Precisely! In a capitalist economy the principal function of business is to make money for its owners and stockholders. The people that find this objectionable are against capitalism. A company can only succeed by providing goods and services that others are willing to pay for at a reasonable price. It is amazing how many supposedly "educated" people fail to comprehend this basic fact. It would seem that fundamental economics is no longer part of our educational curriculum.
I worked for 12 years as an engineer at a world-class manufacturing facility in the US (telecom). Today almost everything is outsourced to Mexico & China, depending on quantities & other factors.
Both of those countries are capable of producing the same high-quality products BUT (!) that is only because we sent our best manufacturing engineers overseas (on-going) to train them how to build products to the quality level we needed. (I.e. we gave away all of our decades of manufacturing tribal knowledge for free). If we had not taken that proactive approach the results would have been disasterous.
The Chinese junk you see sold everywhere is not because the Chinese don't know how to manufacture quality products, it's because their USA-based partner either has inadequate requirements, or they simply don't care (sell it anyway!).
We also noticed, not surprisingly, that the bigger your manufacturing volumes are, the less communication and overall issues you will have (i.e. the offshore suppliers will assign their better engineers to the more important customers).
A few years ago, Managing Automation did a survey of manufacturers who had off-shored some of their manufacturing. One of the questions asked was how the quality compared with what would have been expected in-house.
A few percent said the off-shore goods had better quality and most said it was comparable.
But about 11% said it was significantly worse and a few percent (don't remember exactly how much) said it was "put the business at risk" bad.
I remember the 11% figure because it was remarkably close to the percent that expected to continue off-shoring projects.
Not sure were you are getting your information, but the US has some of the highest corporate tax rates in the world, including most of the countries in Europe and the Middle East. But that's beside the point. A few years ago, I was listening to Bill Watkins, then CEO of Seagate, talking about tax rates and off shoring. He pointed out that he is answerable to the shareholders regarding profitability. So when the Cayman Island government came to him and said, move your headquarters to us and you will pay not corporate taxes, he would get fired for not taking the offer.
It's not a matter of offering low tax rates. It's a matter of making the presence in the US competitive. Right now we are not.
@ George -
There is an industry term in the US of "shadow engineering" to reflect the additional (redundant) engineering labor required to ensure product design compliance/integrity when partnering with lower labor cost countries.
When launching our first pilot engineering off shore program, the engineering staff in China requested the use of an inline glass fuse (common in consumer goods) for our automotive product. When directed to use a SAE compliant fuse, they complied. Or at least we thought initially. The 3A fuses were nearly perfect imitations (color/dimensions/packaging) that would not fail after 15A loads were applied to them.
Communications continued to struggle between the US and Chinese teams to understand the most basic automotive specifications – i.e. Electrostatic Discharge became “Sky Thunder”.
In my Tier 1 company at the time, our domestic engineering labor costs reflected not just engineering labor, but the immediate management level (typically calculated in overhead in other companies) as well. When coupled with these redundant labor efforts, it further perpetuated the myth of high engineering labor in the US.
Some corporations move off shore to force out unions that are ensconced here.
Some offshore to use the cheap labor or escape any reasonable or other regulation.
I think most offshore so the managment can appear to be making wise cost decisions to obtain a great bonus, before the true cost of their move becomes too apparent.
The problem with this is that it can result in the loss of the exact middle class customer the product being offshored is to be sold to.
George, the study about disparities in the job market is worthy of a discussion all its own, without mixing it up with the issue of offshoring.
Why do jobs get posted and remain unfilled when unemployment is so high? It has been reported that the number of job openings has risen 37% in the last year, but the unemployment rate has also risen at the same time.
The AP ran a story yesterday about this, focusing on the trend of companies to combine what used to be multiple job descriptions and functions into one. The conclusion was that many of the unemployed are finding that there are openings in their old career field, but they no longer qualify for those positions.
The story gave some examples like database administrators who are now expected to also manage network security and accountants who are now expected to do financial analysis to identify cost-cutting opportunities.
In our own industry, I could imagine some hypotheticals like the following: an IC design organization used to have design engineers and separate verification engineers -- a good practice for many reasons -- but now the designers are also responsible for doing most of the verification. Or perhaps an organization used to have a digital layout engineer who was separate from the engineer doing logic synthesis, but now has one engineer doing both jobs.
When multiple jobs get collapsed into one, and job postings have a long list of very specific skills and experience being sought, it is no wonder that many jobs go unfilled, despite a large pool of talented unemployed people with experience in that field.
The AP article mentioned that HR people even have a name for the candidate who precisely matches an employer's laundry list of required skills: the "purple squirrel." One IT staffing professional quoted in the article said "There are lots of requests for purple squirrels nowadays."
I am still waiting for President and Congress to act on their promises of "leveled playing field" for the complanies who use offshoring and those who don't. In my mind, the idea is simple: enact an "off-shoring tax" for the companies who manufacture and design overseas and provide tax credits for the companies who are switching back to domestic manufacturing/design. Having to pay an "off-shoring tax" and dealing with quality issues associated with off-shore manufacturing may swing the pendulum just enough against off-shoring.
WRONG!!! The lack of regulations is what put us in this economic mess in the first place. Put back all the regulations that were taken away and add a few more. Businesses will not act in the interest of the country if regulations are taken away. They will act in the direction of maximum profit. Now lets do what China and India do. Tax EVERY product that is made on foreign soil, even if made by an american company. Tax Intellectual property as well (so it will cost to do design offshore). This will also level the playing field so that American companies can remain profitable. The problem is that companies are not going offshore to compete. They are going offshore to make more money than they need. In many cases going offshore costs them more (as they often only look at it as cheaper employees, ignoring the other costs, such as getting their IP stolen due to the huge turnover in foreign countries, How these countries are now starting to become very innovative and have all the startups since we've ignored our engineers and startups at home...this is only just starting to happen. Quality IS a huge cost and involves many managers to maintain (big cost).
We also need to tax companies that build plants overseas just to escape more stringent pollution laws.
Finally, remove ALL tax breaks for anything done on foreign soil by american companies. Currently, they can write off their new buildings, investments, employee operating costs, etc.. Please hurry up and take that away.
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