Offshoring: friend or foe?

LAST month Fresh Del Monte Produce Inc. announced its pineapple operations in Hawaii will cease by mid 2008. The reason? According to the Associated Press, the company stated it is "no longer feasible to grow pineapple in Hawaii because it can be produced for less elsewhere." Yes folks, outsourcing has even hit America's produce aisle. There used to be an issue of big farm vs. little farm in America, but now we're losing our fruit altogether--to foreign lands.

Story after story of job loss echoes around the country as the outsourcing phenomenon grows. The Economic Policy Institute stated that the U.S. software industry lost 16% of its jobs between March 2001 and March 2004. That dip, the Washington-based firm said, may have affected the enrollment of U.S. students in computer and engineering programs. According to the Computing Research Institute, that enrollment decreased 23% between 2002 and 2003. That's huge, especially when considering India turns out about 150,000 engineering graduates every year, and China about 250,000.

On the other hand, many American companies are discovering that sending work overseas doesn't always yield the desired results. According to a 2004 Newsweek article, Dell heard plenty of complaints about thick accents and poor service before relocating its Indian tech-support center back to America. Credit card firm Capital One reportedly ditched a 250-person call center contract when workers were caught assuring potential customers they could get unauthorized lines of credit. It comes as no surprise, then, that companies that outsourced more complex work, such as software development, are finding lower-wage workers are often ill equipped to provide quality work on a consistent basis.

Can we conclude that outsourcing is simply a trend and not a way of life, something that's hot one moment and cold the next? Many economists don't think so. In fact, Newsweek International reported that some experts are predicting a "second wave" of offshoring that will hit America harder than the first tsunami. Service-sector jobs that have been considered "safe" from the far shore--accounting, law, financial and risk management, health care and information technology--may not be able to hold up under offshore work that has worked out its kinks.

With weak U.S. job growth and insecurity, this theory could mean trouble for American workers--again. Harvard economist Richard Freeman points out that "information technology was supposed to be 'the magic field' that insulated North America" from the effects of globalization. But by 2015, consultant firm McKinsey Co. predicts the industries involved in that second wave of outsourcing will make up half of U.S. imports from low-cost countries.

Don't panic yet. Economists don't believe this next wave of outsourcing will cause widespread unemployment. As a percentage of all job losses, they point out that those caused by outsourcing are only believed to be about 10%. Plus, most experts will claim that offshoring benefits outweigh the problems, as globalization keeps consumer prices low, raises corporate activity and permits money to be spent on new technologies. Many people favor globalization because they recognize its potential to free U.S. employees to innovate and create.

How should Americans feel toward outsourcing, with all its pros and cons, benefits and drawbacks? There is a recognizable drive pushing those of us who outsource, just as there is a drive behind everyone else to criticize it. Everyone knows why it exists, even if approval of its repercussions isn't 100%.

The bottom line is, the practice of outsourcing is not going to evaporate soon. Whether you participate in it, or support it, or not is a decision each individual must make. More companies like Del Monte will jump in, and some will come crawling back out. What we must do to keep up, then, is protect and support America's real strengths: innovation and entrepreneurship.

TRACY HEFFNER,

ASSISTANT

EDITOR