Rosen Sharma is sure about one thing. His nine-month-old company, Solidcore, a start-up that makes backup security systems for computers, could not survive without outsourcing. By lowering his development costs, the 18 engineers who work for him in India for as little as one-fourth the salary of their American counterparts allow him to spend money on 13 senior managers, engineers and marketing people in Silicon Valley. If he doesn't outsource, in fact, the venture capitalists who fund start-ups like his won't give him a nickel. Sharma's Indian-American team, tethered by a broadband connection, gets his product in front of customers faster and cheaper. "As a business, you have to stay competitive," he says. "If we don't do it, our competitors will, and they're going to blow us away."
But Sharma's sharp analysis loses its edge when he thinks about what decisions like his will mean someday for his children, a 2-year-old daughter and another on the way. "As a father, my reaction is different than my reaction as a CEO," he says. He believes that companies like his will always need senior people in the U.S., like the systems architects who design new products and the experienced salespeople who close deals. "But if you're graduating from college today, where are the entry-level jobs?" Sharma asks quietly. How do you get to that secure, skilled job when the path that leads you there has disappeared?
That's an issue that economists, politicians and workers are struggling with as the U.S. finds itself in the middle of a structural shift in the economy that no one quite expected. There must be a mix-up here. We ordered a recovery, heavy on the jobs, please. What we're getting is a new kind of homeland insecurity powered by the rise of outsourcing, a bland yet ominous piece of business jargon that seems to imply that every call center, insurance-claims processor, programming department and Wall Street back office is being moved to India, Ireland or some other place thousands of miles away.
To be sure, public anxiety and election-year finger pointing have blurred some important distinctions. To set them straight: most of the jobs that have shifted to places like Mexico and China in the past several decades have been in manufacturing, which is being done with ever increasing sophistication in low-wage countries. Some have also blamed trade-liberalization deals like the North American Free Trade Agreement (NAFTA), which the Labor Department estimates was responsible for the loss of more than 500,000 U.S. jobs between 1994 and 2002. That's a significant number but modest in comparison with the millions of jobs that are created and lost annually in the constant churn of the U.S. economy. Indeed, much of the job loss during the recent U.S. recession was cyclical in nature. But in recent years, one noteworthy segment of the economy began suffering from the permanent change of outsourcing (or offshoring), particularly the movement of service-industry, technology-oriented jobs to overseas locations with lower salaries. What puts teeth into the buzz word is the sense that getting outsourced could happen to almost anyone.