October 08, 2004
The Playdough Effect

Offshoring. The very name strikes fear into the tech community. We have to protect those jobs! Keep them from going overseas! Taxes! Tariffs! Quotas! Whatever it takes, do something to stop it!

The emotional response, yes, but unfortunately the wrong one. because if you do that, then this becomes impossible:

Kathy Brittain White has a dream. She figures if U.S. CIOs will ship programming jobs to India to save money, maybe they'll ship them to rural Arkansas instead. So White's company, Rural Sourcing, is setting up outsourcing centers in places in the U.S. where the cost of living is low -- not as low as in Bangalore, but low enough to compete with the total cost of offshoring.

Because that's the other side of the offshoring equation, the one big media ignores and big labor tries to hide. While third world labor is cheaper than US labor, often by orders of magnitude, it's nowhere near as efficient as US labor. The United States has one of (I'm pretty sure it's the) most efficient labor forces in the world. We're expensive, but we get the job done right, the first time, and almost faster than you can complete the specification. It doesn't much matter if you only pay Haji $3 a day to make your widgets when it takes him two days to make one that's any good. Far better to pay Jane $18 an hour and have her turn out fifty perfect ones in a day.

Companies are often wooed by the siren song of cheap labor only to find their ship foundering on the rocks of terrible quality control, uneven and unreliable infrastructure, rapacious government officials, unstable regimes, horrible customer service, and endless export and treaty problems. These are the hidden costs of outsourcing, and they can be huge, even ruinous. We don't hear about them much because "new widget factory opens in Pacoima" is nowhere near as sexy a headline as "little brown people steal jobs from the US." Even worse, the fact that the new widget factory probably won't be a union shop means a tightly organized force will be actively working against anyone ever hearing about the possibility.

In this particular case, not only do I think it will work, I think it will work well. Tech sector jobs in places like Virginia, California, and Washington state are located in places with spectacular costs of living. I can buy a house twice as big as mine for half the price in Arkansas, and that's only the beginning. From cars to crackers and asparagus to zucchini, nearly everything is cheaper in the South.

It won't just be people moving there either. A strong work ethic and a deep suspicion of organized labor equal a work force that will be and stay at the top of the heap in productivity and efficiency. And these aren't McJobs either... they're good, well-paying, solid work for anyone with the brains and the will to learn them.

I always wondered what, if anything, would become of the sad little shuttered factories that dot my old home town of Dumas, Arkansas (pop. 5800) like dried tree stumps in an empty field. I couldn't be more thrilled if, fifteen years from now, they were replaced by clean, efficient tech centers.

None of this would be possible without free markets and free trade. The rich upper-middle-class "haves" would ensure no government program would ever threaten their cushy jobs, no matter how many "have-not" lower-class single mothers would be helped out of trailer parks half way across the country. Companies having no incentive to take the risk or pay the expense of training a new work force would never even dream of moving anywhere else. Without the ability to charge a price she considered fair Ms. White would have no reason to even think of a program like this, and no government official in Washington DC could ever hope to determine that price for her.

No, markets are not pretty. They're not always fair. But they work. People will lose, but people will also win. Rigging the game with technocratic barriers, doing things like "putting the environment and labor first", or raising taxes on people who know how to make money to give it to people who don't, just keep folks from even trying.

I want to try. I'm just glad that, for now at least, I live in a country that wants to let me.

Posted by scott at October 08, 2004 03:55 PM

eMail this entry!

Ask your Uncle Mike about outsourcing to Mexico. When he worked for Mercury Marine they opened a big old factory in Mexico, not taking into consideration that most Mexicans still believe in siesta time daily and all sort of other things including bribery for instance. I think it was less than a year and multiple law suits concerning quality control before they shut the whole thing down.

I think outsourcing inside our own country would be a wonderful idea.

Posted by: Pat Johnson on October 8, 2004 04:04 PM

Well, I agree with Scott and Pat - outsourcing within rural America is a great idea. My only concern would be how do you get the folks with the knowledge to move there? I say that because I've been many a rural place, and it seems to me that training these folks to move from one career to another might be a prohibitive issue.

Also, to the point that outsourcing is bad, I hate to tell you it works in favor of all of us. Electronics are a great example - how many computer parts are actually made in the States? And what is the quality of those parts? Yes, in the 70's, made in Japan meant cheap crap. Then, the cheap crap was made in Taiwan. Now, both of them produce very high quality items - and they do it cheaper than we can.

And the counter-intuitive part of this? You and I, and almost every other American is the direct source of a companies desire to outsource. We all say that we want high quality items at the cheapest possible price. We say we want a growing stock market. We say we want 1.2 billion different types of every commodity available. We want to switch our complete wardrobe every year. We feel we deserve a pay raise every year even if we haven't become more efficient. Even if we are offering no new benefit to the company. Now, how does a company manage to offer quality parts, high selection, high wages, and lower prices without killing their position in the stock market - and thusly killing our entire economy? They outsource. And it's our fault.

Posted by: ron on October 8, 2004 05:15 PM

Mike & I are actually looking into doing this in my home town....which as you know, is near BFE, NorthCentral Arkansas. I don't want to start a programming business, not too many programmers there. But judging from the local community colleges, there would be a sufficient pool for a help desk service.

It's a beautiful area, cost of living is low, there's just no jobs. I'd like to change the latter. And make a decent living while benefitting the community.

Ain't free enterprise great?

Posted by: rita on October 9, 2004 10:06 AM
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