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Economics

The Necessity of Offshore Outsourcing in Securing American’s Future

The story of mankind’s history is riddled with revolutions, reformations and transformations; ultimately culminating into a single theory, given the name evolution. Humanity is a constantly evolving creature, whose mainstay power of weathering the tests of time lay in the ability to adapt rapidly as the situation calls for. Man is not inept in his abilities to recognize and judge whether to act upon situations as they come or let them be, and the driving force behind these features is man’s primary concern of maintaining homeostasis. Political and socioeconomic revolutions of past such as the industrial revolution or the introduction of socialism have had both their proponents and opponents. Evolution ultimately provides a gamut of options in direction that may be chosen, however as Clarence Darrow once said “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change” (United States, Improving the Quality 17). It is this very ability to adapt to change that has been ever more in demand as the pace at which discoveries are made grows at what is seemingly an exponential rate.

(This article was written for an audience not versed in economic theory. My goal was to develop an acceptable explanation of the necessity for offshore outsourcing, that would consumable by the general public.)

The story of mankind’s history is riddled with revolutions, reformations and transformations; ultimately culminating into a single theory, given the name evolution. Humanity is a constantly evolving creature, whose mainstay power of weathering the tests of time lay in the ability to adapt rapidly as the situation calls for. Man is not inept in his abilities to recognize and judge whether to act upon situations as they come or let them be, and the driving force behind these features is man’s primary concern of maintaining homeostasis. Political and socioeconomic revolutions of past such as the industrial revolution or the introduction of socialism have had both their proponents and opponents. Evolution ultimately provides a gamut of options in direction that may be chosen, however as Clarence Darrow once said “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change” (United States, Improving the Quality 17). It is this very ability to adapt to change that has been ever more in demand as the pace at which discoveries are made grows at what is seemingly an exponential rate.

Over the past three decades there has been more innovation than in the entire history of mankind. Much of this innovation has come in the field of information technology, with the advent of modern-telecommunication systems, and of course, the Internet. These technologies have redefined how commerce is transacted, and have made a world of borders, boundaryless. Born out of these innovations is the fairly recent development of offshore outsourcing business practices. Offshore outsourcing, or offshoring for short, is a subtype of outsourcing, where jobs that are normally done in the home-country of the company, are sourced out to foreign countries that offer similar quality work at a fraction of the cost it would normally run back home. This sort of job movement has stirred up much uneasiness and resistance amongst Americans who are fearful of their employment prospects. Media outlets and politics have added fuel to the fire by feeding misleading economic statistics to the public, skewing unemployment numbers in ways that make offshore-outsourcing look like a major contributor to American job-loss. The truth couldn’t lay further away from this negative portrayal. Offshore outsourcing is a business practice that stands to benefit the American economy as whole, and affords long-term job security to American citizens.

Not Such a New Issue

The story of modern offshoring does not begin with the Internet revolution of the late nineties. Looking back over six decades, with the end of the Second World War and much of Europe left in shambles, there was a massive pool of unemployed low cost labour resources available. American textile and apparel companies, seeking cost savings, laid off workers and moved production to Europe, and years later to Asia and South America as well (Gupta 26). In the nineteen eighties, under the Reagan administration, major market deregulations and lowered barriers to trade led American autoworkers to face a similar mass exodus of their jobs. Foreign countries such as Mexico and various parts of Asia, including China, Korea and Japan began producing substantial amounts of the inputs required by the automotive industry (Hira xiv; Taylor 368). The companies that followed such outsourcing practices were simply living an economic maxim first lauded over two centuries ago by the famed father of modern economics, Adam Smith, in his book The Wealth of Nations. Smith wrote “It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy” (185).

