The issues of offshore outsourcing require a sensible, nuanced discussion

The business practice of offshore “outsourcing”, which has already whittled down and reshaped American manufacturing, is now spreading to high-tech and service IT jobs. It is also spreading to Australia. Computer programming, back-office functions like billing and claims processing, and customer services like call centres are increasingly being handled by educated English-speakers in India, China, and the Philippines.

Futurist William Dunk of GlobalProvince says America is not only exporting manufacturing jobs to China but is sending knowledge-worker jobs all over the globe. He says that America, complacently, may have thought it was only sending grunt, blue-collar work out of the States, but in fact, it is outsourcing a huge volume of white-collar work out to the world. This practice, in turn, has retarded the US economic recovery.

This year an increasing number of medical jobs in the US are also being sent off shore. For example, the doctor required to analyse an x-ray is cheaper in India than in the US, and s/he is probably trained just as well, maybe even from the same training environment. Those same overseas students helping out today’s economy with tuition fees may be helping themselves to the US economy when they return to their own countries. In many instances they have been trained not only in their subject area but also in the language and customs of the country to whom they will ultimately contract their services.

While there is no evidence that this is happening in Australia yet, what is true for the US is, more often than not, is likely for Australia.

As these first moves are bedded down, entire industries will be shifted offshore. The Australian Computer Society says the trend towards offshore outsourcing of IT services could cost the country 40,000 computer jobs and billions of dollars in lost economic benefits by the year 2015.

Recent press reports show that the number of jobless in the IT industry is 77 per cent higher than the national jobless figure. More than 160 Qantas IT workers are currently considering whether to sign up with IBM rather than face redundancy in another Qantas cost-cutting initiative. This followed media speculation that the jobs were to be contracted to workers in India.

The speed at which Australian IT jobs are disappearing will increase as more and more international firms seek to rationalise their investments by moving the individual sectors of their businesses to the most cost-effective locations. In practice, this means India at present but India too may soon be threatened by China as a destination for Australian jobs.

The argument in support of outsourcing runs like this: the availability of low-cost labour in developing countries encourages companies to shift labour-intensive (and therefore expensive) jobs offshore. The money saved can then be diverted into product development, thereby keeping the golden goose here, even if the eggs seem to be laid overseas. So the theory goes that the high-end, high-profit jobs stay here and the jobs that “nobody wants to do in this country” are shifted off to those who have no choice but to do menial tasks. This is true up to a point. In reality, the jobs being shifted are no longer just low-level jobs but rather more highly skilled IT jobs. And a surplus of Optic Fibre Cable will ensure that this trend continues.

That said, such a scenario depends on many variables, none more vital than the ratio of savings to investment and a government that strongly supports research and development. Unlike Gordon Moore (co-founder and President of Intel, and originator of the famous Moore’s law), whose company spends more money on research each year than does the whole of Australia, it would seem the savings being made by outsourcing from Australia are more likely to be used to prop up share prices with little thought for the effect it will have on the country or even the long-term future of the company itself.

Unfortunately for Australia, the Opposition appears little better than the current Coalition when it comes to limiting outsourcing. The ALP policy for example, as announced at the 2004 National Conference, is to hinder Telstra’s efforts to compete, while doing nothing to prevent the outsourcing situation worsening in the medium to long term. Sadly, Labor’s policy is a “nobble Telstra” policy; not a real solution to a real problem.

And the current government’s record on this issue is pitiful. In the field of IT it has yet to realise that the supply of future well-paid jobs depends on the development of IT. With universities being deprived of funds, and priority being given to places for wealthier overseas students, our best and brightest young students cannot compete successfully for university places against full-fee paying international students.

Labor’s approach has been the populist cry "ban outsourcing". Labor knows that it cannot, and even if it could, it wouldn’t work.