September 27th, 2012
01:34 PM ET

Why outsourcing shouldn’t be a dirty word

By Fareed Zakaria

There’s one issue on which Mitt Romney and Barack Obama are in agreement – outsourcing. Every week, politicians on both sides of the aisle bash outsourcing. Each accuses the other of shipping jobs to China.

But what is so bad about outsourcing? Let’s look at the facts.

A common misconception about outsourcing is that it is a zero sum game, and by that I mean when an American job is moved to China, we tend to read the score as China +1, America – 1. But a recent study from the London School of Economics reviewed 58 American industries between 2000 and 2007. It found that rather than limiting jobs for Americans, immigration and offshoring actually improved the domestic job market.

Watch the video for Fareed's full take from Sunday’s show on how Americans benefit from outsourcing. Fareed Zakaria GPS airs on Sundays at10 a.m. and 1 p.m. ET.


soundoff (31 Responses)
  1. 100 % ETHIO

    Up North, the Country called, Canada, was serving as access to use its borders and to attacked Americans by some extremists, since the last few years.

    And now, with full knowledge and preparations, Canada will bring a big obstacles between China and America.

    The Keystone pipe, Oil sand, based in Alberta, Canada, that has been reserved by America, until the Congress pass legislations, has been signed between China and Canada (or Two CC's), by undermining and ignoring America's interest in the Region.

    Is Canada promising the fall of United States of America?

    September 27, 2012 at 2:16 pm | Reply
  2. JAL

    Good information.

    September 27, 2012 at 3:49 pm | Reply
  3. Ferhat Balkan

    Let's not forget about the dangers of outsourcing. Business owners and multinational corporations minimizing costs and maximizing profits, without regard to displacing workers, minimizing investment and minimizing taxes paid to Uncle Sam. Workers are expendable, it doesn't matter where they live mentality. High disregard for the environment as China nor India follow regulations. People who lost their jobs due to outsourcing often can't find the same job, so they have to look for another line of work etc. Need I list more?

    September 27, 2012 at 7:24 pm | Reply
  4. j. von hettlingen

    Outsourcing is a sensible thing to do, out of economical point of view. The only problem is to keep the work force, whose jobs have been outsourced to countries of low labour cost. Hence it's important to integrate these people into other sectors with training and coaching.

    September 28, 2012 at 4:36 am | Reply
    • WorldPeace

      ".... But a recent study from the London School of Economics reviewed 58 American industries between 2000 and 2007. It found that rather than limiting jobs for Americans, immigration and offshoring actually improved the domestic job market."

      That's BS. I have seen so many lose jobs and end up on social assistance.

      September 30, 2012 at 4:25 am | Reply
  5. Shangehy B.

    No offense, but if the study was conducted by "the London School of Economics" and only took their samples from 2000 – 2007 (before the recession), is this study biased?

    When smoking was first linked to cancer, smoking companies came out with their own data as well. Science and stats can be completely manipulated to form conclusions and distort the data to support the biased conclusion.

    I'd like to see an INDEPENDENT STUDY, and not propaganda. Thanks.

    I can't believe this article is on CNN. Trust 0%.

    September 28, 2012 at 12:53 pm | Reply
    • Shangehy B.

      and to add....

      Our economy is based on the sale of PRODUCTS or SERVICES (or a little bit of both).
      Products like TV's, iPods, clothes, shoes, fans, saws, wrenches, microwaves, toys, etc are almost all made in developing countries where labor is cheaper. Those jobs are gone because corporate america and financial business elite wanted to save money because of greed.

      The only thing left is SERVICES, like cutting hair, or cleaning someone's place, being a nurse and giving someone a needle, or fixing a persons leaky faucet. If those service jobs didn't require the person to be physically there, trust me, ALL SERVICE JOBS WOULD HAVE BEEN OUTSOURCED LIKE ALL PRODUCT JOBS. That means BOTH services and product jobs would no longer exist in America if it were up to the corporations and business financial elite who think they know what's best for everyone else. And your politicians and legal system would have allowed it to happen.

      So people like you and me wouldn't have jobs, and merely be consumers in big shopping malls. Of course, we'd have no income to buy things, so our economy would collapse. It is only because the majority of service jobs can't be outsourced that our economy is still functioning. It's like carving out main organs out of a persons body, and expecting it to still survive. Some service jobs are slowly trickling over to places like India, for example customer technical support. And machines and robots will wear and tear at the rest of the services.

      I don't see very good things on the horizon. These laws that allow outsourcing should never have been created. It should be illegal, or at the very least, change the law so that if a product or service is not made locally, then you can't sell it locally and won't have access to the U.S. market.

      September 28, 2012 at 1:04 pm | Reply
  6. Darren Dasburg

    Lets make sure we differentiate outsourcing from the subset off shoring. Outsourcing your engineering work to a local design company keeps jobs in America. Off shoring to The Phillipines for your call center is taking jobs from Americans. Domestic outsourcing far outpaces by some hundred times, the off shoring contracts.

    September 29, 2012 at 10:38 am | Reply
  7. allenwoll

    Our present economic situation unequivocably puts the lie to this hypotheses ! ! !

    GLOBALISM is a SCAM of the first water ! ! ! . It is intended to subvert the U S Middle Class down to mere serfs ! !

    The size of the U S economy is way, WAY beyond the minimum required to ENTIRELY sustain itself WITHIN its borders ! ! ! . Folks, you are being fed the crassest, most poisionous of HOGWASH ! ! ! . REJECT IT NOW ! ! !

    September 29, 2012 at 7:50 pm | Reply
  8. WorldPeace

    This Post comment FKUP. I posted many times, never show up. FIX IT, CNN.

