To David Harris, outsourcing comes down to two factors:
Mobility and cost.
“If the job can be moved, and the prices are cheap enough to make them worth moving,” said Harris, an economics professor at Syracuse University, “then bye-bye job.”
With the growth in the global economy, outsourcing has become a volatile political issue, a cause of contention between labor unions and corporations and an ongoing national and local economic dilemma.
Outsourcing is the business practice of American companies shipping jobs overseas. Companies save money through cheaper labor and some tax breaks. Across the nation and in Syracuse, outsourcing jobs means cheaper products, made overseas and imported, for American consumers.
But it also means American jobs get cut, and laid-off workers have less money to spend. And, economic experts say, there’s no cure-all solution to replace those jobs.
All sorts of industries are moving overseas, usually to countries like India and China. In May, Coca-Cola, that All-American brand, announced it was considering moving some accounting jobs to India. It already bottles Coke around the world. And in June, a newspaper in California shipped some copy-editing to an Indian firm.
But the jobs most at risk are those “that involve the ability to swap high labor costs for low labor costs,” said David Liebschutz, a dean at SUNY-Albany’s Rockefeller College of Public Affairs and Policy.
Manufacturing jobs, like building textiles or car parts, are often shipped out.
That saves money: It costs a company about $40,000 to $50,000 a year to employ an American factory worker, Liebschutz said. Companies also must pay towards Social Security, health insurances and other benefits, in addition to base salary.
But that same job, now given to, for example, an Indonesian worker, costs about $10,000, Liebschutz explained.
The exact number of outsourced Central New York jobs is nebulous. Sometimes, jobs are just cut. Sometimes, jobs are shipped overseas. And sometimes, jobs are shipped to states like Texas and West Virginia, which have weaker unions.
Outsourcing has been a major complaint of organized labor. But representatives from both the United Auto-Workers and United Steel Workers in the Syracuse area did not respond to repeated requests for information for this article.
This much is clear: Jobs have been whisked away for years. In 2003, air conditioning giant Carrier announced it would close two East Syracuse plants. The labor moved to China, Georgia and Singapore. About 1,200 jobs were lost.
And the hits keep coming. From August 2007 to August 2008, the Syracuse area has lost 600 manufacturing jobs, according to statistics from the state Department of Labor. In August 2008, industrial supplier Honeywell closed its plant in Skaneateles and laid off 290 workers. The company moved its manufacturing to China.
But outsourcing doesn’t necessarily hurt the economy, some economic experts say.
With labor costs down, companies can charge less for their products, said Terry Miller, an economic policy expert at The Heritage Foundation, a conservative think-tank based in Washington, D.C. The foundation, like many conservatives, argues that outsourcing is necessary in the global economy and helps consumers.
“People will have access to either lower-cost or better services, or good and services in the case of more traditional trade — at better prices than they otherwise would have,” Miller said. “So there’s a clear benefit to the community, and all of the people in the community on the consumption side.”
But the lost jobs remains a political hot potato, with Republicans and Democrats often at odds on solutions. Both parties support plans to create jobs, but disagree on the details of the plans would work and how to pay for them. Democrats frequently support and Republicans oppose proposals to make it harder or less profitable for companies to ship jobs overseas.
Nationally, President-elect Barack Obama pledged to save or create 2.5 million jobs through construction of roads and schools, and development of alternate energy sources. As a senator, Obama co-sponsored a bill in 2007 that would provide tax credits to companies that remained in the United States and retained American jobs. The bill, the Patriot Employers Act, remains in the Senate Finance Committee and has had no votes.
Locally, Dan Maffei, the Democrat elected to Congress in the 25th Congressional District, embraced a plan that would encourage businesses to stay in Central New York by giving some tax breaks. He supports the Patriot Employers Act’s tax breaks for companies that keep jobs in the U.S.
There is no panacea for lost jobs, experts agree. Industries like trucking and warehousing can support some of the laid-off workers, said Howard Wial, a fellow at the Brookings Institute, a liberal think-tank based in Washington, D.C. Public works projects, like building and repairing roads, can also buffer some of the job losses.
The key for jobs in the area is supporting “stuff that has to be done here,” said John Bishop, a professor at Cornell University.
Winemaking in Central New York is an example, he said, along with increases in construction and public works. Said Bishop, “Each of these is a small idea.”
For laid-off workers, replacing the lost job often means finding a new field. That is the nature of economics, said David Harris, the SU professor and free-market advocate. “If you’re not willing to upgrade your skills or you’re not able to upgrade your skills, for whatever reason, you’re going to take a lower-quality job at lower pay,” Harris said. “And that’s the bottom line.”
And even for free-market advocates like Harris, that’s an issue.
“I’ll be perfectly honest: That presents a problem,” Harris said. “Economists like to use pleasant words like ‘frictional unemployment.’ What that really means is, you lose your job, you have to retrain, you have to sell your house and move somewhere else in the country where people have demand for you skills.”
(Andy McCullough is a senior newspaper journalism major.)
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