If there is anything that Mr. Obama has been vocal right from taking charge as the President of United States has been about Indians taking away American Jobs. He has voiced his thoughts on curtailing the practice of outsourcing jobs to India and even introduced tax benefits for companies not opting for outsourced services. But, all said and done it is evident that Outsourcing cannot be stopped and it pretty much is going to continue in times to come.
However, the bigger question is that Is Indian Outsourcing a real threat to America in terms of Job Losses?
On the surface it sure looks like it. Companies in the US are literally running their back offices from Indian shores and the spread of services available for outsourcing are growing by leaps and bounds especially in the IT services domain. However, this only presents an outbound perspective on the whole job scenario. What about the contribution of India to the US economy.
Here are some of the data points from the excerpts of a research report on Benefits of India-US engagement study which highlight the growing inbound participation of India in the United States,
- In the last five years alone, 90 Indian companies have created 16,576 jobs in the US by investing $5.5 billion in new companies and saved over 40,000 jobs by making 372 acquisitions and investing $21 billion (for 272 deals)
- More than two-thirds of the $5.5 billion of the Greenfield investments in the US were made by 10 Indian companies: Essar Steel, JSW Steel, TCS, Welspun Group, Reliance Adlabs, Indage Group, HCL, Flag Telecom, RIL, and Tata Communication
- Over 40,000 jobs were created or saved by 85 acquisitions. The number of jobs saved for 372 transactions would be much higher.
- There were 231,000 businesses owned by Indian Americans in 2002, which employed 615,000 workers and generated over $89 billion in revenues
- There are almost 10,000 Indian-American owners of hotels/motels in the US, who own 40 per cent of all hotels in the US and 39 per cent of all guest rooms, and employ over 578,600 workers
Phew!! These are only a few of the points which highlight the increasing contribution of India to the US economy. Even if these points are not exhaustive, it sure makes one thing pretty clear. Indian companies are heavily invested in the US economy and more so, given the increasing number of acquisitions and business establishments, it is evident that jobs are being created for the Americans.
One might tend to think that the new jobs being created are being filled by Indian workers but given the spread of investments and acquisitions in variety of sectors, there is every chance that Indian companies are opting for ‘insourcing’ jobs in the US itself. Moreover, the acquisition based investments also highlight the impact that the Indian companies have had in saving job losses.
This tells me that Mr.Obama has gone wrong in dismissing Indian Outsourcing as the major cause for job losses. The data seldom lies and few of the snippets shared above bring home the point. Further, even for a moment if we assume that Obama is right about the devil that is Outsourcing I fail to understand the justification for it
Companies in the US outsource primarily for cost arbitrage (for IT Outsourcing at least). It is this saving that these companies then plough back in their operations and expanding their business. Shouldn’t that lead to creation of jobs in the homeland because the front office and management roles are pretty much handled by the local workforce.
So, if the companies in the US are not able to create jobs after making significant savings by outsourcing, what are the chances that these companies will be able to create jobs if they stop outsourcing. Moreover, this might lead to further pressures on the operating budget leading to further job reductions. Hence, I think blaming outsourcing as the cause for job losses in America might be an ill-founded reasoning.
Do you think Indian Outsourcing is a major cause of worry for job losses in America? Please share your thoughts