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U.S. Offshoring and Multinational Corporations

January 15, 2009

multinationalMany millions of jobs that have been harbored safely within the borders of the U.S. as an active part of the U.S. economy have been moved to distant locations outside the U.S. where labor costs are significantly reduced…or at least, that is the theory. The outsourcing of U.S. jobs, often referred to as “offshoring”, while not new, has become quite prolific since the advent of NAFTA by the Clinton Administration. Outsourcing is often simply the hiring of outside contractors in a foreign land for cost advantages. Offshoring is the act of transferring jobs to a corporate office in a foreign land for tax advantages and projected cost savings.

The reaction to trade agreements and tax legislation was that hundreds of manufacturing plants were closed and relocated outside the States. Champions of NAFTA and the World Trade Organization rationalized that low-skilled and low-paying manufacturing jobs would be replaced with higher paying jobs in high-tech and service sectors. Corporate momentum is such that outsourcing and offshoring have gained wholesale acceptance by companies across-the-board seeking lower costs and higher profits. Job offshoring has moved up the corporate ladder of hierarchy from telemarketing jobs to highly-skilled and managerial positions. Multinational Corporate America has been relocating the very jobs that NAFTA and the WTO announced would replace low-paying manufacturing jobs. The newest wave of job outsourcing is being exercised in accounting and financial services, computer and IT services along with telecommunications.

Mexico was a huge testing field for NAFTA and corporate internal structuring. For a time, Multinational Corporate America sustained many manufacturing plants in Mexico within reach of the U.S. border. When the labor costs and the professional level of the Mexican worker began to increase, most of the plants were quickly abandoned for other less expensive provisions overseas. The corporate taste for labor manipulation was fully birthed.

tax-planMultiple times, Congressional measures have been considered to restrain the federal government from granting contracts to companies to send work overseas. The Bush Administration has consistently opposed legislation that might restrict job outsourcing or offshoring. The administration has continually supported tax incentives to outsource jobs overseas. Unprecedented levels of sensitive personal information are being shipped overseas where privacy protections are not in place. The federal government has made efforts to undermine state laws by convincing state governors to accept new rules for trade agreements, working to promote the use of funding that employs outsourced workers overseas.

While it is safe to say that these multinationals have heavily funded the Bush campaigns (of the past), the same support was obviously in place when the trade agreements were pressed into service by the Clinton Administration. The role of money in politics often appears to be very subtle. General Electric, Deloitte Touche, IBM, Morgan Stanley, Goldman Sachs, Microsoft, Texas Instruments, SBC and Verizon are among the top exporters of U.S. jobs since 2000. There is speculation and analysis, but almost no solid information of the number of U.S. jobs that have been outsourced. The federal government doesn’t keep keep records on jobs that are lost due to outsourcing or offshoring, nor is any corporate reporting required.

Ernst & Young sends tax preparation work to India. Aetna has medical records reviewed in India. Deloitte sends government work to India and commonly brings Indian workers from overseas to perform government work. This is a small tip of a much larger iceberg of  U.S. jobs that are offshored. The large organizations that support a multinational workforce have resisted disclosure of any information that might work against their corporate benefit. The government has worked as a partner to stem public scrutiny of job outsourcing with no federal reporting requirements for outsourced jobs. Multinational corporate America is fearful over a public backlash of opinion that would prevent them from exercising complete autonomy over their corporate workforces.

multinational3deloitteinet.jpgIncreasing numbers in the United States labor force compete with developing third-world countries. The U.S. government continues to subcontract work to private contractors that often outsource with an overseas affiliate or subcontractor. Corporations like Deloitte Touche, have increasingly been sending IT and managerial jobs overseas. It is not uncommon for Deloitte, a major governmental finance and accounting firm, to bring foreign workers into the country to educate them while maintaining control of all aspects of worker’s lives, a form of indentured servitude. Work visas are commonly employed to bring foreign workers to work in the States for reduced wages. The action is considered as harmless and justifiable because of the number of multinational offices held by many players of Corporate America.

The effect of job globalization is the suppression of wages in the United States. 57% of reemployed displaced workers earned less in new jobs than in the jobs that were lost from outsourcing. 34% of those displaced workers saw earnings reductions of more than 20%. Brookings Institute recommends that outsourced reemployed workers recover 47 cents of every dollar that they used to earn. It has all been made possible through the U.S. corporate taxation system set up by the federal government and administered through the IRS. In effect, no job is truly safe from offshoring.

multinationalefficiency.jpgPerhaps the ultimate expression of capitalism results in the export of jobs to lowest-cost countries to enable what used to be “American companies”, now multinational corporations that have the sole goal of maximizing their corporate profits. The ultimate political expression has evolved to a sector of the world that is, in effect, ruled by multinational corporations.

What is worse is that these multinationals fail to realize that ultimately they are undercutting their own profits and shrinking their own market by underminding their own profit center in formerly prosperous prime economies. The bonus from offshoring can only last so long and is highly subject to proper application and use within a given multinational corporation. Offshoring is not a cure-all for corporate profits, nor a real solution for long-term benefit to anyone. Rather offshoring would seem to be a temporary justification to provide short-term profits and short-term recognition for certain mid and high level executives to justify their existence.

What will the Obama administration do to shield Americans from further corporate abuse? It is time for you to have your say by letting them know. While Congress may be unreceptive, the new administration has shown and openly demonstrated that it wants to hear from constituents. It’s time to do so while the Obama administration is in its’ honeymoon period.

~ E. Manning

This is an update for an original article dated March 18, 2008.

Don’t hesitate to check out other articles on job outsourcing at TNTalk! America.

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One Comment leave one →
  1. November 1, 2010 10:40 am

    In this U.S. political silly season, it is difficult to find an intelligent discussion on outsourcing. The statistics suggest it is likely that off-shore outsourcing leads to more jobs in the West, not fewer. http://bit.ly/c42NES On the legal process outsourcing front, I’ve seen with my own eyes how off-shore legal outsourcing, especially high-end, legal services KPO (knowledge process outsourcing), creates more legal work in the West, as deals previously undone, and litigations previously settled (or never filed), due to excessive legal costs, are suddenly affordable.

    Russell Smith
    http://www.sddglobal.com
    high-end legal outsourcing

    “as if attorneys really need another cash cow ~ E.M.”

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