Multi-process HRSourcing

Stimulate the Economy, But Continue to Keep Borders Open

Casting outsourcing as a villain is easy, but to address unemployment woes, here are some solutions
by Atul Vashistha
As we struggle in America to figure out how to stimulate the economy, we are seeing a rising sentiment against outsourcing. So, I wanted to take this opportunity to share my thoughts, though others have made many of these points in the past decade.

Globalization of services is making significant, positive contributions to global economies and the buying power of the U.S., India, China, Mexico, Brazil, and others. Still, outsourcing is seen as an alarming issue. As a participant in the industry, I feel it is important to provide a balanced view to the debate.

It is always unfortunate when an individual experiences job loss. It is even more disturbing when it occurs in a down economy. This trend is real, irreversible, and another step in the globalization of the American and global economy. As companies go through this difficult decision, they also create programs to minimize the short-term pain for employees by offering training, severance, and outplacement services. As an advisor to these companies, I see employers looking at innovative solutions to help manage this difficult personal and corporate change.

While this will continue to be a controversial and emotional debate, keep in mind that redistribution of resources to efficient global locations frees up capital, lowers costs for consumers, and produces new opportunities for investments. Protectionism hampers innovation and cripples growth, which can lead to higher unemployment. The failure to innovate is to cede technological leadership and, ultimately, economic strength.

Globalization is a structural evolution of the American and global economy. The U.S. is part of a global economy, and American companies will flourish by staying competitive. This requires leveraging resources and opportunities globally. It enables them to not only save jobs but also create new ones and new services/products. Some companies that fail to leverage globalization have filed bankruptcy and shed even more jobs.

As the U.S. population ages, there will be a shortage of resources. A shortage of almost 15 million workers by 2015 is predicted if current productivity levels are maintained. Also, during the next 12 years, more jobs will be lost to productivity and technology than to globalization. This trend is apparent in the Chinese manufacturing industry, which lost 15 percent of jobs in the period from 1995 to 2002 due to an increase in worker productivity and technological advances.

How can we create new jobs or keep existing ones? Here are some thoughts.

Expand the R&D Tax Credit.
Introduced more than 20 years ago, the credit has stimulated innovation and kept high-skill, high-wage jobs in the U.S. Expand it to reward further risk-taking and innovation that keep our economy growing.

Increase Federal Spending on Research.
Funding in the physical sciences and engineering as a percentage of GDP has declined since 1985 by nearly one-third. Reverse this trend and dramatically increase federal spending on basic research. The money spent will come back to us many times from the creation of new jobs in new industries making products yet to be invented. Let’s have a Manhattan project along with a stable revenue model for clean energy.

Pass the JOBS Act.
The JOBS Act provides a tax cut for all companies manufacturing products in the U.S. It also contains a variety of provisions to help U.S. companies compete more effectively against foreign rivals.

Deal with Rising Health Expenses. Offer small employer tax credits, funding for employer-based group purchasing pools, increased funding for high-risk pools, build on Medicaid and the State Children’s Health Insurance Program, and permit a Medicare buy-in for the near-elderly.

Enforce Trade Agreements. Keeping markets open and opening new ones for U.S. goods and services will also increase employment. Push for better enforcement of existing trade agreements and for negotiating trade agreements with countries that offer lucrative markets.

Support Lifelong Education. Education provides the skills necessary to unleash Americans’ creativity and prepare workers for the jobs of the future. Improve, consolidate, and expand education tax incentives.

Trade Adjustment Assistance. TAA has helped thousands of manufacturing workers get retraining, keep their health insurance, and make a new start. Improve TAA, and expand it to cover service workers who lose their jobs to offshoring. People should get retraining whether they work in services or manufacturing. Workers, employers, and the U.S. economy all benefit when we equip our workers with the skills they need. 

Tags: Multi-process HR, Sourcing

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