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The benefits of outsourcing

Steve BucksteinQuickPoint!

Oregon finds itself in the middle of one of this year’s hottest presidential campaign issues: outsourcing. The state contracts with a company that uses call centers in India to answer Oregonians’ questions about food stamp and welfare payments. Is this a good policy, or an act of treason?

Lately, Senator John Kerry has called companies that replace American workers with foreign ones “Benedict Arnold” firms. The implication is that outsourcing is a crime against the United States of America.

Politicians who condemn outsourcing are myopic; they fail to see the dynamic nature of free and open markets. If government moves to stop outsourcing, it will backfire and shoot American’s long-term job prospects in the foot.

While it may not be intuitive, the economic reality is that outsourcing has been, and will be, good for American workers. Though outsourcing was partially responsible for the loss of 70,000 American computer-programming jobs since 1999, companies created 115,000 higher paying U.S. jobs in software engineering.

As recently reported in Forbes, “For every dollar spent on outsourcing, the U.S. gets back $1.12.” And, Americans have already gained one major benefit: “High tech hardware would have been 20% more expensive in the 1990s if not for outsourcing.”
Taxpayers and program beneficiaries should applaud Oregon’s move. State officials say they’re getting fewer complaints than when calls were handled in the U.S. Lower costs and fewer complaints sounds like a winning combination.

Steve Buckstein is senior policy analyst at Cascade Policy Institute, a Portland, Oregon based think tank.

© 2006, Cascade Policy Institute. All rights reserved. Permission to reprint in whole or in part is hereby granted, provided the author and Cascade Policy Institute are cited. Contact Cascade at (503) 242-0900 to arrange print or broadcast interviews on this topic. For more topics visit the QuickPoint! archive.

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