TCS Daily

Please, Outsource to My Daughter

By Arnold Kling - July 14, 2003 12:00 AM

"...many of us have our shirts laundered at professional cleaners rather than wash and iron them ourselves. Anyone who advised us to "protect" ourselves from the "unfair competition" of low-paid laundry workers by doing our own wash would be thought looney."
--Alan Blinder

By Alan Blinder's definition, longtime conservative activist Phyllis Schlafly is looney. And, as Glenn Reynolds pointed out in a column on outsourcing, she is not alone. The phenomenon of using the Internet to outsource white-collar work has created the latest fad in economic terrors -- fear that the United States is about to be run over by that economic juggernaut: India.

As Blinder's observation reminds us, outsourcing is the basis of all economic activity. Every time we trade in the market instead of doing something ourselves, we are outsourcing.

In fact, a good way to attain clarity in discussing the issue of outsourcing is to substitute the phrase "economic activity" for outsourcing:
  • There sure has been an increase in economic activity with India lately.

  • Aren't you afraid that you could lose your job to economic activity?

  • The Congressman has introduced a bill that he promises will stop economic activity.

To put a human face on outsourcing, consider my oldest daughter, Rachel, who just finished her sophomore year in college. This summer, she is working for a temporary agency. A medical testing firm has outsourced some of its data entry work to the agency, which in turn has outsourced some of it to Rachel.

Is Rachel's job vulnerable? Absolutely. No doubt, my friend Prashant would be happy to talk the medical testing firm into using his company instead. The data entry would then be done in India.

Am I concerned? No. Because outsourcing is symmetric. For every job that we outsource to India, India outsources a job to us. That giant sucking sound you here is jobs being created in the U.S. to meet the needs of Indian consumers. That is guaranteed to happen. The Indians are not just going to smoke the dollars that they get when they are paid by U.S. firms. They are going to spend those dollars, and that spending ultimately will create jobs.

The process is likely to be very convoluted. Maybe the Indian workers will outsource the production of yogurt. The yogurt producers may outsource the production of milk to Australia. The Australians may want beer, which they outsource to Germany. The Germans want drug research, which they outsource to the United States, because we still allow drug companies to profit from research. With low interest rates, thanks to the fact that all of our trading partners want crateloads of U.S. Treasury securities, one of our drug companies can finance a new research facility. To build it, the construction company may hire workers who are new immigrants. The new immigrants might want schools where their children can learn to read English. These schools might outsource some of their teaching to Rachel. (Just kidding. The teachers' union will not allow economic activity. And they do not seem to care much for teaching English to immigrants, either. But you get the idea.)

Rachel would much rather work with children than do data entry. I am confident that with enough outsourcing, she will be able to get a better job.

Will Rachel's wage go down because her data entry job is outsourced to India? No. Rachel's wage will depend on her own skills. Presumably, one of the benefits that she will obtain from college is that she will find a career that is more lucrative than a job doing data entry. However, my guess is that there will be times in her life when she needs to change fields or obtain new skills. In a world of Progress and Displacement, you cannot stand still.

Someone who commented on Glenn Reynolds' recent article under the pseudonym "Unemployed MBA" clearly is not comfortable with progress and displacement. Maybe he went to a business school where they teach you that having an MBA automatically entitles you to a job with a big salary, and if you do not get it you should blame outsourcing. Unfortunately, business schools rarely teach their students to be entrepreneurial and opportunistic.

When I worked in a big company, I always tried to find somebody who could replace me. I figured that the sooner I could outsource my job, the sooner I could make a move. If I could not move up the ladder, I could at least move sideways and broaden my skill set. So I hired people with an eye toward having them take over my job. That meant that they had to be willing to do whatever work I needed, to be inquisitive, and to learn -- all of which tended to rule out MBA's.

Don't waste time calling yourself an unemployed MBA, or an unemployed webmaster, or an unemployed data entry clerk. Instead, position yourself to take the jobs that India inevitably will outsource to us. The best way to get those jobs is to be willing to do whatever work is needed, to be inquisitive, and to learn. That is my advice to Rachel. Assuming she takes it, the jobs that get outsourced to her will be good ones.

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