Sunday, October 31, 2004


Since Democratic presidential candidate John Kerry has been complaining about "outsourcing," I thought I'd add my two cents to that discussion.

I have two friends, one who is absolutely a Democrat, and another who is quite likely one. Both of them have founded Internet companies that either are - or look as if they will be - fairly successful.

One of these friends has built his company using programmers in the Ukraine and Shanghai. The other started his company using North American programmers, but is now expanding using programmers in Bulgaria.

They are, in a word, outsourcing, and this, of course, has given me a great opportunity for kidding. But kidding aside, I really don't see what they're doing wrong.

Not only are they giving jobs to people in less wealthy parts of the world, but they are also giving jobs to people in the United States. Not to mention making nice products for consumers. So, who's worse off?

Of course, nobody objects to what they're doing. The problem comes with existing companies that decide to lay off people in the U.S. and replace them with people overseas. And that, of course, is painful for the people who lose their jobs.

But should we prohibit companies who have hired people in the U.S. from firing them and replacing them with people overseas? If we do that, then it seems we are giving people like my friends a very unfair advantage. My friends get to pay very low labor costs, while existing companies, which have hired and - for some time, at least - provided a living for American workers, would have to pay higher American labor rates.

At an extreme, the companies with the higher labor costs might go out of business, so the people whose jobs would have been outsourced might lose their jobs anyway.

But I really don't see this happening. I think the concern about outsourcing will die away because other jobs will arise to replace lost jobs. Like what? Well, I think again of one of my friends. He and his partner might not have been able to start their company if it wasn't for low cost programmers in the Ukraine and Shanghai. But because they were able to start their company, now they are able to hire people in the United States - including programmers. These are U.S. jobs that might not otherwise have existed.

So I think in the short run it will be painful for some people, but in the long run there will be more jobs, both in the U.S. and abroad.

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