Outsourcing

New Page -- 20 March 2004

The current rage in Corporate America – which is in turn causing a fair amount of another kind of rage in employees of the rank and file – is the outsourcing of relatively high paying jobs in the United States to new recruits in dismally paying (or just lower paying) countries. Time Magazine [1] has written that “outsourcing is accelerating, and quickly becoming the defining economic issue of the 2004 campaign.” It's probably safe to say that outsourcing is also becoming something of issue for those people un- and under-employed as a result of this new trend in Corporate Rule.

In the last three years (2001-2003), 2.3 millions jobs have vanished from the land of the free and the home of the brave (the United States for foreign visitors). As a result of the North American Free Trade Agreement (NAFTA), roughly half a million jobs have gone south, so to speak, between 1994 and 2002. “More than 3.3 million U. S. jobs are projected to leave the country by 2015” [1] -- just in time for the baby boom generation to reach retirement age.

“We ordered a recovery, heavy on the jobs, please. What we're getting is a new kind of homeland insecurity powered by the rise of outsourcing, a bland yet ominous piece of business jargon that seems to imply that every call center, insurance-claims processor, programming department and Wall Street back office is being moved to India , Ireland or some other place thousands of miles away.” [1]

Outsourcing can be thought of as simply the replacement of someone making a fairly good living in one country with someone willing to work for a fifth or a tenth of the other person's salary – for the same work – but whose living expenses in another country are substantially less. For example, a computer programmer in the U.S. making up to $80,000 is being replaced with workers from India who are earning up to $11,000. There is a significant difference in the effects of this variation in salaries for the corporate bottom line. At the same time, living expenses in India are considerably less, such that American companies are creating a middle class on the other side of the globe. [Of course, employees in India are often working in the middle of the night in order to communicate with call-ins from Americans with a 12 hour time difference.]

There is a tendency, unfortunately, for most everyone involved in thinking and/or pretending to do something about this problem (i.e. American politicians) to assume there is simply no hope of dealing effectively with the problem in an open capitalistic society. Those in the know think in terms of living with and even learning to love outsourcing. “Analysts doubt any protectionist strategy will slow what appears to be a permanent shift in the way the U.S. does business.” [1]

Thus the useless advice to being given employees who are seeing their jobs going the export route – and thus occasioning the slow elimination of the country's middle class – is to grin and bear it, seek education for other careers to be outsourced later, and resign themselves to watching the continuing saga of the rich getting fantastically richer and the poor, middle class, and portions of the upper middle class getting even more rapidly poorer. There is also a great deal of talk about adapting educational systems to provide the best graduates – but this is really quite pointless when there are no entry level jobs available.

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Take heart, dear traveler on the economic road of life. Perhaps, there is a real solution! Not necessarily a politically expedient one (i.e. there's going to be a LOT of opposition from CEOs), but a political solution nonetheless. The answer to the prayers of the recently replaced higher paid employees is at hand. Better yet, it's not about protectionism -- what Allan Greenspan, the chairman of the Federal Reserve (and whose job is unlikely to be outsourced), claims will end up causing foreigners to retaliate and thus cause the loss of yet more jobs.

The proposed solution is simply a matter of reducing or removing the incentive and/or motivation for highly paid members of a corporation to replace high paid local employees with low paid employees in a galaxy, far, far away.

How is this done? For starters, it should be obvious that if it were the jobs of CEOs and high ranking employees that were being outsourced, the problem would be immediately solved! For example, if Disney replaced Michael Eisner with someone from India -- someone who was capable of working with a mouse obviously, but who would do it for oh say a half million dollars per year -- the Disney Corporation could save untold millions of dollars. They wouldn't even have to provide severance packages to the tune of some 140 million dollars for departing presidents. The fact that this plan would also eliminate the millions to be spent protecting Eisner's job from takeover bids from other corporations, would simply be icing on the cake. Roy Disney would love it!

On a slightly more realistic scale – i.e. there is likely a strange reluctance for CEOs to unemploy themselves – we are forced to resort to the recognition that corporations are public entities, licensed and at the mercy of governments. Public corporations exist, in theory, at the pleasure of the governments under which they are incorporated and also when they do business within a particular government's jurisdiction. Thus, by the simple – i.e. politically horrendous – step of governments stepping up to the plate and dictating to public corporations how they are do business, all quickly falls into place.

This does not mean a wholesale intrusion into the affairs of the corporation (which would undoubtedly be a bigger disaster than seeing Michael Eisner in an unemployment line), but rather a simple requirement that public corporations – along with the companies with which they do a substantive amount of business – adhere to a limit on the amount of total compensation that CEOs, directors, and high level executives can receive.

This is, of course, fantastic news for the shareholders of the corporations – those beleaguered individuals on whose behalf the corporation supposedly operates. And the plan is guaranteed to reduce extravagant costs by ensuring that all corporations incorporated and doing business within the jurisdiction of the high paying jobs nations have similar limits on what they pay CEOs and high ranking executives. There is therefore no problem with attracting executive talent since there is simply no other place to go and find obscene CEO type employment.

In essence, all that is required is to link the maximum total compensation to any and all highly paid employees of a corporation to the employee(s) of the corporation with the lowest total compensation. Of necessity, all of the employees of any company which does a continuing and significant amount of work for the corporation would have to be included . This is essentially the concept of The Rule of 20-50.

Obviously, there would have to be some specific rules to prevent circumvention of the rules by redefining who is considered to be an employee of the corporation, but this is hardly an insurmountable task. Essentially, any individual employee performing a task or job description which is required for the continuing routine operation of the company would be viewed as an employee of the corporation. Janitors, for example, would be such corporate employees, even if the work if farmed out to another independent company.

There would also have to be some variations in the rules, depending upon the size of the corporation, but again a slight attempt at honesty and fair play would make this a slam dunk solution.

The very slight difficulty, of course, is Corporate Politics, whereby the politicians are in bed with the corporations to the tune of millions of dollars. This reduces the likelihood of an early resolution to the outsourcing problem.

But with the right kind of leadership – or grass roots revolution, whichever – things might just move along rather well. Just remember that a “revolution” is not necessarily a violent affair, but which could be the simple expedient of people doing their homework on who sells what, and thereafter refusing to buy the products of corporations who sell out their employees in order for the top executives to be able to afford luxury apartments, expensive art, and egocentric status rewards. It's a matter of voting with one's dollars.

References:

[1] Jyoti Thottam, “Is Your Job Going Abroad?”, Time Magazine , March 1, 2004 .

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