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.”
Offshored customer-service staff in overseas call centres tend to annoy customers.
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?
Follow James Adonis on Twitter @jamesadonis