Opinion: The Obama administration promotes outsourcing

2/4/2009 12:38 PM EST

Guest columnist Ron Hira urges engineers to take action in order to stop the offshoring of U.S. jobs. What do you think can be done to reverse the trend?

2/4/2009 2:24 PM EST

Where do concerns about offshoring become synonymous with protectionism? If the impact of labor cost on product pricing is such that an IBM or another US company cannot compete against others who do use lower labor-cost resources, what does it really buy us? Yes, we will create jobs, but end up with companies whose products cannot compete, and who go bankrupt. Short-term, we're okay. Long term, we're gone. With artificial barriers - such as constraining off-shoring - we hobble our companies in the global marketplace. Is that really in our long-term best interest? Obama understands that a free market will gradually increase the standards of living in low-labor-cost markets while, yes, gradually decreasing the standards of living in high-labor-cost markets. It's up to us to protect our jobs by acquiring skills that make it worth it to our employers to hire us instead of our counterparts in Bangalore or Shanghai. If we just do the same things, but cost our companies more to do them, any benefit to us will be short lived. Our best strategy is to develop new industries, based on new technologies, where we have more competitive advantage, globally. As much as I hate the thought of me or a friend, losing our jobs to outsourcing, I understand how and why it is happening. To say that we won't help companies that outsource is to say we will only give money to companies that will be unable to compete, successfully. How smart is that? When Ron Hira can show me how we can make US engineering salaries and still produce devices that compete profitably with those engineered for half or one-third of the cost, I'll be more inclined to agree with him. Look in any parking lot in Silicon Valley. How many of those cars are made in US, or designed in the US? Whether we like it or not we live in the new industrial revolution where skills are globally available and information travels at the speed of light. We - all of us - have to adapt, and keep ourselves in demand, rather than expecting Obama and our government to artificially protect our jobs. Protectionism is a lose-lose. It squelches innovation, and ends up costing everyone more.

2/4/2009 2:33 PM EST

Outsourcing has increased as the number of H1B visas has decreased. Either companies will do business in the U.S. if it can find enough qualified engineers or they will go overseas to get them (i.e. they will outsource). Restricting the number of H1B visas, therefore, leads inexorably to increased outsourcing. Trying to restrict this practice through protectionist policies invites protectionist retaliation and makes the problem much worse. Coincidentally, protectionism is the same prescription for a deep recession that Herbert Hoover pursued - to the detriment of the rest of the world, as well as the United States.

2/4/2009 4:13 PM EST

All you beautiful people out there who wanted change..that's what you'll find in your pockets soon. Elections have consequences...you get what you vote for.

2/4/2009 4:45 PM EST

Does Dr. Hira propose that US companies be required to pay higher wages to a restricted labor pool to fill the same jobs that companies elsewhere can fill at a substantially lower cost structure (even accounting for health care, environmental laws, work conditions and other factors)? The logical conclusion of this is that companies will incorporate outside the US and be free of such artificial constraints in order to maintain competitiveness, ultimately costing the US dearly. Dr. Hira’s protectionist stance is a dead end which would, in 20 years, have Silicon Valley looking much like Detroit does today. Like the war on drugs, raising barriers to outsourcing fights the fundamental economics of the situation: there are lots of smart people in this world willing to work harder than you and I at lower wages in order to better their lives.

I have three things to say in response:
1) There are several recurring themes of work force evolution: technical skill sets inexorably grow obsolete and commoditized over time; for the successful, the process of learning and professional development never ends; and there is no true job security except for one’s pure competence, work ethic and the ability to work well with other people. These themes are gathering strength, not diminishing, and we ignore them at our own risk. Raising barriers to outsourcing will not change this.
2) Any good technical manager knows there are enormous advantages to having a team located in one place, able to interact in real-time with the benefit of face-to-face (often unintentional) communication as well as cultural coherence. This, in contrast to 1), is not likely to grow obsolete any time soon, and confers a critical competitive edge against companies who outsource indiscriminately.
3) America’s strength is in its incredibly diverse, creative, educated and enterprising workforce; its workforce mobility (including the vitality that immigrants bring); and the essentially level playing field it offers businesses through the rule of law and ease of incorporation. If the past is anything to go by, its future lies not in the bunker mentality of people like Mr. Hira, but in the endless creation of new companies driving the next wave of technologies and business models.

2/4/2009 4:51 PM EST

As long as the sole purpose of a CEO's existance is to show a profit for the shareholders for the next quarter (not next year, 5 years, etc.), outsourcing will continue to grow.
It takes a senior-level experenced engineer to sucessfully manage an outsourced project that is doing the work that the newbie's used to do to gain experience. So, when the senior leaves, there will be nobody with the experience to take over. The intellectual property that was shared with the outsource will only reside with the outsource. At that point, the company might just as well turn off the lights and go home as there is no point in staying in business. I think that the US companies should start outsourcing the CEO jobs which would save engineering jobs about 100 to 1.

