Even a chimp can write code

Friday, June 04, 2004

If you give peanuts, you will get monkeys

"If you give peanuts, you will get monkeys". So goes the old HR adage. When I look at companies outsourcing jobs primarily for lowering the cost incurred from payroll, I can't help but think about that line. An opinion piece by Paul Kimmel on Developer.com presents a viewpoint on the outsourcing question. I came across this article from an entry in Andrew Kuzmin's weblog. He describes Paul's article as "[offering] some straightforward discussion and insights on this current trend, including some historical perspective, where we are now, possible outcomes, ways to protect yourself, and how international outsourcing might unfold"

Paul Kimmel also provides some reasons why outsourcing of Information Technology jobs will fail in the next few years. I don't agree with his reasons. My take on it is that the quality of life for workers in countries like China and India will steadily improve with higher wages and other benefits. That will lead to an increase in purchasing power and they will now be in a position to own things they couldn't afford only a few years ago. This will start a cycle of higher salaries and higher purchasing. In a couple decades, it is very likely that a majority of these people (not everybody in China and India, mind you, but just these people) will demand exponentially higher wages. At that time it does not make too much economic sense to move or maintain jobs there on the basis of a wage differential.

So will companies bring those jobs back to the United States? Unlikely. Just as manufacturing bases moved from Mexico to China in the 90s, so too will they move from China to elsewhere. It is disheartening that unlike the US, these countries do not have the institutions to bear the brunt of a job exodus. Although, I will concede that IT and manufacturing are two very different beasts. Countries that churn out large numbers of engineering and science graduates do have an edge. In the US, over the years, a number of checks and balances have been created to counter unexpected downturns. India and China do not have any kind of mature medical insurance (universal or otherwise) scheme for a vast majority of their populations. Nor do they have unemployments benefits for their citizens. It is in the US interest to encourage these countries to remedy the situation with a carrot-and-stick approach: "If you want our jobs, make sure your people have some recourse for when we take those jobs away." Yes, there are no free lunches.

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