Up until the mid nineteen nineties, offshoring had been mostly constrained to the manufacturing sector. This was in-part due to obstacles such as the lack of clear channels for communication and the high expense of long-distance calling that stopped service sector jobs from being performed abroad. With the advent of modern telecommunication systems and the Internet, companies are no longer bound by proximity and could now tap the knowledge and varying skill sets offered by the world community. The price of these technologies dropped by as much as 30% over the decade covering 1995-2005 (Mann 1). Centralized database systems allow for information to be accessed from virtually any location around the globe (Mann 1). E-mail and World Wide Web pages are leveraged as powerful tools for mass information dissemination. Voice Over Internet Protocol (VOIP), videoconferencing and high speed internet connections that carry this audio and video has all but eliminated the need for physical face-to-face meetings; further reducing the cost of doing business by cutting down on travel expenses.

Why do Companies Offshore Outsource?

The mainstream belief as to why a company would send jobs abroad is usually rooted in monetary savings or some derivative thereof. The wages in countries such as China and India for work quality that rivals that of American workers, could be as low as 10-20% of wage rates in modern developed nations (Hira and Hira 3). Lowered expenditure on human resources, although quite significant, is not the sole reason nor the primary reason most of the time for offshoring service sector jobs. Managers at firms that offshore mention a myriad of reasons for employing foreign labor (Mann 10). One factor, often stated as being more important than cost savings, is allowing the company to further concentrate on its core-competencies by freeing up human capital currently employed on non-core jobs. Management theory, and as previously mentioned in the quote from Adam Smith, state that companies should concentrate their efforts and most valuable resources on their core business. A computer manufacturer’s main job is to manufacture computers- back office work such as accounting, although required is not directly related to the company’s raison-d’être . Noncore work may be outsourced to professionals who specialize in those tasks, allowing for cost reductions, superior job quality and time savings to be achieved by leveraging their economies of scale (Taylor 369). This premise on outsourcing stands true as well for any input the company requires to produce its service or product. If a comparable resource may be acquired externally for a lower cost than it could be produced internally, then it makes economic sense to use the external product. The company essentially avoids the added drag of maintaining payroll for employees that are not central to the company’s offerings. Businesses can also avoid costs associated with insurance, health benefits, fringe benefits, labor laws and tax implications. In essence, it makes a company more agile, allowing them to scale-up or scale-down without much of the associated overheads (Di Gregorio 981). These prepositions may be construed as diminishing the value of American workers, however it must be understood that there is no face or nationality put on sound economic theories. These are simple realities, and as will soon be discussed, the alternative options lead America down a bleaker path.

There is a pre-conceived stigma that only large corporations participate in offshore outsourcing, however, small and medium sized enterprises (SMEs) stand to benefit just as well. Many SMEs do not have the capital required to hire the best local talent for every job position. Offshoring allows companies to spend less while tapping a wider talent pool. The beauty in this, is that it gives the opportunity for smaller companies, with agility inherent in their size, to stay competitive against larger corporations (Di Gregorio 973). This leads to another major reason companies decide to offshore. Thanks again to technology, it is easier than ever for companies to transact business in markets abroad. The most efficient manner to expand into foreign markets is to hire personnel directly in that market’s geographic region. This allows companies to fine tune their products to local needs and foster better relations with the local population (Di Gregorio 973). Whereas once the prevailing reason for offshoring was cost savings, more and more today the reason is becoming that of capitalizing global markets. Gupta says that “[o]ne needs to treat offshore vendors as strategic partners rather than as mere low cost service providers” (7). Thus SMEs looking to expand globally benefit from creating strategic partnerships with organizations abroad.

Behind the Numbers – Public Sentiment and the Truth

Since the dot-com bubble burst in early 2000, there has been an outcry in America to halt the outflow of jobs to foreign countries. The belief was, and still is, that offshore outsourcing is a major contributor to American job loss. In an effort to stem what was perceived as a bad business practice, the media began to publish negative stories about American companies that offshored jobs. Lou Dobbs, a well known former CNN business news anchor, took frequent pot shots at American enterprises who hired foreign contractors to do the job of an American. Dobbs alleged that these companies were behaving too near sighted and overly focused on making shareholders happy in the present. Dobbs also claimed that American enterprise turned a cheek and valued a quick dollar over their employees’ well being, and ultimately the US economy.