2/4/2009 5:02 PM EST

Why is it that executives that promote off shoring jobs never seem to include their jobs? If a $5,000/year engineer is better for the company than a $100,000/year engineer than surely a $1,500,000/year executive is better for the company than a $30,000,000/year executive. Third world countries graduate far more business students than engineers so why are most corporate headquarters in the USA? As an investor I can see my stock value growing if the whole company is moved to a third world country with low cost management and not just the design and production arms of it.

2/4/2009 7:02 PM EST

I am an Electrical Engineer with 22 years of experience. I will not allow either of my children to become engineers. There is no point in them pursuing this unstable career that has no future in the USA.

2/4/2009 11:19 PM EST

The author is seeing the Obama administration's policies through a narrow prism.

#1. Only 2 weeks have gone by. I am willing to give the President more time. Dot forget that this economic crisis was not planned and has to take priority over everything else.

#2. We cannot judge the administration based on the past views of certain nominees. The vision and marching orders still have to come from the top.

#3. I agree that H1-B visas help US based jobs. This country is willing to legalize 12 million unskilled workers from Latin America but cant go beyond 65,000 trained engineers and scientists a year? It takes over a million dollars to educate a EE. We can get that for free by just promising the poor guy a chance to work hard and pay taxes here.

#4. I agree with a previous comment that we can’t force companies to not outsource. However, we need to put in place policies which discourage short-sighted outsourcing. We need to end the quarter to quarter mentality for a longer term view. If CEOs outsource all their engineering who will buy their product in the US? Where is the Henry Ford who wanted to pay a high wage to his workers so they could buy the cars they built? One suggestion is to not allow executive management to cash out of stock and option grants for 10 years. This will force mangers to follow practices which maximize long term returns.

#5. My bottom line is that no country can survive without controlling its manufacturing and design base. In our industry engineering follows manufacturing. Once you move manufacturing overseas, soon design jobs follow. I am now seeing marketing engineers working for Asian design houses. A service economy without a design and manufacturing base is a myth.

2/5/2009 2:59 PM EST

The decision to outsource is primarily a cost cutting decision impacting industrial segments that are maturing and where innovation has already slowed down. Insourcing, that is bringing people from outside to innovate in the US happens more easily at the risky front end of technologies. Surely large companies, competing for diminishing margins in slowly evolving fields, will find to their advantage to outsource. Conversely, young companies, most of the time smaller, competing at the leading edge of technologies will tend to have their teams working closely together thus avoiding outsourcing. The Internet has made easier to outsource some functions, however true innovation and large scale value creation are still the realm of young entrepreneurial companies, here in the US and around the world.

The only concern I have as as outsourcing is to have a cross-over situation of outsourcing with insourcing in the form of foreign workers hired in their local markets and brought to deliver services in the US in short stays. This illegal practice, that some software companies have engaged, can erode my argument and the laws we have in place should be enforced against companies that engage in these practices.

Vast regions of the US have lost their entrepreneurial roots; much of the argument against and fear about outsourcing come from people trying to avoid progression in their career towards leadership and entrepreneurial roles. Those that create their own jobs have no reason to fear from outsourcing since it opens entire new possibilities for entrepreneurial spirits.

2/5/2009 4:14 PM EST

Outsourcing is championed by those who are incapable of taking the long view. If America continues to outsource jobs, it will discourage our youth from pursuing engineering careers. That will eventually make us dependent on foreign technology. Already we see this dependency in the communications field, as an increasing amount of fiber optic components, for example, are made in China. Outsourcing can also harm America's security, as we will no longer own the technolgy necessary to defend ourselves.
And what about the quality of the work that is outsourced? I can tell you from experience that although the goods and/or talent may be less expensive, the quality is often not there. One poster cited the difference between domestic and foreign cars in his parking lot. Poor example. He is comparing apples to oranges. The auto industry's downfall was the UAW and its high cost of benefits and work rules, not the cost of US engineering salaries. Engineers have no UAW. If the Big 3 had non-union labour, they could afford to spend more on creating compelling products. If you want a better comparison of quality of foreign goods to US goods, take a look at the equipment in your lab, and compare the quality of asian equipment to Tek or HP gear.
Often products from countries such as China are less expensive than Western products because those countries do not have cumbersome environmental regulations, as well as worker health and safety regulations. In the long run, that cannot stand, nor should it. Eventually Chinese and Indian products will rise in cost to become more comparable to Western goods, as Japanese products have.
As for foreign of H1-B workers, I can tell you that often they lack the good communication skills of their US counterparts.
I do not expect US firms to end outsourcing on their own voluntarily, for obvious reasons. therefore I hope that the new administration will take action on this and curtail outsourcing and H1-B visas.
In short, it's all about providing an incentive for our youth to pursue a carrer that we hope can still be found on these shores, so that America can still posess the talent it needs to compete and to defend itself.

2/5/2009 5:51 PM EST

Perhaps the solution is to outlaw H1Bs, outlaw outsourcing and make a law setting engineering salaries at $1M per year. If attracting new people to the engineering will solve our problems, that ought to do the trick.

