Reference no: EM131279408

The Delmar Dog Butler: Is Outsourcing Killing America?

First outsourcing moved manufacturing jobs from the United States to parts of the world where labor was cheaper. Then U.S. companies began outsourcing white collar and professional jobs offshore, many to India. Jobs contributed by American firms have helped India has become a huge player in the world economy.

India’s success story can be attributed as much to accident as it can to strategy, says Professor S. Sadagopan, Director of the Indian Institute of Information Technology in Bangalore. India entered the world labor market by competing on cost; U.S. textile firms, for instance, outsourced production jobs during this phase. Quality and processes fueled the second stage of growth, and many U. S. airlines, for example, outsourced reservation jobs. Finally, India started getting into products and intellectual properties. While his country has successfully moved up the value chain, Sadagopan says it is not sufficient for India to move only up the value chain. A country of a billion people needs jobs not only for PhDs but also for those with much less formal education.

Outsourcing, says Sadagopan, gives the whole world, not just India, the opportunity to bring down the cost of both low-end jobs in manufacturing and high-end operations such as medicine. Many U.S. information technology firms have moved computer programming jobs to India to obtain skilled workers and save significantly on labor costs. Indian programmers are educated, hard-working individuals with positive attitudes who are willing to put in extra time beyond the typical workday if needed. A programmer working for an Indian firm typically earns around 14,000 rupees, about $3,000. By moving to a multinational firm located in India, the same programmer can receive a 150 percent increase to 35,000 rupees or about $7,500, far below the nearly $60,000 or more a programmer in the United States would earn.

As U.S. firms outsource to save money, of course American workers lose their jobs. Steve Relles, a computer programmer for General Electric Plastics in Selkirk, New York, lost his job when GE decided to send its programming to India. With two young children, Relles and his wife, Rose Duhan, experienced an uncertain and scary time. Relles worried that his skills were not up-to-date. Fortunately, Duhan was able to return to the labor force after staying at home with the children for six years, and the spouses switched roles.

Once both children were in school, Relles had to decide what to do. After a friend gave him the idea, Relles started the Delmar Dog Butler to provide dog waste removal services in the area surrounding Delmar, New York. Now he needs his computer knowledge only to keep records and handle billing, and he uses computers mostly for fun. Relles takes the work seriously and is reliable and thorough. He likes working outside and being his own boss.

Relles feels fortunate that his wife has marketable skills and they do not have any debts. Relles no doubt voices the sentiment of many Americans. “I feel that outsourcing is hurting our country and helping other countries,” he says. He questions whether outsourcing helps U.S. companies save as much as it would seem, since it lowers labor costs but increases costs related to distance and communication.

Questions: at least 100 words per question

What forces in the global environment are leading to increased outsourcing?

What has outsourcing meant to countries like India?     

Do you think outsourcing is helping or hurting America?