Wednesday, April 26, 2006
[IWS] USITC: Growth in SERVICES OUTSOURCING to INDIA: Propellant or Drain on the U.S. Economy? [January 2006]
IWS Documented News Service
_______________________________
Institute for Workplace Studies Professor Samuel B. Bacharach
School of Industrial & Labor Relations Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor Stuart Basefsky
New York, NY 10016 Director, IWS News Bureau
________________________________________________________________________
No. 2005-12-A
Office of Economics Working Paper
U.S. International Trade Commission
William Greene*
January 2006
Growth in Services Outsourcing to India: Propellant or Drain on the U.S. Economy?
http://hotdocs.usitc.gov/docs/pubs/research_working_papers/EC200601A.pdf
[full-text, 64 pages]
[excerpt]
Conclusion
Outsourcing of business process services is here to stay, but the degree to which it will either
positively or negatively affect the U.S. economy is yet to be determined. U.S. corporations continue to
outsource many of their routine labor-intensive business process services tasks to developing countries
that offer significant cost savings and quality advantages. Labor arbitrage continues to be the driving
force behind offshoring as it has allowed companies to dramatically lower their labor costs. In theory,
these savings can be passed on in the form of lower prices to consumers and higher dividends to
shareholders. Offshore outsourcing also allows American companies to focus on their core competencies
while improving quality and productivity.
India is only one of a number of low-cost countries that U.S. companies are using to lower their
costs and gain greater efficiencies. At present, India dominates global business process outsourcing
because of its competitive advantage in the areas of linguistic skills, institutional comparability,
competitively priced telecommunications services, and its ability to offer quality services at 40 percent to
60 percent of the manpower cost in the United States. However, India continues to be weak in
infrastructure and its business process outsourcing sector continues to suffer from attrition and
absenteeism problems, rising costs, and security concerns (IP piracy). Consequently, there are a number
of countries such as China, the Philippines, and Malaysia that are waiting to challenge India's
supremacy.
Anxiety in the U.S. jobs market stemming from outsourcing and potential job loss continues to
be an important issue among white-collar IT and services sector workers and in Congress. There is clear
evidence that IT and services sector jobs have been sent offshore, but most of these jobs have been
concentrated in lower skilled occupations. Nevertheless, there is no hard evidence to support the notion
that globalization or offshoring will transform the United States into a third world nation or that it will
exert downward pressure on U.S. wages or broaden the income distribution gap. Much of this debate has
been made with "incomplete data, anecdotal, politically motivated, or data that has been otherwise
tweaked." Even the most generous estimates of jobs lost to outsourcing account for less than two 185
percent of total U.S. non-farm employment. Nevertheless, Forrester Research and other consulting firms
contend that trade in services could generate net benefits to the U.S. economy including lower prices to
consumers, higher dividends to shareholders, growing exports, greater job security and higher wages for
the remaining workers, and greater overall economic efficiencies.
AND MORE....
_____________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky *
Director, IWS News Bureau *
Institute for Workplace Studies *
Cornell/ILR School *
16 E. 34th Street, 4th Floor *
New York, NY 10016 *
*
Telephone: (607) 255-2703 *
Fax: (607) 255-9641 *
E-mail: smb6@cornell.edu *
****************************************
_______________________________
Institute for Workplace Studies
School of Industrial & Labor Relations
Cornell University
16 East 34th Street, 4th floor
New York, NY 10016
________________________________________________________________________
No. 2005-12-A
Office of Economics Working Paper
U.S. International Trade Commission
William Greene*
January 2006
Growth in Services Outsourcing to India: Propellant or Drain on the U.S. Economy?
http://hotdocs.usitc.gov/docs/pubs/research_working_papers/EC200601A.pdf
[full-text, 64 pages]
[excerpt]
Conclusion
Outsourcing of business process services is here to stay, but the degree to which it will either
positively or negatively affect the U.S. economy is yet to be determined. U.S. corporations continue to
outsource many of their routine labor-intensive business process services tasks to developing countries
that offer significant cost savings and quality advantages. Labor arbitrage continues to be the driving
force behind offshoring as it has allowed companies to dramatically lower their labor costs. In theory,
these savings can be passed on in the form of lower prices to consumers and higher dividends to
shareholders. Offshore outsourcing also allows American companies to focus on their core competencies
while improving quality and productivity.
India is only one of a number of low-cost countries that U.S. companies are using to lower their
costs and gain greater efficiencies. At present, India dominates global business process outsourcing
because of its competitive advantage in the areas of linguistic skills, institutional comparability,
competitively priced telecommunications services, and its ability to offer quality services at 40 percent to
60 percent of the manpower cost in the United States. However, India continues to be weak in
infrastructure and its business process outsourcing sector continues to suffer from attrition and
absenteeism problems, rising costs, and security concerns (IP piracy). Consequently, there are a number
of countries such as China, the Philippines, and Malaysia that are waiting to challenge India's
supremacy.
Anxiety in the U.S. jobs market stemming from outsourcing and potential job loss continues to
be an important issue among white-collar IT and services sector workers and in Congress. There is clear
evidence that IT and services sector jobs have been sent offshore, but most of these jobs have been
concentrated in lower skilled occupations. Nevertheless, there is no hard evidence to support the notion
that globalization or offshoring will transform the United States into a third world nation or that it will
exert downward pressure on U.S. wages or broaden the income distribution gap. Much of this debate has
been made with "incomplete data, anecdotal, politically motivated, or data that has been otherwise
tweaked." Even the most generous estimates of jobs lost to outsourcing account for less than two 185
percent of total U.S. non-farm employment. Nevertheless, Forrester Research and other consulting firms
contend that trade in services could generate net benefits to the U.S. economy including lower prices to
consumers, higher dividends to shareholders, growing exports, greater job security and higher wages for
the remaining workers, and greater overall economic efficiencies.
AND MORE....
_____________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 12:20 PM
