Outsourcing: Threat or Opportunity for the Western Economies?

The Myth of Job Losses Caused by Shipping Jobs Overseas

The practice of sending jobs to countries like India is often greeted with venomous criticism and unsavory sentiments. Perhaps this is because job shipping is seen as negatively impacting the national economy and resulting in job losses.

There are many arguments, some from a company perspective and others from a wider economic viewpoint, that dispel many of the myths associated with shipping jobs to other countries. The rebuff to anti-job shipping commentators herein, however, is, “What if a company simply cannot hire locally? In such a situation if a company sends a job to a remote location, will it be called a job “lost” to job shipping?

There are three common situations when a company cannot hire locally. The first is when a company cannot afford to pay the local rates of local professionals. What if a company simply would not be able to survive, or would not make a profit if it hired locally? Such a hypothetical scenario is often actually the case for startups and many small- to medium-sized enterprises (SMEs). Job shipping not only reduces salary costs, it also reduces, if not completely eradicates, office overheads, employee insurance and recruitment costs. With small turnovers and profits, job shipping can swing the balance between loss and profit.

This can also be particularly true during a recession. A company that might have been able to hire locally, might no longer be in a position to do so during a recession. Thus, during such times, job shipping can help a company become competitive enough to stay afloat and survive a recession as opposed to going completely under.

In short, if a company simply could not exist if it did not send its jobs, then no job existed in the first place to be “lost” to job shipping business. In this respect, it is actually because of the job shipping industry that such small companies are able to start up and or even survive.

The second common situation is due to geographical remoteness. Often a company can afford to hire locally but due to the remote location of the company it does not have access to the required skilled staff. Again, in such a situation, a company may be forced to ship jobs and no local job actually existed in the first place to be “lost” to job shipping.

A third common scenario is when there is a skill shortage in the labor market. For years, Western countries have welcomed the brain drain of Indian professionals because of local skill shortages: doctors, engineers, accountants, nurses and software developers have emigrated from India in the millions during the past six decades. If an American company ships jobs because there is a national skilled labor shortage, then surely no job is being lost?

In these situations, it is apparent that a job simply did not exist in the first place for it to then be lost to job shipping. If the company did not send jobs this would not translate into the company hiring locally. Furthermore, if job shipping makes the difference between a company’s non-existence and survival then not only is it not causing any job loss it is actually contributing to local job and business creation. For, if a company could not survive without shipping jobs to an economically cheaper location, then firstly there would be no company in existence and at the very least the owner of the company would be unemployed. This argument helps us understand that job shipping creates and sustains the job for the owner of the company and helps create a company for the local economy.

Many opponents of job shipping oversimplify the dynamics of sending jobs to other countries, equating job creation in India with an equivalent job loss in America. This simply is not the case. Many companies send jobs because they have no other alternative; the job positions they were looking to fill locally never existed in the first place; this could be due to financial, geographical or skilled worker restraints. By not shipping jobs, a new local job would not be created and the company could easily go out of business.

From such a perspective, even the sternest anti-outsourcing campaigner must acknowledge the positive impact of job shipping. It is businesses that drive and stimulate national economies and job shipping helps businesses to start up, exist, and survive during times of recession. That job shipping results in job losses is just a myth, pure and simple.