During the years following the dot-com bubble, the media would often publish articles that skewed jobs numbers and overstated the effects of offshoring on the overall jobs market. The fray over the loss of IT and related white-collar jobs in the first half of the decade was fuelled by these misleading reports. The basis for comparison that much of the media used when talking about offshoring was flawed. Whenever there was talk on television, radio, in magazines or newspapers about job numbers, media outlets would focus their comparisons of the present day to that of the peak of the technology boom in the late 1990’s up until the dot-com bubble burst on March 10th 2000 (Mann 2). During the late nineties, the rate at which jobs grew in the IT sector was spurred by artificial expectations that had caused unsustainable liquidity levels in start-ups. Dot-coms had failed to translate theory into practice and the bubble burst. The media’s interpretation of job losses failed to take this bubble effect into consideration. This curtailed proper consideration and examination of normal business cycles, a long-standing decline in the U.S. manufacturing sector, and rapid inflation of the US dollar (Mann 2).

The reincarnation of public angst over outsourcing is primarily due to layoffs in the IT sector of white-collar jobs ensuing the dot-come bubble burst in-between 2000-2003. Prior to this, Americans believed that these higher-paying technical jobs were immune to being offshored, and that it was only basic low-level tasks that would be affected. Although some IT jobs were shed during those years due to offshoring, over 90,000 new American jobs were created in 2003 to support and compliment those that were sent abroad (Global 1). This leads to a key premise on offshoring. As Taylor mentions in his article “In Defence of Outsourcing”, workers who lose their jobs to offshoring eventually will be re-deployed into other work sectors (371). Hira however argues the opposite on this theory, stating “The track record for adjustment is terrible, and there are no resources to facilitate the adjustment process” (5). As we will visit shortly, it is this author’s opinion that the truth lay somewhere in the middle of these two statements.

Attention now shifts to the un-escapable fact that the latest wave of modern technologies has defined these times as the ‘digital era’, and has redefined how commerce can be transacted. The digital era is part of the evolution of globalization. As communication technologies have proven, businesses are no longer bound by physical proximity. Furthermore, advancements in foreign trade policies of both developed and developing nations have lowered the barriers to transact business across borders. Member countries of the World Trade Organization (WTO) have forged the generalized agreement on trade and tariffs (GATT), which aims to ease trade between nations by reducing duties and tariffs on imports and exports (Gupta 27). This freer flow of goods and services across nations is a key economic growth factor as the world becomes more interconnected and dependant on foreign business. GATT allows companies to stay competitive by seeking out the most cost effective inputs for their products, as well as being able to sell them internationally at price points that stay competitive with foreign businesses in their home countries.

Maintaining a competitive advantage is crucial for the American economy. Foreign businesses today have unprecedented access to the American market and are now in direct competition for the same clients as local businesses. Other countries also have access to the same offshoring options America does. Foreign companies make use of this in order to try and steal U.S. market share away from competing American firms. The two primary methods that companies use to compete in the global marketplace are price competition and product differentiation. In price competition, firms attempt to produce an end product in the most cost efficient manner in order to sell the consumer a product at a lower price than their competitor can (McConnell, Bruce, and Flynn 230). As previously mentioned, this means having access to lower cost inputs and methods of production. Product differentiation means creating a unique set of features for a product that competing companies do not have and consumers would want (McConnell, Bruce, and Flynn 223). In order to differentiate best, organizations want to have a sizeable talent pool from which they can tap the best possible resources to stir up fresh, alternative ways of thinking.

