, the
domestic IT industry would bounce back, but at a significant loss
of purchasing power for workers.  

than outsourcing corporations, the only segment of the economy benefiting
from job flight are organizations linking labor exporting companies
to overseas workers. One such service provides an “online outsourcing
price quote” formula for how much money will be saved as a
consequence of job transfer. “As the world stampedes toward
outsourcing,” their ad reads, “don’t get trampled.”
Let us “help you navigate efficiently in this new frontier.” 

ramifications of outsourcing are staggering not only for individuals
whose positions are terminated, but also for the larger society.
Unemployment and “underemployment” (working below one’s
level of skill and training) will contribute to a shrinking tax
base, as already financially burdened city, county, and state governments
cut back additional personnel and services. In a nation where 15
percent of the population has no medical coverage, that figure can
only increase as most people secure health insurance through their
employment. Fewer good paying jobs will be available to college
and technical schools graduates as the societal opportunity structure
is diminished. 

cities such as New York, Boston, San Jose, and San Francisco are
certain to be the big losers, while rural areas crippled by the
loss of family farms have little chance of economic improvement.
Suburbs with an employment base of “back office” activities
(customer service personnel and medical transcribers, for example)
can expect to see their labor force shrink. 

are the chances of checking this employment exodus? While manufacturing
jobs were leaving in droves, union membership and power declined
steadily. There is no reason to believe that white-collar workers,
the vast majority of whom have little if any history of collective
organization, will create a viable movement to halt this trend.
In addition, corporate America and its conservative allies have
successfully demonized unionism, linking worker solidarity to that
most “evil” economic system—socialism. Secretary
of Education Rod Paige referred to the National Education Association,
one of the country’s largest teacher’s unions, as a “terrorist
organization.” In a clumsy apology that revealed Paige’s
sentiments toward workers’ organizations, Paige said he was
referring to the union, not the teachers. 

the national level, neither Republicans nor Democrats have shown
any inclination to deal with this problem. Both parties are more
or less committed to “economic globalization” and job
outsourcing is only one aspect of this pheno- menon. 

the outsourcing of jobs from rich to poor countries is inevitable.
However, the consequences for those on the losing and receiving
ends are not. By one estimate, U.S. companies will save $11 billion
in 2004 by outsourcing to India alone. A portion of that money combined
with enormous industry profits would go a long way toward prolonged
unemployment and health benefits as well as job creation for outsourcing
victims. Congressperson Tom Lantos of California argues that the
aim of globalization should be the maximization of benefits for
workers in both the developed and developing worlds. However, in
a corporate “democracy” such as the United States, there
is little chance of realizing that goal.

George Bryjak
is a professor of sociology at the University of San Diego.