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Last updated: May 30, 2014 at 11:38 am

Mr.Obama, We Are Not Stealing Your Jobs!

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

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19 Comments

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  • […] please, let me refrain from number crunching over here! We’re not here to debate whether or not Indians have replaced American job opportunities. We all know how the President has been more than vocal about Indians taking away American […]

  • Unfortunately the US government sold out the American IT worker years ago. Millions of highly qualified American workers will never work again due to the Indian dominance of the IT sector. Qualifications not withstanding, Indians flatly do not hire Americans of any color and will always hire Indian. The government sold out the IT worker while listening to idiotic statement that ‘one job to India means 5 jobs here’. Anyway, America is crashing economically so soon we will be a third world country. We know why there are so many jobs going to India – money. The CEOs get greased from Indian companies and the American worker gets screwed.

  • YES, YOU INDIANS ARE TAKING OUR JOBS AND I WISH IMMIGRATION WOULD STOP SO MANY OF YOU FROM COMING IN. IT SHOULD BE ILLEGAL TO SEND JOBS TO INDIA AND WE SHOULD LIMIT THE NUMBER OF YOU COMING IN.

  • The Future will be like this and I am gonna make this : The PM of INDIA : ” America is taking away INDIAN Jobs ” Obama/PRS of US : ” No don’t say that: we are help you working for less salaries and We desperately need those jobs “

  • Wow. A lot has been already said here but still I would like to add my comments. 1. When corporation outsource/ insource jobs it is a management decision based on saving costs, efficiency, quality etc. 2. What the company saves in costs either flows as cheaper prices to consumers or profits to shareholders, or both. Whether they spend the money purchasing goods and services, invest it in real estate/ stock market, or hoard it is their call. Either way, the economy generally benefits from it. 3. So what ends up happening is creating the same or better products at cheaper cost, give better returns to shareholders etc. Patriotic talk is different – about losing jobs etc. Its not different from getting the products for the dollar store or the iPad manufactured from China or Taiwan. If we are to talk patriotic then I would say that IT engineers etc., should not get pay hikes of more than 5% in a year otherwise the labor costs and hence inflation would go up. So the MNC’s would go to lower cost locations like Malaysia or Phillippines. (So capping the pay hikes would have to be enforced by the govt.)

  • “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.” Yeah… no. The savings these outsourcing companies see are not commonly funneled into job creation. They are funneled to the stock holders wallets. Sorry, but as an American, I know how our companies operate and the author of this article is a bit naive.

    • Jim, I won’t argue about the fact that there are likely to have been job losses, and that there is a lot of associated pain. But I would take you on your naivety statement on two fronts. i) There are two benefits. (i.i) Ability of consuming american companies to better compete with other non american companies such as european ones – in which case the savings are actually not in increased profits but in terms of non loss of revenue / profits and (i.ii) What you mention is the additional profits. Most of the profits that go to wall street again go back into funding additional ventures. Rich people don’t like leaving money idle – and it will get invested back into the economy. These investments will lead to job creation. ii) I will push back on the naivety argument on a completely different front. Job losses due to outsourcing – however painful they are – are a result of the same class of medicines that US and Europe either directly or through lending agencies such as the world bank and IMF are liberally prescribing to the rest of the world. It is but a small percentage of the total such pain created worldwide in pushing globalisation and easier trade. That is one thing the rest of the world is at least not naive about though it doesn’t boldly state it that often.

  • Regardless of what the report says, I can tell you *for a fact* that people in the US *are* losing jobs due to outsourcing. I was laid off from my previous job due to outsourcing. During the last year working at that company, *every* contractor that the company used was an Indian company with workers from India. How many American workers did not get hired as a result of such practices? The report might indicate that on the whole the US isn’t loosing jobs to India, but the reality is that *many* Americans are losing out to outsourced employees.

  • I wont comment on the report. But I definitely agree Dhananjay’s sentence- “Yes Mr. Obama, we stole your jobs, but in turn you and I both are so much better for it.”

    • Sagar: To each his own. I guess its a matter of perception. I feel strongly about the issue and hence the title :-)

  • I agree with Dhananjay… Aside from the fact that the report is from an interested party, some of the data points seem questionable, and rather irrelevant to the outsourcing debate. For example, if in five years, Indian companies only created 16K jobs in the US, that’s a drop in the ocean. And what do Indian-American owned businesses (such as motels) have to do with outsourcing? What do they mean by “$5.5B of greenfield investments”? Over what period? Which locations? Surely you’re not saying that fully two-thirds of ALL greenfield investments in the US are made by Indian companies? Irrespective of any period/location, that’s highly unlikely. It’s also strange to read that acquisitions result in saving jobs — typically it’s just the opposite :)

