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FOREIGN LABOR

Overview

In the never ending effort to cut costs and maximize profits, companies are always looking for the cheapest source of labor. This often means looking outside borders as foreign labor typically offers a cheaper alternative to domestic labor. But no matter how logical, the practice of outsourcing jobs overseas is very unpopular. Sending jobs overseas not only cost jobs at home, but deprives us of future jobs that would have otherwise been located here. But the issue of foreign labor is more complicated than most suspect and warrants a deeper look in order to fully understand its effects and consequences for an economy.

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Analysis

While cheap foreign labor most certainly costs jobs at home, there are several overriding benefits to employing foreign labor. Foremost of which are cheaper goods and services.
Since labor is one of the largest expenses in the production of a good or service, by employing foreign labor we are able to produce those same goods and services at a cheaper price. This is a very unappreciated benefit to foreign labor since lower prices increase purchasing power universally. And by increasing purchasing power universally we not only increase the standards of living for a select few, but all people, especially the poor.

Another rarely contemplated benefit to foreign labor is that it frees up capital and labor resources to pursue more profitable ventures. By sending textile jobs to Bangladesh or Thailand, billions of dollars in resources are freed up here at home to pursue more profitable industries such as software programming, pharmaceutical development, electronics, and media. And perhaps even more important is that resources are freed up to pursue new, creative and innovative ideas and technologies that will advance and benefit society; the Internet, hydrogen powered cars, cures for diseases, etc.

It is in pursuing these more profitable and innovative industries that foreign labor provides us with another simple, yet overlooked benefit; the luxury of offloading dangerous, hard, and low paying jobs and replacing them with safer, easier, and higher paying ones. With each successive economic "revolution" old, hard, dirty and dangerous jobs are replaced by cleaner, easier, safer and more profitable ones. No longer does Jimmy Patriot have to till the fields with his mule for 80 hours a week just to get by in colonial America. Now Jimmy Javascript sits at a comfortable desk, barely breaking a sweat in an air-conditioned room programming C++ earning 18 times as much as his revolutionary ancestor, largely in part thanks to foreign labor.

But no matter how many reasons and benefits there are to employ foreign labor, any debate about foreign labor is actually quite irrelevant simply because there is no argument to be had. Foreign labor is a reality, it is an unavoidable fact of life. Labor transcends all borders and, like it or not, foreign competition is here to stay especially given advances in transportation and communications technologies which make it even more economical to employ foreign labor. This reality can either be accepted, faced up to, and welcomed as a benefit to society, or it can be feared, ignored and futilely fought against with government regulation that will only prove detrimental to society.

Capitalist Arguments

The true strength of an economy is not just its ability to produce more goods and services, but to produce them at a cheaper price. This is the single most important strength of an economy as it does more to pull people out of poverty than any government program ever could. It is by making goods and services cheaper that we make them affordable to the masses and thereby enhance the wealth and standards of living of all people. And to obstruct any attempts to make goods and services cheaper for the masses for one’s own selfish interests is the epitome of greed and arguably evil.

Such arrogance is demonstrated by unions and protectionist who insist on forcing the remaining 280 million Americans to pay higher prices and forsake a higher standard of living to subsidize a job that has either become obsolete or has priced itself out of competition.

Furthermore, employing foreign labor sends a wake up call to our own domestic labor force; that we are not the only people on this planet and that we are eternally in competition with foreign labor. Thus it behooves us to not only produce, but to produce more efficiently and to educate our labor force so that they not only work harder, but smarter.

Socialist Arguments

1. Cheaper labor doesn’t necessarily result in cheaper goods and services. There’s nothing to stop corporations from keeping the extra profit by employing foreign labor. Therefore instead of passing on those savings to the consumer, corporations just keep the profits for themselves, but we still lose out on the jobs.

2. While we may benefit from lower prices, we lose jobs. This loss of jobs not only costs us income, but additional income .

3. You won’t be ensured of the quality of work performed by foreign labor. Products may be faulty and even unsafe. By using US labor those products are subjected to the same laws and regulations

4. The new jobs (if any) that are created are lower paying jobs resulting in underemployment.

Counter Arguments

1. This argument would be true if all corporations in the US were monopolies. But the fact is corporations are in perpetual and intense competition with each other (despite conspiratorial theories that all corporations are under one sentient entity). And by sending jobs overseas they are not so much pursuing additional profits, as much as they are trying to remain competitive. It is the forces of competition, a vital and required component of capitalism, that ensures those costs savings are passed on to the consumer.

2. There most certainly is a cost to employing foreign labor and that is a foregone job at home. Fortunately, despite this massive exodus of jobs offshore, more jobs are created than destroyed as evidenced by US job turnover. This shows that (excluding times of recession where it’s obvious more jobs would be destroyed than created) even with all the jobs being sent overseas, as well as those domestic jobs that through the natural course of economics are eliminated anyway, the US economy creates more jobs than were lost. And while there are no figures that exist as to just how many jobs are sent overseas, a very detailed breakdown and analysis of job loss figures (performed by Jacob Kirkegaard of the International Institute of Economics) shows that of the total amount of jobs lost, the vast majority are due to natural economic forces and not outsourcing.

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Furthermore, the jobs sent overseas are predominantly more mundane, boring, labor intensive and less desirable than the jobs that replace them. However, there is a drawback to the new jobs in that they usually demand a higher level of skill or training. This is why it’s vital to educate and train your labor force so that they are able to perform these intellectually and skill-demanding jobs.

3. Commonly used by labor unions to protect their jobs, they are largely the victims of their own success. By driving labor costs so high in certain industries, unions have effectively priced themselves out of competition and either driven their former employers into bankruptcy or offshore.

4. The "underemployment argument" is a typical argument any time there is a recovery in unemployment or jobs growth. While being forced to admit the unemployment rate has gone down or jobs have been added to the economy, the left will still critique that progress by claiming the jobs are poor and low paying. The only problem with this argument is that there is no way to prove it simply because the US does not measure underemployment. In other words, whoever uses this argument doesn’t know what they’re talking about. A very simple solution to the argument is to ask "what’s the underemployment rate?" Most will say they don’t know and then revert to anecdotal evidence, but there may be some foolish enough to guess the underemployment rate even though it doesn’t exist.