TCS Daily

Fear Not Outsourcing, Knowledge Workers

By James D. Miller - March 4, 2004 12:00 AM

"If there's only one lawyer in town, he'll starve, but if there are two they'll both get rich."

The above joke implies that attorneys should embrace, not fear competition because lawyers make work for each other. Although many workers fear that outsourcing will cost them their jobs, scientists, engineers and many other knowledge workers should welcome competition because similar to the lawyers in our joke, knowledge-seeking workers often create employment for one another.

When one scientist makes a discovery, he does harm other scientists to the extent that they can no longer directly profit from patenting this new-found innovation. Each scientific breakthrough, however, opens pathways for other discoveries so scientists often benefit from each others' advances. The tremendous scientific progress of the last century have obviously increased the number of scientists and engineers employed because each discovery gives these knowledge workers more potentially productive tasks to labor at.

Imagine you're a genetic researcher for a biotech company. Much of your time is spent doing lab tests that suddenly get outsourced to India. Does this outsourcing reduce your value as a researcher? True, some of your job has been outsourced away. These lab tests presumably got outsourced, however, because Indians could do to job cheaper and perhaps even better than Americans. The cheaper tests will make it easier to conduct scientific research. Since the more that is known about human genetics the more useful genetic researchers are to society, anything that increases the speed of genetic research enhances your job security.

Now imagine that rather than conducting scientific research you're a computer programmer who spends about one-third of his workday debugging. Suddenly all debugging work gets outsourced to India. Should you worry?

True, each new computer project now requires 33% less time. But firms outsource their debugging because it saves money, so since software now costs less, firms will create more of it. So even though you now have less work to do on each program, you should be getting more programming assignments.

Outsourcing debugging will further benefit computer programmers by allowing them to increase their productivity through specialization. Since they no longer have to spend so much time on debugging, they can devote more time to their core tasks, which presumably will increase their skills at these tasks and thereby raise their value to employers. Since knowledge workers have multi-faceted responsibilities, outsourcing will likely take away only parts of their jobs. To the extent that outsourcing allows them to focus on what they do best for their companies, it helps workers by raising their productivity.

Economies of scale provide yet another reason knowledge workers shouldn't support outsourcing restrictions. Knowledge workers often labor on information goods, such as software or movies, which are expensive to design but cheap to replicate. Firms will design information goods only when the potential market is huge. For example, a firm would never spend $100 million producing a movie unless it believed that many people would want to see it. The greater the extent of the international market, the more movies and other informational goods businesses will produce. To have access to international markets, therefore, workers laboring on information goods should support free trade and the outsourcing that free trade necessarily brings.

The most important reason for Americans to support outsourcing, however, is that only those countries which embrace it can hope to have world-class high-tech industries. Today, U.S. technology companies can call on the brain power of nearly the entire world when designing, producing and servicing their products. What if, however, a future President Kerry or Edwards decided to restrict U.S. outsourcing while a more forward-looking Tony Blair allowed British companies to employ talent throughout the world? In that case, when designing sophisticated software or complicated computer chips British companies would have American industry at a disadvantage for whereas they could draw upon the brainpower of the entire globe, our firms could tap the skills of only a small fraction of the world's population.

Of course, many politicians and commentators reject free-market economists' advice to not worry about outsourcing. For example, New York Times columnist Bob Herbert warns in an article ominously entitled the "Dark Side of Free Trade":

American workers are caught in a cruel squeeze between corporations bent on extracting every last ounce of productivity from their U.S. employees and a vast new globalized work force that is eager and well able to do the jobs of American workers at a fraction of the pay.

He goes on to state that free-trade economists don't have an answer to this problem. He's wrong, for I have the perfect solution to Herbert's fears: Forbid American workers from using their left hands.

Such a restriction would certainly prevent corporations from "extracting every last ounce of productivity from their U.S. employees." Imagine how many extra programmers Microsoft alone would have to employ if a right hand restriction crashed the productivity of its current employees.

Herbert worries about low-wage competition from third-world workers when he should be worrying about zero-wage competition from left hands. After all, once companies hire a worker's right hand, they greedily use his left hand for free. If it's wrong for a U.S. company to use cheap Indian call centers to save money because this outsourcing takes away American jobs, isn't it just as wrong for a company to insist on all its workers using both their hands, when a one-handed policy would force the company to hire so many more?

James D. Miller writes The Game Theorist column for TCS and is the author of Game Theory at Work. He last wrote for TCS about compassionate conservatism for the ex-prisoner.


TCS Daily Archives