Princeton prof defends outsourcing

The outsourcing issue has always been hounded by controversy – but has its share of supporters right in the US. One of them is Princeton professor Gene Grossman, who believes that sending certain jobs overseas is beneficial to the US economy, helping the private sector gain a comparative advantage and efficient production.

He points out that aside from providing for foreign jobs in the manufacturing and service industries, non-core activities such as such as those in the call centers and R&D centers now play a big role in coloring the outsourcing landscape. These are mostly brought to developing countries with lower wage brackets, like India. This phenomenon is partly due to the developments in information and communications technology as well.

Grossman explains that the outrage over outsourcing is quite understandable especially with the loss of employment of even white-collar workers. The 2004 presidential election alone was transformed into a showcase of outsourcing stands and strategies. He is adamant with his belief that only low-wage workers would be affected by the lure of lower wages in the developing countries.

Included in these low-wage works are:

• telephone operators
• medical transcriptionist
• payroll clerks

To illustrate the difference: average hourly rate for a US telephone operator back in 2003 was US$12.57 (503 baht) while in India it fetches a measly $1 at the most (40 baht).

Grossman assures that high-wage work for the likes of accountants, financial researchers, and analysts would be safe home in America – but only in the short run. ''In the longer run, the question is whether the US will continue to be powerful in education, technology and maintain its macroeconomic climate,'' he says.

Over the years from 1996 to 2004, figures raked in by the US imports of business, professional and technical services have showed phenomenal growth to four times the original figure. Initially, figures stood at $250 million in 1996 have skyrocketed to about $1 billion dollars in 2002. This presents only 0.1% of total imports and should not be a threat to the US economy.

Grossman says that limiting outsourcing would not be the solution to US job woes. Instead, the country emphasize on retraining and compensating workers rendered jobless due to outsourcing.

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