  • Journalistic lingo is beguiling many a time. At least it has affected the commentssection herein. The report is not about outsourcing to India. It is on Indo-US economic engagement and how it benefits the US economy. The report at several instances talks about in-sourcing of jobs to US. Why is that whenever Indo – US economic relations are discussed, outsourcing alone takes the centre stage of all discussions? There are several other aspects to our relations with US. Since this discussion has taken the outsourcing angle, allow me to put some things in another perspective In US, it would cost around USD 19000 / year / call centre employee. The same job if transferred to India would cost in the range of USD 9500 / year / employee. These facts are from PWC and are slightly dated; chances are that the figures would have moved upwards. Nonetheless, India still presents a cost advantage in the range of 50 to 70 percent. Cost wise, Indian labor is more productive. Another tenet of the outsourcing theory is that it provides freedom to focus on other strategic aspects, which can bring in more efficiency or increase productivity. These twin factors have benefited the US economy. According to the data by US Bureau of Economic Analysis, between 2000 and 2007 labor productivity alone has contributed 72% to US real GDP growth. Outsourcing is one of the aspects in the overall picture. Now if you say that Indians are stealing jobs, well, that is your opinion. Aren’t we directly & indirectly benefiting the US economy too? Isn’t a 269 % increase in US exports to India during 2004 – 09 a testament to it? (yes, Indians have comparatively become richer during this period too, but there also have been certain cost advantages in importing from US) PS: 1. @Dhananjay Nene – The report has not been sponsored by FICCI nor is there a vested interest that I can find. It talks in plain facts. Organisations like FICCI have too much at stake to come up with biased reports. 2. I am sure many would know the opening facts in II paragraph, yet still they have been stated for clarity purposes

  • IMO you’re flagging a dead issue. I have perceived Obama’s approach to be more politics than action, more style than substance. Quoting a report, and that too one cosponsored by FICCI is hardly going to be convincing. After all you did not expect anything else coming out of that report. Similarly I’m sure there will be other reports by other bodies who have a vested interest in the issue to be making out an extreme case one way or the other. In today’s world reports by vested interests (even if they seem to be coming from neutral bodies) are rarely worth the paper they are printed upon. The issue with this approach is that it is attempting to pit supposed logic sponsored by one vested interest with an emotional issue represented by another. Its a no brainer – its going to lead nowhere. Bottom line – neither the said report nor this blog post adds anything particularly meaningful to my current understanding of the issue.

    • Dhananjay, first of all thanks for the feedback. As for Obama’s approach, i agree with you. It has been an over-hyped balloon. As for quoting the report and reports being biased based on the vested interests. Yes, the reports might be biased but then are you saying that the numbers are wrong. Moreover, i never tried to highlight an extreme case here. The post tries to question the standpoint that Indians are stealing the jobs and thats about it. Agree on the dissection of the data based logic and emotional issue of the post. But, i am keen to understand what could have been a better way to present the same issue. Moreover, as for the post being of no value to you i apologize but then again we need to understand that not every reader is going to have the level of understanding of the matter as you have. Would be great if you would throw some light on your understanding of the matter

    • Dhananjay, So what you are saying is – the FICCI report is wrong ? I agree that every report needs to be taken with a pinch of salt, but numbers are numbers, especially acquisitions & investment numbers…they are out in open. Forget doing analysis – just looking at numbers does point to some irrefutable facts !

      • Ankit, Arun No I didn’t state it is wrong. Such reports usually reflect polarised realities. Polarised images are not incorrect – but they are not complete. For starters, there is very little linkage that the said benefits would not have accrued to the US economy if it had not gone down the outsourcing path. eg. Most of the motel industry is owned by Indian origin immigrants who did not in most cases reinvest their earnings out of software outsourcing. Ditto for investments done by Essar Steel, JSW Steel, and other businesses owned by Indian Americans. I am not saying the facts are wrong or the argument is incorrect, I however do believe they are not “apt”. There needs to exist a cause – effect relationship which seems to be absent in this case (at least to a substantial extent). Maybe you and/or others might see a strong cause-effect relationship I couldn’t, in which case that would be my shortcoming. As far as my understanding goes, I would summarise it to the effect that (a) The existence of a real emotive issue of “real” or “perceived” job losses is undeniable. (b) I haven’t seen a convincing argument either way yet on whether the job losses are real or perceived, though I believe consistent with the same philosophy that US preaches – anything that makes good economic sense is generally good for everyone – “on the whole”. In this case I believe the “on the whole” positive side does not come out of the benefts such as investments but the fact that it economically and competetively strengthens the consumers of such outsourcing services that are not being referred to (at least I didn’t see them) (c) The administrative response is more bark and less bite (though those affected by the little bite may not agree with me).

        • Besides I generally believe that both globalisation and technology substantially encourage job losses, but the resultant benefits result in newer job creations. If I had to make a statement that reflected my beliefs (based on known evidence and some substantial amount of thought/conjecture/deduction) – I would say the job losses are real, (or reduced growth of jobs) in IT is real, and contesting that is not wise. The benefits are also equally real – but those impacted by these losses are less than likely to be wanting to hear much about them since the response is primarily going to be emotive. If I wrote the article I would have called it (I am deliberately making it a little extreme for effect) – Yes Mr. Obama, we stole your jobs, but in turn you and I both are so much better for it.

        • The cause-effect may not be directly evident but for one the inflow of dollars via outsourcing to a certain extent would have promoted bi-lateral trade. Even in the motel example you gave, drilling down to the last detail is not possible. Moreover, the focus of the blog post was that jobs are being created via investments in the US economy and moreover as i mentioned in the later part of the post- indirectly by the savings that US companies make through outsourcing. As for the choice of the title, you can call it the choice of words. The one you suggest has a positive tone to it. The job losses might be real but it is not something that is being forced upon the companies. It is purely business sense since local workforce wont possibly wont come for cheap.So, my problem is with Obama playing the blame game rather than focussing on more pertinent matters. Thanks for your inputs though

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