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Editor's View: It's OK to Outsource, Site Selection Magazine, May 2004

Mark Arend

by MARK AREND

A


s this issue was going to press, the Dept. of Labor released some new-jobs numbers that must have left the outsourcing-is-evil crowd in a heightened state of bewilderment. Word that 308,000 new jobs had been created in March alone in the U.S. was no less troublesome to the pols who were hoping for some number far short of that – job losses ideally – with which to make their case that they would deliver the needed jobs after the next election.

        Keener business minds see offshoring or outsourcing for what it is – a cost management tool involving one of most corporations’ largest expenses: labor. Investors punish corporations that don’t manage such expenses by withdrawing capital and leaving them to wither on the vine, dry up and blow away. In fact, that scenario is worse than outsourcing, because the whole company evaporates.

        Chances are, the current fixation on politicizing basic economic factors, like job growth, will lift sometime on or shortly after Nov. 2nd. Once the fog clears, it will be easier to see the real job-creation dynamics at work in this so-called jobless recovery.

        Look at it this way: To buy into the condemnation of corporate outsourcing, one must be of the mindset that the Industrial Revolution is still here, rather than the Technological Revolution, and the loss of any industrial jobs means that the United States is no longer competitive.

        The Milken Institute’s latest “State Technology and Science Index: Enduring Lessons for the Intangible Economy,” released in March 2004, puts it like this: “The engines that propel state and regional economies forward today differ dramatically from the engines of the past. The old engines of economic success were the accumulation of physical assets, proximity to waterways, railways, raw materials and the manufacturing infrastructure that developed around them, such as cheap labor.” Much of which is still true, as the corporate executives interviewed for articles in the pages of this publication attest.

        But “the new engine of economic prosperity is based upon how successful a given location is in attracting and expanding technology and science assets and leveraging them for economic development,” the Milken report argues. “State and regional economic performance is determined by how effectively it uses its comparative advantages to create and expand knowledge assets and convert them into economic value.” Massachusetts, California and Colorado currently are the best at doing this, according to Milken’s 2004 analysis.

        Lots of political leaders understand the relationship between economic prosperity in their jurisdictions and their state’s business climate as it relates to cultivating high-tech companies and industries. They know that fewer workers sewing buttons on shirts means more workers available to test software. Come this fall, let’s keep them in office.

Till next time,