How Many Jobs in the Stimulus Bill Could Be Offshore Outsourced?

A simple question. An obvious question. While the non-debate debate rages on over tax cuts in the American Recovery and Reinvestment Act of 2009, this fundamental question of how many real jobs will go to real American workers needing a job....is not asked.

So, I'm asking it. I do not have an answer.

We have already seen TARP bail out recipients replace Americans with foreign guest workers.

From the Stimulus bill analysis, parts I, II and III, we know there are no provisions in the American Recovery and Reinvestment Act of 2009 requiring jobs created go to U.S. workers.

We also know the projections for I.T. jobs created is 1 million. A recent study finds 8% of all I.T. workers currently working in the United States have been displaced by offshore outsourcing.

Alan Blinder in his paper How Many Jobs are Offshorable? estimated 22% to 29% of all jobs, data used from 2004, all other variables static, have the potential to be offshore outsourced. Blinder also gives an occupational ranking of vulnerability to global labor arbitrage. Computer Programmers and related Science, Technology, Mathematics, Engineering jobs are at the top of his list. This includes I.T. jobs.

Literally IBM is suggesting to U.S. laid off workers they offshore outsource themselves to have an income.

Looking over the Stimulus package there are projects which correlate to Blinder's vulnerability estimate for offshore outsourcing.

Yet examining global labor arbitrage is simply not mentioned. Outsourcing expert Ron Hira points to promotion of offshore outsourcing as the agenda by the Obama administration.

Business week lists some of the most offshorable projects in the Stimulus:

Also included in the legislation are several initiatives aimed at creating jobs through spending. For starters, $20 billion in the stimulus package is directed at health information technology and the building of an infrastructure to promote the electronic exchange of health records. That investment will create or retain 86,820 jobs for one year in high-paying industries such as computer hardware manufacturing, software, and IT services, according to the Information Technology & Innovation Foundation, a nonpartisan think tank focused on public policies to advance technological innovation.

The stimulus act also includes another $6 billion to improve broadband Internet access in the U.S. That amount would create or retain 29,892 direct telecom jobs for a year and 8,304 capital equipment jobs, according to the Information Technology & Innovation Foundation. Finally, $11 billion in funds that will go to modernizing the power grid in the U.S. will create or retain 64,509 direct and indirect IT jobs for a year, according to the foundation. "IT did pretty well. There's a real focus on digital infrastructures, there's real money there," says Robert Atkinson, president of the Information Technology and Innovation Foundation. "It basically affirmed the commitment that the country's building out IT networks is important to our future."

Even if the spending doesn't prompt companies to create jobs in house, it may give them extra incentive to choose to send work to domestic firms rather than those outside the U.S., says Jagdish Dalal, managing director of thought leadership at the International Association of Outsourcing Professionals, an industry group of outsourcing leaders from Fortune 500 companies and other organizations. That's because it takes some time to set up an offshore model and the work in this stimulus package is designed to happen immediately. This will ultimately be a challenge for offshore outsourcing destinations like India and China, he says.

 

Yet the claim by these outsourcers of don't worry, be happy and how they do not have the offshore outsourcing infrastructure already in place is false. IBM, G.E., Cisco, Microsoft as well as Indian offshore outsourcing firms like TCS and Infosys already have federal, state contracts in the billions. These companies are completely set up to offshore outsource jobs created with U.S. taxpayer money.

According to the ITIF, the jobs generated in Technology related areas are half a million. In examining those jobs they do not recognize foreign guest workers in their calculations or offshore outsourcing of jobs, except in terms of foreign capital equipment purchases, which appear to be underestimated.

Even worse, the ITIF may well be a corporate lobbying front group:

It's hard to tell from ITIF's Web site or the group's financial disclosures exactly who's funding this operation. Whether Atkinson, Ph.D., is already on the industry payroll -- or just auditioning for the gig -- the beneficiaries of his efforts will undoubtedly be the biggest phone and cable companies.

They're all too happy to avoid the public spotlight and hide behind independent-sounding analysis, even as their army of lobbyists descends on Capitol Hill to cash in on the fast-moving stimulus bill.

So, how many of these Stimulus generated jobs will actually be going to offshore outsourcing companies through contract awards, to multinational corporations who have as their corporate strategy pure global labor arbitrage?

I would say at this point to assume Blinder's estimates and give a conservative thumb in the air guess of 25%.

