Dan Pink, in his excellent book A Whole New Mind, says that “outsourcing is overhyped in the short term. But it’s underhyped in the long term.” That opinion is supported by experts’ predictions of the number of jobs that will move overseas from western countries to countries like India and China in the next few years and beyond. So far, manufacturing and the IT sector have lost the most jobs, and those losses are expected to continue. But these job losses may be the canary in the coal mine. Most experts are predicting that the next wave of jobs moving overseas will be in the insurance, financial services, customer support, and engineering sectors.
It’s not just a question of jobs in western countries moving overseas. Foreign multinationals are aggressively going after markets in western countries, taking on the local multinationals on their own turf. A July 31, 2006, article in BusinessWeek cites the example of China’s Huawei Technologies Co., which won a huge contract with British Telecommunications PLC in a deal that “sent a chill through the rest of the telecom manufacturers.”
The same article states that over the next decade, the World Bank projects that developing nations’ share of world gross domestic product is expected to grow from one-fifth to one-third.
Ron Hira is considered one of the leading experts in this area and has written a book titled Outsourcing America: What’s Behind Our National Crisis and How We Can Reclaim American Jobs. In a July 3, 2005 interview published in The New York Times, he was asked in regard to outsourcing, “How can this trend be stopped?”
His answer was “There’s nothing that can be done to stop it. The question is, how do we adapt to it and deal with the negative effects?”
That answer should be a wake-up call to governments and business leaders in western countries.
Outsourcing is becoming more common among small businesses, including single operators. An August 20, 2010, report in Bloomberg BusinessWeek, titled “A Glut of Hiring Alternatives,” says, in part, “Between interns, temporary employees, freelance contractors, and overseas outsourcing shops, small businesses can get much of what they need done without hiring a single full-time employee.”
It mentioned a small, Long Beach, California business that used international contractors in Bolivia, India, Pakistan, and Germany for special projects. They found these through oDesk, a company that brokers work mostly between US companies and 700,000 contractors and freelancers around the world.
It gave another example of a single operator in Austin, Texas who hired an artist and a musician in the Philippines to create a 90-second video for $300 USD, one-tenth of what that would have cost in the US. It referred also to Solvate, a New York service that helps small and midsize companies to build on-demand teams.
Michigan governor Jennifer Granholm’s response to outsourcing is a plan to make her state the innovation capital of the United States. As the historical US hub of automobile manufacturing, Michigan has lost thousands of jobs to outsourcing in the past couple of decades. In July 2006, Google announced plans to open a Michigan operation that would generate 1,000 direct jobs and 1,200 indirect jobs over 5 years. Michigan offered Google tax breaks over the next 20 years as an incentive for creating these jobs.
When General Motors can get their cars built for $2 an hour in China versus $34 an hour in the United States, you don’t need a degree in economics to understand why they are now the biggest foreign car manufacturer in China. This is also an example of why manufacturing jobs, which have been a key part of the economies in western countries for decades, will continue to move overseas.
Dan Pink points out that the conventional view thirty years ago was that an economy couldn’t be based on services — manufacturing had to be the foundation. When asked how the United States can survive outsourcing, he suggested, “We massively underestimate human ingenuity and resilience.”
The future, he says, will bring “industries we can’t imagine and jobs which we lack the vocabulary to describe.”
Our future, in other words, lies in our imagination — to create products and services that the world doesn’t know are missing. Dan makes a valid point, but unless we pay more attention to the impact outsourcing is having on our workforce and find ways to deal with its negative effects, as Ron Hira suggests, we’re in danger of becoming nations of Wal-Mart and Starbucks employees.
A new relationship
An employee with a company in yesterday’s workplace could safely assume that included with the job were a variety of benefits and services that the employer would supply. Benefits ranged from dental plans to pension plans, and you could often expect an employer to assume the responsibility for such things as mapping out a career plan for you.
Even your employability and expectation of being with the company on a long-term basis was a given once you had gone through the hiring process and had landed a full-time job. Today, having a full-time job is no guarantee that your future with the company is assured. Your security is tied to the value that the company perceives you to bring to their operation at any given time.
More companies are looking at employees as commodities; that is, we will pay you for the set of skills that you bring to us but benefit packages, career planning, continuing education, upgrading of skills, and those types of issues are viewed as costly overhead, and the onus to provide for them has shifted from the company to the employee.
The consensus among experts on the workplace is that today, everybody is a temporary worker and the only security you can expect is in having a set of current, marketable skills that are in demand.
The shift to smaller companies
The workplace of the twentieth century, up until about the 1970s, was dominated by large companies. This changed in the 1980s and ’90s to the point where, for years now, the vast majority of jobs and work opportunities are created by small businesses. Small today could mean a single operator who has expanded to the point where he or she needs an extra body on a full-time or part-time basis.
This shift has many repercussions for today’s workers, especially those who have lost their jobs with medium to large, well-established companies. Whether the shift is positive or negative is all over the map depending on how informed the individual is about the workplace and how well they’ve positioned themselves to survive in it.
Many of today’s small-business owners were formerly full-time employees in large companies who decided that self-employment made more sense for them than looking for another full-time job. Also, more young people coming out of college or university are starting their own businesses than at any other time in the past. According to a May 2005 Ipsos-Reid poll, 40 percent of Canadian college and university students would like to be their own bosses by becoming entrepreneurs or consultants.
In the US, according to a New York Times article on May 1, 2008, over 2,000 colleges and universities are now offering courses in entrepreneurship, up from 253 institutions in 1985. The article pointed out that many colleges have turned to active or retired business owners rather than academics to teach these courses. It also pointed out that some people see a strong liberal arts education as a foundation for success in these courses and that entrepreneurship in business schools is often too narrowly focused.
A new set of expectations
While there are no hard and fast rules that define how small and large businesses operate, there are some things that you