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Small business

The ethics of sending jobs offshore

July 20, 2012
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Are we hypocritical by revolting when Aussie jobs are sent elsewhere, but celebrating when they’re sent here?

One of the hottest issues in the US presidential election has little to do with policy or the future of the world’s diminishing superpower. It’s more about the past. In particular, the degree to which Republican presidential candidate Mitt Romney was – or was not – involved in sending American jobs offshore in his previous corporate life. The offshoring argument is one that’s especially potent here in Australia, too.

So far this year, companies like Suncorp, Heinz, Telstra, Westpac, Woolworths and, of course, Fairfax (publisher of this website), have all declared they’re sending jobs to places like India, Malaysia, New Zealand, and the Philippines.

Whenever an offshoring announcement is made, it’s usually followed by a cacophony of predictable condemnation, much of it reminiscent of that classic clip from South Park: “They took our job!” It’s worth pondering, though, whether the offshoring of jobs is really as bad as it seems.

First, the case in favour.

Proponents of offshoring point towards globalisation as a reason to support it. Part of doing business in an interconnected world means that, yes, we’ll lose some jobs overseas, but we’ll also gain others. Or, at the very least, the exporting of low-skilled jobs leaves Australians with more fulfilling high-skilled ones.

Offshoring’s advocates also suggest it provides economic benefits and positive PR in the beneficiary country, making that population more likely to buy Australian goods. It similarly increases Australians’ purchasing power because products are cheaper when they’re manufactured overseas.

Then there’s the profit motive. If offshoring enables Aussie firms to make more money, that creates a stronger Australian economy, greater shareholder returns, and healthier superannuation balances. There was a study released this year by Harvard, for example, which showed that a 10 per cent increase in foreign investment leads to a 2.6 per cent increase in investment back home.

And we haven’t even touched on the skills shortage yet. If companies can’t source the right workers in Australia, it makes sense to look elsewhere. To not do so would restrict economic growth.

That, in a nutshell, is the argument in favour of offshoring. In short, the most efficient allocation of resources is paramount. Even though it’s sad to see people lose their jobs, there’s a net advantage overall from a macroeconomic viewpoint. 

But now for the downside.

Professor Greg Bamber from Monash University is a co-author of International and Comparative Employment Relations. He provided me with four compelling reasons to justify why Australia should reverse the offshoring movement:

  • “Offshoring tends to decrease employment in this country as jobs are exported.”
  • “Offshored customer-service staff in overseas call centres tend to annoy customers.”
  • “It may be more difficult for Australian enterprises to manage and motivate staff who are based in remote offshore locations.”
  • “Intermediaries … tend to exaggerate the benefits of offshoring and gloss over the costs and possible disadvantages.”

So, is it possible to undo it? It’s afoot already in the United States. Barack Obama has promised tax breaks to companies that create jobs in the US, while those who send jobs offshore will face tax disincentives. 

And, as Professor Bamber tells me, companies like Nike and Apple are facing consumer pressure to relocate staff back to the US because of the conditions to which many of their offshore employees have been subjected.

For me, the crux of the offshoring debate is the ever-present but frequently ignored double standard. 

We revolt whenever Australian jobs are sent elsewhere but we celebrate when they’re sent here. We complain about developing countries taking our jobs, but we’re not resentful of the technologies that do the same thing. And when small business owners use online services – such as Guru.com – to outsource projects to freelancers in Pakistan and Bangladesh, most of us don’t kick up a fuss.

It’s a complex debate – but also, at times, a hypocritical one.

What's your view on offshoring? Are you an advocate? Or an opponent?

twitter Follow James Adonis on Twitter  @jamesadonis

62 comments so far

  • "There was a study released this year by Harvard, for example, which showed that a 10 per cent increase in foreign investment leads to a 2.6 per cent increase in investment back home."
    Hmm. Wonder what a 10% increase in investment at home leads to

    Commenter
    Nicho
    Location
    Sydney
    Date and time
    July 20, 2012, 1:22PM
    • It is completley unethical to retain jobs here in Australia when the could be done more efficiently overseas. Firstly, there is an inherent racist presumption that people of colour in other countries have less right to employment, than Australians of any colour. Second, where efficiencies can be gained and prices lowered as a result, it is unethical to deny the poor in our societythe right to the better standard of living that results. The efficiencies gained mean that capital is reallocated to other tasks here in Australia, by definition higher value tasks, and implicity tasks that bring a higher quality of worklife. we may have an ethical obligation to those that lose employment here, bt should remember that every loss is outweighed by greater gains. Third, the denial of employment to people of other national is a dangerous nationalism, and therefore highly ethically questionable..