When offshoring of technology services began to spike in the late nineties, there was a lack of trained employable resources in the U.S. to fulfill demand (Gupta xxi). One direct cause for this could be the insufficient number of engineers American Universities graduated relative to demand during this rapid growth phase. Countries such as India and China however, had large pools of unemployed, university educated individuals ready to take on work (Hira 68). According to the National Academy of Engineers, in 2004 the U.S. awarded 137,437 undergraduate degrees in engineering, computer science and information technology; by contrast, China awarded 351,537 in the same year (210). Now that offshoring has begun to touch on many careers outside of information technology, such as finance, medical, and back-office business work- it is worth looking at total output of advanced university degrees. Here is where numbers become staggering- in 2009, the U.S. conferred approximately 659,000 graduate degrees, India conferred 3.5 million (United States, “Degrees conferred”. Table 268; India “Annual Report” 104). These numbers however do not speak as to the quality of those graduates, as Mercer Consulting says that “only 25% of graduates in India are employable” (qtd. in “Mere 25% graduates”). Similarly, research by the National Academy of Engineers finds that corporations only deem about 5% of Chinese universities as producing employable engineers, read: up to American standards (211). Keep in mind however, that this is still a sizable number of graduates that are up to snuff, and yet once more, cost a fraction of what an equivalent American employee would run.

How much less are employees in other countries being paid? According to Hira, an engineer earning $70,000 in the U.S. would earn $15,120 USD in China, $14,420 USD in Russia and $13,580 USD in India (69). At first glance this discrepancy in wages might seem significant, and allude to the fact that perhaps engineers in these foreign countries do not have as good a standard of living as does the American engineer. It needs to be understood though that these wages should be filtered through what is known as the ‘purchasing power parity’; this equates the purchasing power of each country’s respective currency to that of the United States dollar. In essence, the engineers from these foreign countries experience an equivalent standard of living to that of the American engineer (Hira and Hira 68). Their costs of living are simply much lower than those in America.

What happens if America does not take advantage of global resources? Foreign firms will. American corporations will lose their ability to compete on price, and perhaps even innovation. Consumers will end up purchasing more and more imports since they will be priced significantly lower, funnelling money completely away from the U.S. economy and destroying American jobs. The automotive industry was faced with this very problem in the eighties when foreign automobile manufacturers began selling their cars in the U.S. American autoworkers were fearful for their jobs and tried to lobby congress to reduce the amount of imports. In his book, Gupta quote’s an interview with economist Lester Thurow, former dean of MIT’s Sloan School of Management, “There were only two long-term viable alternatives: either half the car is produced in Detroit and the other half in Mexico, or the whole car is produced in Japan. By attempting to use legislative measures to tilt the balance in favor of Detroit over Mexico, one would in fact be tilting the balance in favor of Japan” (2). This was reiterated over a decade later, when Robert Miller CEO of Delphi, a major American automotive parts manufacturer, said during his company’s bankruptcy proceedings- that Delphi would need to cut wages down from an average of $65 an hour to about $20 in order to stay afloat due to increased global competition (Knowledge@Wharton).

Allowing for the transparent bi-directional free flow of both goods and services between America and other countries ensures that the American economy will be able to continue to grow into the future unbounded by the limits of its native resources. At one extreme of confinement, Lester Thurow in his forward to Gupta’s book describes the situation in Africa:

Central Africa has almost no contact with the outside world. Other than commodities, it gets almost no foreign direct investment. It has few exports except raw materials. Not surprisingly, it is one of the few places in the world that has a falling per capita GDP. Central Africa has gone from being an area that had a per capita income above that of Asia to an area that has a per capita income below that of Asia. As Central Africa demonstrates, to stop globalization in one’s own country is to stop economic development in one’s own country. (xviii)

This is not to say that America should be considered in the same light as Central Africa, as it has been very fortunate in the path history has provided for its growth. However, it should not consider itself insusceptible to the slowdown that limiting or making foreign interaction costlier would cause.

The recent slowdown of the global economy and high unemployment rate in the U.S. has caused many to once again become cynical of the roll that offshore outsourcing plays on employment numbers. Getting a fix on the exact amount of jobs sent abroad is difficult as the statistics currently gathered by the government on this are limited. The Bureau of Labor Statistics only collects information regarding jobs being offshored in what is known as their ‘Mass Layoff Statistics’, in which only companies that have laid-off 50 plus workers during a five week period would be recorded. These laid-off workers would also have to had applied for unemployment insurance in order to be counted in the numbers (United States, “Extended Mass Layoffs” 2). In 2007, approximately 11,526 workers were laid off during these mass-layoff events due to their jobs being offshored; this account for only 2% of all mass layoffs in said year (United States, “Extended Mass Layoffs” 1, 10). This is a small number when compared to the near one million individuals that were part of mass layoffs due to a host of other reasons, including: waning business demand, financial issues, labor disputes, product discontinuations, seasonal jobs, and the list goes on (United States, “Extended Mass Layoffs” Table 2). Of course these numbers do not paint the whole picture on offshoring since they neglect all layoffs that have to do with a smaller amount of employees losing their jobs. What can be alluded to though upon careful examination of these BLS trends over the years, is that there are a host of other reasons that play much more significant rolls on job loss than offshore outsourcing.

