Insourcing: A Better Alternative to Conventional Job Shipping
In previous articles, we have discussed how the benefits of free trade and globalization outweigh any perceived losses. Many regard job shipping as simply “job loss” and it is thus not surprising that job shipping is confronted with negative public opinion. For many reasons, however, such a view is a misconception.
Job shipping is a part of free trade and globalization. And free trade and globalization is a “two-way street.” It is unfeasible to expect the US to export and not import, witness insourcing but not shipping of jobs overseas. Most importantly, as a result of free trade and globalization US insourcing outweighs job shipping. It is for this reason free trade should be encouraged and job shipping should not be deemed negative. Job shipping is simply a part of the free trade “deal” that brings the US more than it loses.
- US companies sell 3 times more IT services to the rest of the world (more than $10 billion worth) than what it buys. Despite India’s prominent ability in IT services, it is the US that dominates the industry.
- The Silicon Valley Business Journal in March 2009 stated, “An annual survey by accounting and consulting firm BDO Seidman LLP showed that 22 percent say the United States is the job shipping destination they are most likely to consider in 2009, compared to 13 percent for India.”
- India is the world’s second largest IT exporter of software after the United States. Job shipping helps maintain US dominance.
- With a 59% share, the US commands the largest share of the global BPO market.
- In 2002, US companies exported $14.8 billion worth of computer, data-processing, research, development, construction, architectural, engineering and other IT services. During the same year, Americans imported $3.9 billion of similar services. Thus, for every dollar sent, the rest of the world sent more than three dollars back to the US.
- According to the Bureau of Labor Statistics, the number of jobs shipped increased from 6.5 million in 1983 to 10 million in 2000. The number of insourced jobs increased even more in the same period, from 2.5 million to 6.5 million.
- In 2001, U.S. cross-border exports of IT services totaled $10.9 billion, while imports totaled $3 billion, yielding a trade surplus of $7.9 billion.
- In 2002, overall commercial services exports exceeded imports by $58 billion.
- Nearly 170 Indian IT companies have offices in the US and they employed nearly 60,000 people in the US in 2001. These people paid nearly $810 million in taxes in 2001. Employees of Indian IT firms bought goods and services worth $1.2 billion in the US and paid nearly $300 million as social security in 2001.
Job shipping is merely one element of the overall free trade and globalization compound. And free trade and a globalised world are of vast benefit to the US. Most significantly, free trade and globalization produce an overall net gain for the US economy. This is why steps should not be taken to counter job shipping, for such measures could have repercussions which escalate beyond what one might envisage. An attack on job shipping is an attack on free trade and globalization, and it is the US economy that has the most to win or lose from free trade.