If this is true, the stimulus will not stimulate since the Keynesian theory implies income creation must be within the domestic economy that is using the government expenditures, deficit spending.

One thing is certain, we do not have anything in the current Senate Stimulus version to tie the Stimulus to U.S. citizens, permanent residents, who are the United States workforce.

Nor do we have full disclosure of precisely who would get these project contracts, where are they incorporated and who would they hire.

Meta: 

Comments

Robert, you raise a very valid point, again!

In the end though, it doesn't matter and it won't affect the superstitious dance going on in Washington. Hell, you could estimate fairly well the job creation of school construction. But that wasn't "stimulative" I guess. So instead we get an AMT patch which won't create a single freaking job from where I sit. In fact, it might simplify some tax returns (where is the CPA outrage?) so you could argue that this is ANTI-stimulus! But I support your protests and am reading up feverishly on labor arbitrage, thanks to you. I believe you have the basis for a good selling book on this topic, if you can turn it out this Spring.

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wow, thank you

I can point to some good books and studies already in the reads page.

I read a lot of these existing experts, they are the ones doing the hard work.

Although many of us on EP are moving into first principles and examining raw data...sticking with professional research concepts...ain't impossible to do.

Hmmm, grassroots labor research. interesting. there is always that credibility issue but if one's math and methods are solid, reviewed by professionals, I do not see why not.

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When in Rome...

Hell, do what the disingenuous rethugs do, just state it as irrefutable, hold your head up high and do your best Mussolini impression. You'll have a best seller in no time.

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no kidding

A. citizen kind of got mad at me and I have on the cable news....and she's right (although I think she grabbed the wrong video clip)....all of the "Republicans" are now blasting picky issues that are not even the right issue.

It's like non-debate, debate again, spinning people's heads with bogus corporate agenda crap.

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The Proposed Stimulus Package is Already Stimulating

The Proposal has already caused stimulation. Deep and rational thought process has been ignited. And what the stimulated brain is determining is that this spending bill will NOT spur growth in the US economy. What we need is immediate money in the hands of US workers/consumers. I propose a PAYROLL TAX HOLIDAY for 6 months to one year. Can you imagine what you could do with the FICA funds presently deducted from your hard earned paycheck?! And the saving to employers would allow investing in new projects, additional hiring, etc.

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payroll tax implies you have some income

the problem with tax cuts, even those at the "bottom up" (which are assuredly better than top down!) is it requires people to actually have some money to get a tax cut on.

People do not have any money.

But isn't the payroll tax significantly cut in this bill?

I'm pretty sure that cut has survived.

I love the concept that the Stimulus is stimulating people to start learning and thinking things through!

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FICA reduction Is Not in the Stimulus Package

$500 tax credit per person ($1000 per couple)- even for non income earners, First time home buyer credit (didn't excessive home purchasing get us into this depression in the first place??????!!!) and New auto purchase credit. These are suppose to stimulate the economy??? The $500 will most likely be used the same way the Bush tax credit was used --- pay down debt.

Also, It bothers me that the proposal includes money earmarked for Health Services. One will note that the only industry not plagued by layoffs and reductions in employment is the health care industry. The health care industry is not in need of financial assistance. The other industry growing is Government, this spending bill has the potential to increase the government, again, an industry that is not showing financial hardship.

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that $500/$1000 is the FICA

is the payroll tax reduction, the FICA reduction.

That's where they get people paying zero taxes....will get an additional break because FICA is taken out by the employer, it's a split tax, separate from income.

They are saying those who pay zero taxes, that means income tax and this additional break is the FICA or payroll tax.

I do not believe people who earn zero income will get a cash check of $500 a piece is in the stimulus.

I've written now 3 posts going through the Stimulus bill but it's 1300 pages so more eyeballs are a good thing!

Yeah, I ripped those consumer based tax credits too, hello,

0-0=0! No income means no income means no income.

They should expand nursing school slots, give huge pay to professors to increase slots. You cannot even get into nursing school and they do not expand the programs, insist on paying a nursing PhD $40k when out in the field they make over $100k.

On the electronic records this is actually a huge cost in medical care so this would reduce medical costs significantly if done, problem is privacy as well as potential to offshore outsourcing the contract and/or the people doing the work.

But one area I truly believe is critical and I don't see any real money going to it is manufacturing as a whole.

This is bad, bad news and if they are not going to give them any money they had better modify trade policy...