Another public misperception most probably drawn out because of over exaggerated media reports, is that the IT industry in the U.S. is suffering at the hands of offshoring. This is simply not true; in fact the BLS reports job growth in the IT sector. In 2004 there were 460,000 computer software and application engineers, which grew to 515,000 in 2008. In the same years there were 231,000 network systems and data communication analysts that grew to 292,000. In fact, recent BLS projections mention these fields as two of the top thirty occupations which will experience the largest employment growth through 2018; growth of an estimated 70% (United States, “Employment Projections 2008-18” Table 6; United States “BLS Releases” Table 3c). The surge of jobs into the information technology industry in the 90’s was due to the Internet revolution and a massive drop in computer equipment costs that made technology more readily available. It would be unrealistic to expect jobs to keep growing at the exponential rates experienced during the Internet’s infancy. The boom years of the Internet brought a surge of early adopters, all trying to be the first to market in a new industry. Employment growth has since calmed down, and although higher than in other industries, has begun to take on more sustainable levels.

It is true that there are many jobs that can be offshored, but common sense also spells out that there is much that simply cannot. Anything that requires a physical presence cannot be done away with: registered nurses, retail salespersons, construction workers, school teachers, security guards, lawyers, physicians and surgeons, truck drivers and fitness trainers would not be very useful coming over a phone wire (Gregory 1; United States, “Employment Projections 2008-18” Table 6). These are all positions expected to experience job growth over the coming years, and there are many, many more. In fact, over 75% of the top 30 occupations estimated to grow the most over the next ten years are expected to create millions of jobs (United States, “Employment Projections 2008-18” Table 6).

My First Hand Experience with Offshoring

Up until recently, I ran one of Canada’s larger marketing agencies. In 2009, my company began to undertake a major Web development project. When I originally began scouting for North American based development firms, the estimates I was receiving for the project ranged from $150 thousand to $400 thousand dollars, with time horizons of five to eight months to complete the job. The budget I had envisioned was much more modest than this, and so I began to look at alternative markets for development. I read articles on outsourcing in various publications such as The Economist, the usual Google searches on the subject, and consulted with others in industry that had found low cost IT prospects. The general consensus was that India has an enormous pool of talented web developers that charge on average 20-40% of what comparable developers would charge in North America; and due to the sheer size of their resources, they could start and finish the job on a much shorter and rigid schedule.

My first contact with India was a one week barrage of phone calls and emails to setup meetings with six of the country’s top Web development firms. As soon as I had finished explaining the project requirements, and had non-disclosure agreements in place, I began to receive estimates ranging between $40 thousand to $75 thousand. I reviewed each company’s portfolio, and was quite impressed. The company I choose to contract had done work that was developmentally sound and artistically expressive. Their client list includes Fortune 100 companies and top Web portals such as Yahoo!, Microsoft, Dowjones and Sony.

Prior to starting the large project, I decided it would be best to test the waters and have the Indian firm work on a pilot. This was a way for me to gauge the efficacy and efficiency of our communications, as well as a great method to determine if we would be able to build a lasting partnership before investing a great deal of time and money. It was a simple low-budget project that was to last one month and I was to personally direct. However, the project did not end up unfolding as I had expected. The time difference of ten and a half hours between Eastern Standard Time and Indian Standard Time created a communication scenario where I needed to be up between midgnight and one in the morning to direct the next day’s work. When I would wake up in the morning, the developers in India would be heading home for the night. Through an online portal I was able to see the work that was done and if needed, request changes. The time difference meant that there would be a lag of 24 hours before I would be able to see any new modifications; this caused delays and set my company behind schedule.

