THE OUTSOURCING WAR:

LET ECONOMICS TRIUMPH OVER POLITICS

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In an article, "Why Your Job Isn't Moving to Bangalore" in the New York Times, Jagdish Bhagwati, a senior fellow at the Council on Foreign Relations and professor at Columbia University writes that the panic and furor over outsourcing is completely unwarranted. He further says that no jobs are being taken away from America. He says that the affect of changes in technology is being felt in the labor intensive industries. According to him, the loss of jobs in the US is due to technological changes.

Professor Bhagwati is also critical about politicizing the whole issue. He says that outsourcing will strengthen the competitiveness of the US companies. Firms ignoring the cheaper supplies would lose out. Professor Bhagwati further says that outsourcing service jobs is nothing different from importing of labor-intensive textiles and other goods. According to him, all empirical studies in the US over the last two decades suggest that wage stagnation in the manufacturing industry is more due to automation of the processes, not the cheaper imports. The same is applicable to service industry as well.

Jane Linder of Accenture's Institute for Strategic Change says that companies outsourcing the traditional back-office work have more control and discipline over their operations. Moreover, employees of the company can concentrate on framing strategies. Further, outsourcing also results in greater efficiency and lowering costs. This allows companies to offer better services to customers. A study done by McKinsey Global Institute reveals that for every dollar of work outsourced by the US, it gets back $1.14 as income, and the countries to which the work is being outsourced gains 35 cents. This shows that outsourcing is a win-win situation for both the countries.

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