      The nationalistic protectionistic approach to agriculture is particularly threatening to the poor of other countries. Food is often the only realistic export for poor countries, and therefore the only way they can get foregin capital, and consequently buy goods from the developmed world to enhance their health, education sytems and economy, and move out of life threatening poverty.

      Commenter
      offaro
      Location
      Sydney
      Date and time
      July 20, 2012, 1:44PM
    • What nonsense
      Why have OH&S laws here then export all the dangerous and menial jobs. Why import produce which then has to be irradiated before passing quarantine. Your argument is based on an idea that we have to help everyone achieve their own couch-potato gridlock lifestyle. If you feel a need to do that go ahead but stop trying to take me with you.

      Commenter
      .bg
      Location
      Date and time
      July 20, 2012, 2:07PM
    • The offshored jobs create income and therefore increases consumption in the offshore countries, which in turn leads to more opportunities in the home country. If the US had not offshored to China and created manufacturing jobs there, Chinese wouldn't have had the income to consume more white goods, cars & apartments which would lead to more demand for Australian iron ore and coal to produce steel. So offshoring is win-win for all sides. Like Kennedy said "A rising tide lifts all boats"

      Commenter
      ozilibertarian
      Location
      Sydney
      Date and time
      July 20, 2012, 2:51PM
    • All the foreign investment is in CHina to off shore those jobs......

      Commenter
      Ben
      Location
      Shanghai
      Date and time
      July 20, 2012, 3:29PM
    • I was wondering the same and I also wondered:
      Offshoring’s advocates also suggest it provides economic benefits and positive PR in the beneficiary country, making that population more likely to buy Australian goods.
      What good might that be as there is hardly any manufacturing left in Oz, some more in the US though. It would more help the super rich that hide away from the fiscal some $20trillion in tax havens, something the G20 nations promised to close down since the GFC in 2008 but have not yet tackeld (its still in the too hard basket I guess).

      Commenter
      Rod
      Location
      Geelong
      Date and time
      July 23, 2012, 9:11AM
  • Go china or go burst... If a company doesn't send jobs oversea, they face going bankrupt and sending everyone jobless...
    There is nothing wrong with sending jobs overseas. I got sacked twice and i moved on with education and now in a position where i can sack people, and no i won't feel bad for you if i have to sack you to save the company.

    Commenter
    got brain
    Location
    Date and time
    July 20, 2012, 1:46PM
    • ...then I suggest you run for parliament on the platform; I INTEND TO IMPROVE THE LIVING STANDARDS OF PEOPLE OVERSEAS! (the rest of you keep getting over-educated for jobs in the service industry!)

      Commenter
      What have the Romans done for me
      Location
      The Real World
      Date and time
      July 22, 2012, 10:22AM
  • The question asked above is a stupid one.

    The writer already answered it.

    There are winners and losers.

    There are no neutral ones.

    The issue is what is best for the largest number of people and what is best for the country's economic and social systems.

    For example, if AUS firms produce abroad they may be able to make their goods cheaper but they still have to bear the cost of bringing it back for distribution.

    The employees who lost their jobs due to the firms going offshore may be unemployed for some considerable time. This means they have little purchasing power to buy goods and services. They no longer pay taxes and the State has to provide unemployment benefits. being unemployed their self esteem suffers and so do their families.

    Now compare the benefits and the cost of having sent those jobs overseas.
    Don't just look at the financial implications the social one are also important.

    Commenter
    caledonia
    Location
    sydney
    Date and time
    July 20, 2012, 1:49PM
  • "at the very least, the exporting of low-skilled jobs leaves Australians with more fulfilling high-skilled ones"

    Does it? Don't the Australians need to be skilled in order to be able to fulfill the high-skilled ones? Are they automatically deemed skilled on the basis of them, and the position being geographically available.

    In my view, which is largely uneducated in this regard, I don't have a problem with outsourcing overseas. It wouldn't matter if I did have a problem with it, it's still a natural function of a global economy. Of course businesses within a capitalist society will seek to lower their costs and increase their profits, to think otherwise or to bemoan this practice is absurd and naieve.

    I don't get the problem with employing others in less developed countries, Aren't they as deserving as us? We get a developed economy, free education, access to technology, healthcare, we have homes and a transport system. A lot of the population of the devloping countries have nothing. Who are we to begrudge them a developing economy. Why shouldn't we support them?

    Another factor is that the less low skilled roles there are in Australia the lower paid they will become. Sure that sounds mean to the low paid employees, but in the grand scheme of things a lot of business can't afford to pay $25+ per hour to unskilled workers. I have a degree and nearly 20 years experience in my field and I don't get much more than that. Why should snot-nosed school drop outs have it so easy at the expense of the rest of us.

    Commenter
    lactosetolerant
    Location
    Date and time
    July 20, 2012, 2:29PM

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