TCS Daily

Outsourcing and Elections

By Glenn Harlan Reynolds - June 25, 2003 12:00 AM

It's no secret that more and more technology jobs are being outsourced to Third World countries where salaries, and other costs, are lower. And, as Hiawatha Bray reports in The Boston Globe, it's starting to generate some pushback:

For years many engineers, computer programmers, and other high-tech workers have complained that US companies have used special visas, called H-1B and L-1 visas, to import workers from India and other countries. These workers allegedly supplant native-born Americans, increasing unemployment among highly educated US workers.

But since the technology slump of the past three years, companies have reduced their use of H-1B and L-1 visas. Instead, many firms have set up operations in other countries to handle everything from telephone call centers to computer programming tasks. Countries like India offer thousands of well-educated workers at wages far lower than those offered in the United States.

Unemployed software engineer Steven Paris, 47, says that work visas and outsourcing are why he's been out of a job since October, despite bachelor's and master's degrees in computer science. ''I think we need to curb the H-1B and L-1 program,'' Paris said, ''and I think we're going to have to look at tariffs and some kind of protectionism'' to limit outsourcing. Paris agreed that foreign competition was healthy for the economy, but said that the outsourcing trend has gone too far.

With all sympathy to Mr. Paris, people usually conclude that foreign competition has "gone too far" when it threatens their job. (And if we could import foreign politicians to compete with domestic ones, you'd see tariffs and protectionism that would make Napoleon's Continental System look like free trade.) Nonetheless, this sort of competition can certainly cause dislocations, both political and economic. (For more, here's a report that outsourcing to India increased by 25% last year, and a somewhat sunnier view of the situation from the Hindustan Times.)

But it also causes moral dislocations, and in various parts of the political spectrum. Bray's story reports on an "alliance of liberal activist groups and labor unions" that is opposing the outsourcing of jobs. And while it's easy to see why labor unions might oppose this sort of thing, it's hard for me to see it as a liberal issue, really. After all, aren't liberals supposed to be for the redistribution of wealth from the better-off to the less-well-off? These jobs don't disappear, after all: they go overseas, to people who probably need them more. Isn't that a good thing? Or, at least, to me it's not obviously worse than, say, taxing corporations in a way that causes them to cut jobs, and then using the money to pay for foreign aid. In fact, it's probably better, overall, since it builds up a corps of educated professionals in other countries, instead of fostering the sort of dependency (and corruption) that usually results from foreign aid.

It's true that corporations do this in order to maintain profits -- but they usually are pressed to do that by downward pressure on prices, brought about by competition, which means that they're not earning a windfall out of the deal, and the savings are passed on to consumers, another group that liberals are supposed to like. So it's odd that opposition to outsourcing would attract interest from "liberal" groups, though it clearly has.

On the other hand, conservatives are supposed to like free markets, and some of them are upset by this sort of thing, too. Phyllis Schlafly doesn't like it. And Pat Buchanan and Ross Perot have been calling for more protectionism for over a decade now, though they might argue that they are more interested in nationalism than fairness in the abstract, something that liberals (at least outside the labor community) find it harder to argue.

Could this outsourcing produce a major political backlash? Sure, it could. Will it? That's less clear. Right now the issue is owned by relative extremes on the left and right, making it unlikely to produce much movement one way or the other. It's possible that a Democratic candidate -- Dick Gephardt, perhaps? -- might raise this issue, and might make some inroads among Information Technology workers, who have traditionally leaned libertarian/Republican. But big enough inroads to turn the election? Probably not. Things might become more unpredictable if a third-party candidate raises the issue in a big way. Ralph Nader might do so, or some as-yet-unheralded candidate might come out of the right to steal votes from George Bush. That doesn't seem likely now -- but then again, in 1991, neither did a Clinton Presidency, which was made possible in no small part by protectionist third-party candidate Ross Perot.

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