Region

North America

Don’t Build Fences, Build Bridges

By Atul Vashistha

As we struggle in America to figure out how to stimulate the economy, we are seeing a rising sentiment against outsourcing. So, I want to take this opportunity to share my thoughts, though others have made many of these points in the last 10 years.

Globalisation of services is making significant positive contributions to global economies and to the buying power of the United States, India, China, Mexico, Brazil and other countries. Still, outsourcing is seen as an alarming issue for many government officials, media, corporations and individuals. As a participant in the industry, I feel it is important to provide a balanced view to the debate over the globalisation of services.

It is always unfortunate when individuals lose their jobs. It is even more of a concern when the job loss occurs in a lacklustre economy. The reality is that this trend is real, irreversible and another step in the globalisation of the American and global economy.

In the short term, it will continue to present challenges to industry, government and individual employees. Yet, it is also important to note that clients are not sending all jobs offshore. They are carefully evaluating what jobs are best suited for each global location.

As companies go through this difficult decision, they are also creating programmes to minimise the short-term pain for their employees. They are offering their employees reeducation programmes, severance packages and outplacement services. As an advisor to these companies, I see companies looking at innovative solutions to help manage this difficult personal and corporate change.

While this will continue to be a controversial and emotional debate, it is important to keep in mind that the redistribution of resources to efficient global locations results in freeing up of capital, lowered costs for consumers and new opportunities for investments. Protectionism hampers innovation and cripples growth, which in turn can lead to higher unemployment. The failure to innovate is to cede technological leadership and, ultimately, economic strength.

Globalisation is a structural evolution of the American and global economy.  America is part of a global economy and American companies will flourish by staying competitive. This requires them to leverage resources and opportunities globally. This is helping American companies stay competitive and thus enhance shareholder value and stay healthy.

This enables them to not only save jobs but also create new jobs by expansion and new service or product introductions. Many companies that do not leverage this globalisation strategy have filed bankruptcy and as a result the US lost even more jobs. These are companies that may never have the opportunity to create new jobs or provide a return to their shareholders.

As the US population ages, there will be a shortage of resources. In fact, it is projected that with the current productivity levels, we will face a shortage of almost 15 million workers in the year 2015. Also, over the next decade, more jobs will be lost to productivity and technology rather than globalisation.

The following was written by Heritage Foundation (a public policy research institute in the US): “Chinese manufacturing employment peaked in 1996 at 126 million workers. The privatisation of inefficient state-owned enterprises and the adoption of productivity-increasing technology eliminated tens of millions of Chinese manufacturing jobs between 1996 and 2002. Chinese manufacturing employment partially recovered to 113 million by 2006, but was still well below its 1996 level. The same factors that have eliminated American manufacturing jobs have also eliminated millions of manufacturing jobs in China. Congress cannot bring back manufacturing positions eliminated by technology by restricting foreign trade.”

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How to create new jobs or keep jobs?

Expand the R&D Tax Credit: Since first introduced more than 20 years ago, the R&D tax credit has helped stimulate innovation and kept high-skill, high-wage jobs in the US. Lets expand the R&D tax credit to reward further the risk-taking and innovation that keep our economy growing.

Increase Federal Spending on Research: Federal research funding in the physical sciences and engineering as a percentage of GDP has declined since 1985 by nearly one-third. Let’s reverse this trend and dramatically increase federal spending on basic research. The money we spend will come back to us many times over in the creation of new jobs in new industries making products yet to be invented. Let’s have a Manhattan kind of project along with a stable revenue model for clean energy.

Pass the JOBS Act: The JOBS Act provides a tax cut for all companies manufacturing products in the United States. It also contains a variety of provisions to help US companies compete more effectively against their foreign rivals.

Deal with Rising Health Expenses: Offer small employer tax credits, funding for employer-based group purchasing pools, increased funding for high-risk pools, build on Medicaid and the State Children’s Health Insurance Programme, and permit a Medicare buy-in for the near-elderly.

Enforce Trade Agreements: Keeping markets open and opening new markets for US goods and services will also help increase employment in the US. Push for better enforcement of our existing trade agreements, and for negotiating trade agreements with countries that offer lucrative markets where US companies could increase their sales.

Support Lifelong Education: Education provides the skills necessary to unleash Americans’ creativity and helps prepare them for the jobs of the future. Improve, consolidate, and expand education tax incentives; to increase scholarships for engineering students; to fund the No Child Left Behind Act fully; and to support community colleges.

Trade Adjustment Assistance: TAA has helped thousands of manufacturing workers get retraining, keep their health insurance, and make a new start. Improve TAA and expand it to cover service workers who lose their jobs to offshoring. People should get retraining whether they work in services or manufacturing. Workers, employers, and the American economy all benefit when we equip our workers with the skills they need to fill jobs in growing industries.

Visa Programme: Expand the H1B and other such visa programme for technical and advanced degrees. Limiting visas for technical workers will only make the skills gap and dearth of talent more acute for American employers.

Many of the ideas above have been championed by Senator Baucus but we also need the outsourcing industry and professionals to rally to support the above. 

Atul Vashistha is founder & chairman of Neo Group, a Globalisation Advisory and Analytics Company based in Pleasanton, California.

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