The costs of the pilot began to rise as more time and work was needed to get things just right. In the end the savings did not amount to the expected 60-80%. Rather, the project cost was roughly 30% less than that of a comparable North American job. I decided not to continue with the Indian firm due to these time lags and costs, although I know many other organizations that would be content with reaping these sorts of savings. What I learned from my offshoring experience is that in order to justify the added complexity of contracting foreign workers, the monetary savings would need to be significant, and probably best suited for projects of a significant size.

My original reason for offshoring this work was economic. What I had envisioned, was that the larger offshored project could save my company enough money to hire an additional two permanent full-time employees for local positions. The actual Web development work would not have required full-time employment for more than a few months. Economically speaking, the cost savings from offshoring would ultimately have contributed more to Canadian GDP in the long-run than had my company expended the estimated $150-400 thousand on local web development. This theory is still sound, however as previously mentioned, would probably best be applied when the volume and costs are large.

What Needs to be Done

There will indeed be millions of jobs shed over the coming years; however most of them could not even be offshored. The top ten industries estimated by the BLS to see the most significant declines in employment and wages all require a physical presence, such as motor vehicle parts manufacturing, postal services, printing, newspaper publishers, gasoline stations and wired telecommunications carriers (United States, “Employment Projections 2008-18” Table 4). This brings up a key point, none of these fields are losing jobs because of offshoring, they are losing their jobs to technology advancements and automation. Looking back to the industrial revolution over the 18th and 19th century, the vast majority of the world worked in either farming, manufacturing or mining. It took sheer man-power in mass numbers to have done what can be done today by the simple push of a button and a couple of individuals guiding a machine. As Lester Thurow describes the 1700s “Most people, 98% or more, were farmers and everyone did their farming in the same way: human or animal power…” (Gupta xvii). The number of farmers declined because of the increased productivity provided by machines such as tractors and cultivators, as well as advances in the sciences of agricultural biotechnology that lead to greater harvests per square acreage. The automotive worker experienced a similar fate in the second half of the 20th century, as automotive assembly line robots pushed man out of his career.

Although the postal worker could fault the creation of email for the major decline of employment in his profession, and the newspaper printer along with his delivery boy could fault the World Wide Web- should they? Email and the Web have become some of the most powerful tools ever created. They have revolutionized not only business, but how many people manage their lives. These technology advancements alone have created countless jobs, and their importance today is so great that their operations are protected by dedicated government agencies and even military. Offshore outsourcing is one piece in the larger context of globalization, which is a paradigm shifting evolution of humanity similar in moniker to that of the industrial revolution. It would not mean a decline in overall employment. Offshoring would simply lead to a shift of a small part in workforce composition as workers retrain into new careers- just as humanity has done throughout any other period of advancement.

Where the true problem lays is not in unsound business practices or unfair trade policies. The problem rests not within the framework or concepts of offshore outsourcing, nor those who use it in their business practices, at least at first. It is a problem with the public’s perception of how offshoring actually affects the economy, and also how both companies and government react after workers have been let go. There are proactive steps that can be taken to offset the pain that adversely affected individuals experience when their jobs have essentially become no longer sustainable in their current form.

It is costly for a company to hire new employees and acquaint them with the business’s culture and operations. One method that can prove beneficial to both employer and employee is to re-deploy workers that have been laid-off into another position within the same organization. If there are positions available whose required skill set does not drastically deviate from that of the employee who’s lost his job, and retraining costs would be less than hiring a completely new worker from outside, then the company should retrain and redeploy the worker. Alternatively, businesses who offshore could use some of the savings they have amassed through offshoring to aid displaced workers by paying compensation equal to salary for a reasonable amount of time until a new job is secured. The displaced worker would have to prove that he/she is actively searching for a job, and the company should also aid in the search.