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What a mess.

Robert,

You are younger than I am, but your heart is in the right place from my perspective. Our government was hijacked a long time ago and I truly believe that your efforts and websites like this are absolutely fundamental to making it work positively for the majority of Americans. I studied econ way back in the day (mid 70s) and I was fascinated, at the time, by Friedman's monetary policy agenda. So much so that I applied to Chicago grad school and was accepted. No stipend though so I went back to work instead.

Today I ask myself, "what were you thinking?"

So, we become older and wiser. But common sense is just that. You have the mathematical ability to persuade. You also have the passion to maintain this site for the pursuit of truth. You have attracted excellent contributors like NDD, Tony Wikrent, MidtownG, and others (sorry all, it's late and I apologize if I left you out. You know who you are though because you value contributing to this site). I come here multiple times each day to gauge the economic climate per all the wonderful links you provide.

You are doing a real service to our population and I appreciate it. Thanks.

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glad you're here

Hopefully we can get more folks participating to learn/focus on economics/policy generally. I hear ya on that "what was I thinkin'". When I first heard about offshore outsourcing I was like "oh sounds great, hey jobs for the 3rd world, la de da, raise all boats", oblivious to economic realities of the globe and buying into the sales pitch.

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The Brainwashing of the Sheeple

Glad you have gotten past the brainwashing of the sheeple by the corporate elite and their spokespeople such as Thomas L. Friedman (whose head is flat).

Here is what they want the sheeple to think:

"Yes, it's great I lost my job and cannot find another one besides minimum wage in a convenience store! However, I know it's much more important that the upper middle class young adults in India who have no responsibilities and live with their parents until marriage don't have to ask their parents for money to go clubbing anymore and can afford lots of new clothes and shoes every week on the paycheck they get doing my former job while I scratch for the necessities in life! The added bonus is that the corporate elite will get even richer while saving an obscene amount of money on labor costs!"

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There is no one on EP

who believes Flat Brain Friedman or any of that fictional economics. In the FAQ on EP, that is the one rule you cannot do and be in good standing on The Economic Populist.

You cannot write economic fiction.

One must defend positions with logic, theory, charts, graphs and mathematics.

Obviously all corporate lobbyists or corporate sock puppets are thus banned on EP.

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$8,000 per year salary == poverty wages in U.S.

Every high school or college student who plans on investing in an Computer Science degree MUST read the following quote:

From the Business Week article:

An average salary for a software developer in the U.S. is $75,000 and it's $8,000 in India," says Mary Jo Morris, president of World Sourcing Services for Computer Sciences Corp. (CSC).

For $8,000 in the US, you are better off going on welfare and food stamps.

Computer Science is a tough field of study and therefore requires large incentives in terms of potential salary or job security. These incentives simply aren't present in the US.

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ya got that one right

Truth is the real skill level for Science, Technology, Engineering, Mathematics....well, they often take their courses with Pre-med, Pre-law, etc. majors...

i.e. it's a very difficult college major...a very difficult career area and it used to be acknowledged as such..
with the prestige of career being on the level of attorney or MD.

so by labor arbitraging these career areas they have guaranteed U.S. citizens will not study it because it simply does not pay out...

so we are probably going to lose entire occupational areas which only happen to also be.....where major technological shifts and innovation for future job creation, growth would happen...

they basically just labor arbitraged the entire area to "zero" long term.

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very true

and these MNCs know this as well....but in absolute global terms, they are going for that exchange rate, keeping profits offshore or whatever particular tax haven suits them best.

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More outsourcing while sucking up taxpayer money

The Salt River Project out of Phoenix Arizona is readying an RFP to outsource the majority of IT jobs in an effort to "save money" over the next five years. US jobs are being lost to India, China, and South America. This “Global Market” is impacting yet another company. What isn’t being talked about is how SRP is also in the process of applying for hundreds of millions in stimulus dollars for Smart Grid technologies and various other IT projects. Here our government is handing over money to a quasi-governmental organization so they can fund outsourcing their jobs overseas. Not only should we be worried about outsourcing additional American jobs but how about the Security of the Nation’s Electric Grid? How about a company taking tax payer money while moving jobs overseas?

There is always a half truth behind every news report like the one below. They have every intention of outsourcing all of IT no matter how they spin it with the media.
http://www.azcentral.com/business/articles/2009/05/21/20090521biz-outsou...

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