Difference between revisions of "Talk:IT Outsourcing: Economic and Policy Analysis"
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== Economic considerations to outsourcing == | == Economic considerations to outsourcing == | ||
| + | On the US-firm side, the consideration of whether or not to outsource is made on the basis of a cost/benefits analysis. In this analysis, US firms take into account some of the following in determining whether they choose to outsource or not. | ||
| + | |||
| + | Costs: | ||
| + | Increased transportation costs | ||
| + | Increased competition from abroad | ||
| + | Lower employee morale with lower employee wages and fear of losing jobs | ||
| + | |||
| + | Benefits: | ||
| + | Lower cost of production of good | ||
| + | Lower wages paid (due to lower standard of living) | ||
| + | Cut costs go towards R&D, marketing, business development | ||
| + | Decrease layoffs | ||
| + | |||
| + | On a policy leve (US government policy), we would consider the tradeoff between exploiting comparative advantages by outsourcing and the redistibutional effects of outsourcing (loss of lower-level jobs, decreased wages, increased competetiveness from abroad). Its important to confront the tradeoffs with the various costs and benefits to determine how the US should create policy, if at all, to speak to the issue. | ||
Revision as of 04:28, 8 November 2004
Some considerations for the project: where the outsourcing predominantly goes to. Some of the main case analysis we could make are India or China. As for as IT outsourcing, I think India is the where most US firms are outsourcing to.
Reasons for this: living costs in India are low, India's government focuses alot of its policies to increase their worker's value in the IT sector. From a source (I will do more research on this), earning a $72,000 salary in India, you could live as if you had $100,000 in the US.
Bush administration encourages outsourcing. There was a recent release referring to outsourcing, and basically the Bush administration is mainly concerned with profit maximization, efficiency, but not American "equity". (Are Americans even at par with Indian workers in regards to education level?)
France enacted tax cuts for firms to discourage outsourcing. There are a few articles on this, but I have yet to read them indepth.
Even with tax cuts, firm expenses [including logistics such as operating expenses like high-speed internet access, janitor wages for its facilities, secretaries, airconditioning, complementary food in break rooms-- things often taken for granted at US firms] are much higher than in countries such as India.
India has a surplus of highly skilled, educated individuals, and they are willing to work for a lot less.
- what risks do we run when we outsource IT?
Good job with the subtopics, Brad. How shall we divide the work up?
Contents
Economic considerations to outsourcing
On the US-firm side, the consideration of whether or not to outsource is made on the basis of a cost/benefits analysis. In this analysis, US firms take into account some of the following in determining whether they choose to outsource or not.
Costs: Increased transportation costs Increased competition from abroad Lower employee morale with lower employee wages and fear of losing jobs
Benefits: Lower cost of production of good Lower wages paid (due to lower standard of living) Cut costs go towards R&D, marketing, business development Decrease layoffs
On a policy leve (US government policy), we would consider the tradeoff between exploiting comparative advantages by outsourcing and the redistibutional effects of outsourcing (loss of lower-level jobs, decreased wages, increased competetiveness from abroad). Its important to confront the tradeoffs with the various costs and benefits to determine how the US should create policy, if at all, to speak to the issue.
Technological incentives to outsource
Analysis of existing public policies
US public policies to "manage" outsourcing
User: aamiralavi Im not convinced that these measures are necessary. Several of the articles that were posted claimed that the effects on the US workforce in the long-run will not be negative. Instead, outsourcing is a positive phenomenon in the long-run (its really only hits us in the short-run). Also, several of them showed that its more of the blue-collar jobs that are outsourced, so i dont think extra education would be that effective, unless we can move people from a level of education where they would be blue-collar to white-collar. I think once we do our economic analysis of outsourcing, we might find this to be true. This is because each country is working with its comparative advantage. This saves money for US firms to invest in other initiatives (or skim off the top), but also work towards long-run gains. So i think the policy alternatives (a-e) suggested in section 4 should be reconsidered because i think we still have to do our economic and technological to evaluate if we need to (or should) try and keep jobs in the US. Instead, we can focus on US policies towards outsourcing and maybe based on our sectoin 1 and 2 evaluation, if they should be relaxed or more restricted. I think a bigger issue is dealing with decreased US wages due to outsourcing.