The government could create a program separate from unemployment insurance, specifically for individuals who have lost their jobs to a worker in a foreign country. In this program, companies who lay-off workers because of offshoring would need to contribute to the program which would pool nationally and be available to all workers displaced due to offshoring. Of course there could be many enforcement problems with such a program, since the burden of proof that the job was sent oversees would probably fall on the worker whose been laid-off. Catherine Mann suggests that the government should give tax-credits to displaced workers, however again this creates a difficult situation in identifying and proving that an individual lost their job because of offshoring. (Lookup proposed measures in McConnell, Bruce, and Flynn. Mention of such programs that are already in action.)

Ultimately, it falls on the government to secure the future of America. To do this it must first educate the public of the true effects of offshore outsourcing. It can bring offshoring back into the spotlight by employing respected public figures to form an open discussion on the mechanics of offshoring and economic theory in lay-mans terms. Also, funding must be expanded for the BLS, Census Bureau and other government agencies- with spending to be focused on gathering and studying a more detailed body of statistics on offshoring in order to better understand its movement and the progression of jobs amongst industries. Most importantly, the government needs to spend more on education. The true power of a country lays not in the strength of its currency, its wall street or its army, but the strength of its people and the knowledge they possess. Countries such as India and China are pouring more money into their education systems because they realize this. The U.S. public education system in the meanwhile is in a period of contraction, with schools closing down and too many students in classrooms for teachers to properly give needed attention. Education is the key to unlocking innovation, what has defined America as a world leader.

Times have changed. The face of business has changed. For the first time in humanity’s existence, there is a true global economy. One of the best examples is the European Union, in which a singular currency, the Euro, is the economic lifeblood of 16 countries. Many people are afraid of change, as change signals walking out of the known and shifting into what can only be described at best as prediction. Favorable to this generation is the fact that the study of economics has come a long way since the last revolution. The body of time tested theories has many who understand them at ease with the developments of offshoring. Harvard Economist and former Bush presidential economic advisory committee member Gregory Mankiw stated:

I think outsourcing is a growing phenomenon, but it’s something that we should realize is probably a plus for the economy in the long run. We’re very used to goods being produced abroad and being shipped here on ships or planes. What we are not used to is services being produced abroad and being sent here over the Internet or telephone wires. But does it matter from an economic standpoint whether values of items produced abroad come on planes and ships or over fiber-optic cables? Well, no, the economics is basically the same. (qtd. in Taylor 369)

In the long-run, offshoring allows America to compete with the rest of the world on an equal playing field. It aids in economic expansion by shifting workers into fields in which the U.S. would be able to best compete in, and outsources those in which other countries can provide greater efficiencies. It is a process that affects a relatively small part of the population, but is still a subject that should be understood by the public at large. Beneath all the theory, the fact remains that when somebody looses their job, the outcome overshadows the reason. It is their world that has just been chipped away at, and no talk of sacrifice for the greater good will serve as solace.

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Gregory, Sean. “Five Jobs for Our Shores: Afraid of Outsourcing? Here Are Some Growing Fields That Won’t Be Farmed out to Overseas Workers.(Time Bonus Section November 2005: Inside Business/Careers).” Time 166 15 (2005): A11. Print.

Gupta, Amar. Outsourcing and Offshoring of Professional Services : Business Optimization in a Global Economy. Hershey, PA: Information Science Reference, 2008. Print.

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“Mere 25% graduates in India are employable: Mercer Consulting.” livemint.com. The Wall Street Journal, Feb. 2008. Web. 3 Mar. 2010.

Mann, Catherine L. Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth. [United States]: Institute for International Economics, 2003. Print.

McConnell, Campbell R., Stanley L. Brue, and Sean Masaki Flynn. Economics : Principles, Problems, and Policies. The Mcgraw-Hill Series in Economics. 18th ed. Boston: McGraw-Hill Irwin, 2009. Print.

Smith, Adam, and Germain Garnier. An Inquiry into the Nature and Causes of the Wealth of Nations. London etc. New York,: T. Nelson and sons, 1865. Print.

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