On the other hand, having the government micromanage the economy is probably harmful. We have run the socialism experiment many times and it always fails. It probably makes the most sense to let businesses do what is financially most sensible for them. Historically, when all businesses prosper, the national economy prospers. Also historically, when people make the best short term decisions, it tends to work out best in the long run. As John Maynard Keynes said, "In the long run, we are all dead." If it is not obvious that making good short run decisions leads to a favorable outcome, perhaps it is more obvious that making a series of bad short term decisions will lead to a bad outcome.

In any event, it is presumptious to think that business people do not do the best that they can to "make money now and in the future." Any idiot can lose money now for a hypothetical future which may not materialize. The only thing for certain when you lose money now for a future benefit is that you WILL lose money now.

2/5/2009 10:48 PM EST

In Business there is no compromise. Win or lose. The U.S. has decided to be a business a long time ago. We have already lost to China, India, Europe and we are going to lose in S America soon. We have no future in S.T.E.M. careers anymore. That was where we thought we had an edge. Politician, lawyers, academic professionals will not make U.S. strong. I ask everyone, What will?

2/6/2009 3:23 AM EST

I welcome competition, but not H1-B visas where U.S. companies have abused them to replace American workers in the U.S. and train their replacements. Outlaw ALL H1-Bs when there is a surplus of American software and hardware developers out of work. Congress granted H1-Bs to bring in overseas help when there is an American worker shortage and NOT for replacing with lower wage help. MAKE COMPANIES STOP ABUSING H1-B visas.

I have witnessed the worst software in the world that was written overseas. Many U.S. companies have been duped by the lure of cheaper software development overseas only to find out that these people cannot deliver quality and schedule. I welcome all overseas competition!

2/6/2009 3:38 AM EST

Also, we need Congress to make U.S. companies that use countries like China and India to manufacture our goods to ADHERE to our environmental and worker laws or no thanks. To allow countries like China to DEVESTATE our oceans and atmosphere to make cheaper U.S. goods by our direction is totally unexceptable, immoral, and criminal. STOP U.S. companies from exploiting foreign workers and our environment for CEO bonuses. Anyone can make money taking the criminal route by lying and taking advantage of under privilege people. Greed is evil and will destroy the world. I don't want to eat poisoned seafood and food products made by foreign criminals.

Also, global warming has only accelerated the past years due to the industrial globalization of China and India by the U.S.. Corporate rape and greed is going to kill us all.

2/9/2009 4:27 PM EST

Outsourcing and H1B visas are two different discussions. The H1B program may have been abused by a few dishonest companies, but has allowed many more small companies to attract unique talent to the US that made them more competitive and eventually viable. Small companies cannot afford to go around the world opening R&D centers, they need to recruit talent locally.

I came as student, worked under H1B, produced multiple patents and products, started three companies, employed US workers in a depressed regional economy, and I have even invested in startups started by US entrepreneurs.

Among my university friends, not less than 10 used H1B visas, most of them are successful executives, paid far, far more than the average salary. Three of them started companies, two achieved reasonable liquidity and one is now a very large investor and venture capitalists following an spectacular liquidity event. He is an engineer.


There are several studies that show an unusually high correlation between engineering and scientific immigration and high achievement in their careers, including very high level of participation on VC backed startups.

Do you really think that the US would be better off limiting temporal work under H1-B leading to green card and US Citizenship? The people I know no only did not take jobs except over the first 5 years but have created 100's of jobs for other not very entrepreneurial engineers.

2/10/2009 10:26 AM EST

Come on, there is alot of engineering talent in the U.S.. Remember software and hardware technologies were invented in the U.S.. Digital ASCII hardware technologies, software technologies, Defense department technologies, and Space department technologies. The U.S. has been the innovator and leader for technology in the World. Also, H1-B visas has been exploited by more than a few dishonest companies. Try 8 out of 10 visa awards have been to Indian outsourcing firms and not U.S. companies. Talk about fraud. I welcome all overseas competition, not dishonest and unfair competition by overseas governments trying to steal American jobs. OUTLAW ALL H1-B VISAS WHEN AMERICANS NEED THOSE JOBS. GO BACK HOME TO WORK IF YOU THINK IT IS SO GREAT IN YOUR OWN COUNTRY.

2/23/2009 12:30 PM EST

Clearly at this time there is absolutely no need for H1-B visas.
There are enough talented and capable US Engineers available.
The companies that would have you think otherwise are simply
incompetent or too lazy to recruit the available talent. Policies
should be amended by the government to assure that the H1b
visa and similar programs are not abused. For example, only
grant visas if the unemployment rate is below 3%.

Write to your congressman/woman, your senators and to the President.
Ask them to fix this.

4/14/2009 11:03 AM EDT

Electrical Engineering as a career is over in N.America. There is absolutely no point in pursuing it any further. The last 50 years were good but I think We've reached a saturation point in terms of technology advancement as well as our standard of living. The only way to get out of this is via a new technological revolution.....but I doubt this will happen anytime soon