    September 30, 2012 at 4:36 am | Reply
    • Muhammad

      You must be saying some pretty nasty stuff.
      Or just J apan.

      September 30, 2012 at 2:19 pm | Reply
  9. trwilde

    Sounds like another form of trickle-down economics: move jobs to China or other countries and American corporations will prosper and create new jobs. Bunk!

    We became a "service" economy because most manufacturing moved off-shore. Now services like providing tech suppport, banking and credit card customer service, travel information and reservations, etc. have largely moved off-shore as well. Even journalism, legal research and some medical-related services have moved off-shore. What next? (please let it be economists, politicians, and TV pundits!)

    Insofar as immigration (which was Fareed's other point), go to any construction site and see who's doing the work. See who's replacing roofs on homes. See who's installing the electrical wiring in new-home construction - at least in the sourthern states. Go to Las Vegas and see who helps you at the car rental agency or the hotel. Immigrants everywhere. Nothing wrong with this provided jobs on the next rung up aren't being sent off-shore. But they are.

    No way all the Americans who formerly filled these jobs found work suited to their skills at similar pay in a timely manner. Economists - and apparently Fareed - think people are widgets, readily moved to where new work becomes available, retrained (at their expense), or maybe just plowed under for the good of the few.

    September 30, 2012 at 11:52 pm | Reply
  10. Roto

    This appears to be a thin article with weak legs. Why is the American middle class missing? Reason: American executives outsourced American jobs to China, India, etc. Why is their huge class separation in the US. Reason: The middle class is gone and American executives made record bonuses from their outsourcing actions (a double hit). The London study may show otherwise, but look just how well England is doing right now. At this point in time, the study does not appear to be believable. Show evidence of US prosperity from outsourcing and show very, very soon. Otherwise, another revolution may be upon us.

    October 1, 2012 at 7:42 pm | Reply
  11. Dee

    Fareed,

    I had a lot of respect for you and your GPS show, but after watching you a week ago praising outsourcing policy without the necessary facts, it bothered me. Now, I am wondering whether I should continue watching your show and listening to your commentaries. Have you sold out, Fareed , to multinational firms in order to save your show on CNN?

    I side with a lot of the earlier commentators in this blog because the FACTS do NOT, I repeat DO NOT, corroborate with your assessment of outsourcing. Here are a few of those facts you chose to disregard completely:

    1. Outsourcing take jobs AWAY from one country to another (that's a fact, eh?)
    2. People who lost jobs in one country are NOT given another job. They are left jobless to look for another job ON THEIR OWN
    3. The theory about one job lost here results in a different job coming back has never been TESTED or PROVEN
    4. The people who benefit are the multinationals and the country which acquired those jobs
    5. The benefit of the sourced country is QUESTIONABLE in the long run because people are paid low wages and they become dependent on multinationals
    6. Multinationals keep complaining about skills in the outsourced country but they are not interested in training these people. In fact they favor lower taxes for corporations at the expense of government educational programs
    7. The outsourced country's economy is ALWAYS affected negatively by massive outsourcing for a very long time

    So, Fareed, I don't know why you said what you said, but I just want you to know that YOU WERE WRONG!!!

    Dee

    October 3, 2012 at 12:55 pm | Reply
    • Heather

      " the theory about one job lost here results in a different job coming back has never been TESTED or PROVEN"
      Then how is Fareed wrong if it hasn't been proven. This is just his opinion and he says himself the concept of outsourcing is advantagous. Whether or not it actually follows the concept is a different story.

      October 25, 2012 at 8:27 am | Reply
  12. Colin S.

    Outsourcing shouldn't be a "dirty" word. It's how I make a living and honestly, the biggest problem was getting employers to trust that I wasn't over-billing. This is the real dirty part of the outsourcing business. But, I got back the trust as I now use a service called TransparentBusiness.com. This service allows any of my employers to track my task/project progress in real time. Anytime I am on a task I am being timed and having screenshots automatically taken. So, when I send my employers an invoice it is one that they can see is only hours I worked on their assignments. More trust by more outsourcing companies might bring a clean name up for a change.

    October 4, 2012 at 4:20 pm | Reply
  13. Jason

    I think most people are overlooking a key point or two about outsourcing. Roughly 1/3 of the American population is near, at, or past the retirement age. They will retire at somepoint, leaving a significant gap in available workers. To compensate and keep our companies profitable, we have to outsource jobs. The key problem we are seeing is the higher skilled and higher paying jobs are also going overseas. We need to focus on ways to keep the better paying jobs here and let the lower paying jobs go. Part of this is an direct result of the quality of education, from Kindergarten through college, here in the US. The reality is that our educational quality is on par with many 3rd world countries now.

    It is also silly to expect companies to manufacture things here when the costs are so disproportionate to the costs in other countries. It a global economy and we have to find ways to compete with the costs in other countries. Better yet, let some of the lower paying jobs go and focus on the higher paying jobs.

    October 5, 2012 at 2:24 pm | Reply
    • Arbogast

      "Part of this is an direct result of the quality of education, from Kindergarten through college, here in the US. The reality is that our educational quality is on par with many 3rd world countries now." Not really. China, India, et al. are sending their students here - in some graduate STEM programs, the majority of students are foreign. And much of this is paid for with federal tax dollars. A big part of the problem is industry - they complain about a shortage, but they're not willing to make a long-term investment in education. Why should a student spend years in a program and and many tens of thousands of dollars when there's a downward pressure on wages and the constant threat of being replaced by a cheaper H1-B worker or having one's job off-shored? If industry is serious, they should look to train and retain skilled workers.

      October 5, 2012 at 3:18 pm | Reply
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