Anti-outsourcing bill blocked in US senate

[KhalsaWarrior]

*Good move. It was protectionist in nature and not the right way to address US' economic problems. Plus it sends out a bad signal to other countries. US companies vying for Govt. contracts in other countries cant ask for a level playing field with such protectionist policies at home.


Anti-outsourcing bill blocked in US senate



WASHINGTON: Senate Republicans successfully blocked the passage of an anti-offshoring bill that would have denied tax breaks to US companies which move jobs overseas.

Republicans in a 53-45 vote prevented the bill from overcoming a filibuster. At least 60 votes were needed to overcome the Opposition's obstruction.

As per the bill, there will be a ban on government contractors from using American taxpayers' money to move jobs offshore.

What is seen as an electoral populist move, the Creating American Jobs and End Offshoring Act aims at small manufacturers and included a payroll tax exemption for firms that move jobs to US, but the bill also contains provisions to prevent businesses from deferring US taxes on the income they make from foreign subsidiaries.

Indian IT honchos had said the bill won't make much of an impact on India. However, they warned that US companies operating in other countries may be beaten by the same stick.

Several business groups such as the National Association of Manufacturers (NAM) were strongly opposed to the legislation. It had sent a letter to senators arguing the measure would make US corporations less competitive and hurt job creation.

Terming the bill as an election gimmick, Republican senator Orrin Hatch slammed the Democrats for their "height of irresponsibility" that would put the US economy at "greater risk."

"Desperate times call for desperate measures and the majority is showing how desperate they are with a bill that increases the tax burden on job creators and ship much-needed US jobs overseas."

Hatch feared that "raising taxes on companies' overseas profits will just incentivize them to move their domestic facilities to another country... That is not the prescription that will cure our ailing economy."

Read more: Anti-outsourcing bill blocked in US senate - The Times of India http://timesofindia.indiatimes.com/w...#ixzz10tSTKB8s

[amna.]

How would this put the US at bigger risk? All of the jobs for us Americans are being taken by Indians who are treated like slaves as far as wage goes.

[KhalsaWarrior]

How would this put the US at bigger risk? All of the jobs for us Americans are being taken by Indians who are treated like slaves as far as wage goes.

In many ways, Amna. Read this -

How Does Outsourcing Affect the U.S. Economy?

How outsourcing affects the US economy is a matter of great debate. For those to the political right, this practice will have an overall positive effect on the US economy, since it saves money for companies, opens up opportunities for greater entrepreneurship in the US, and leads to more Americans holding higher level jobs. Critics suggest hiring foreign workers has an immediate effect on the US economy by stripping many Americans of jobs they would have performed, particularly by semi-skilled or skilled laborers. The way that companies are taxed based on outsourcing may decrease a corporation’s tax debt and thus decrease federal spending.

Both sides on this issue and all those who try to navigate a middle road between the two sides, have some valid points. It is true that outsourcing has led to job loss in the US, and has had a detrimental effect on those people who may be only minimally qualified to work. It’s also the case that there are plenty of skilled labor jobs being outsourced to foreign countries. The loss is not only to people with minimal job skills.

A problem for those Americans who are impoverished, and might take minimal skill jobs is that it is now much harder to get jobs of this type. When President Clinton enacted the Welfare to Work plan in the 1990s, he was attempting to encourage people to get back to work so as to reduce government spending in welfare. Unfortunately, with fewer jobs available for unskilled workers, people may find themselves in exceptional poverty. Poverty does not benefit the US economy since it reduces consumer spending and tax revenues.

Even in the middle classes, there are plenty of jobs that are now outsourced. This has been particularly the case in the computer and technology industry. Again, inability to find work means inability to purchase homes, spend money, and profit companies. When people don’t buy, corporations that produce things don’t make money, which can thus “trickle down” to fewer jobs available and a greater desire to outsource to make things more cheaply so they will be more attractive to consumers.

Those supporting outsourcing say that lowering expenses of corporations will create jobs. There are plenty of government agencies that outsource some of their work, saving them millions of dollars, a direct effect on the US economy and on federal spending. A common theory contends that being able to pay people lower wages for work means that companies will be able to produce things with less expense and transfer this saving to consumers. Lower prices may mean more consumer spending, and companies will be able to hire more workers in the US because they’re paying less for workers outside of it.

Further, many argue that giving jobs to workers in less developed countries improves those countries economically and increases trade for US products. It also increases a country’s ability to pay back debts to the US, and may promote better political relationships. Companies economically benefit by selling their products in other countries. This means they can hire more people in the US, lower their prices on products for US consumers.

There is another “side” to the issue of outsourcing that needs to be addressed. Not all people in other countries economically benefit from outsourced jobs, and some companies aren’t dedicated to providing humane working conditions. Outsourced work may be performed by children, or in inhumane working conditions. Abuses of foreign employees might not benefit US trade or political relationships.

Outsourcing remains a difficult issue, but it does remain. Virtually no one, on any side of the argument concedes that outsourcing can be eliminated completely. There are those who feel that corporations are evading taxes and depriving the government of needed money and suggest corporations should be taxed for outsourcing, and rewarded for keeping jobs within the US. Others feel the temporary loss of jobs will be followed by greater economic growth in the US and will ultimately be worth the cost

[KhalsaWarrior]

It states more American holding higher jobs, won't Americans hold the high jobs regardless since they are American companies?

Samima, not necessarily. Many guys working at outsourcing cos. hold equal or higher positions that the guys they are dealing with in the American companies.

[KhalsaWarrior]

Khalsa I am against outsourcing to India. I would rather have a smaller American company than a company that is outsourced.

Outsourcing makes our lifes as Americans miserable. We speak to someone over the phone that is incompetent and lacks the ability to clearly speak English. I would rather wait on hold for extra minutes and speak to my fellow American than waiting for 2 minutes and pulling my hair out while speaking to them.

Heratigirl, I understand your point. But I think the fault lies with the company in this case. See for a given Quality level X, there would always be companies offering services with the price of 1-10. Some companies, like the one you mentioned decide to go for the cheapest solution. They could have had better quality but that might have cost them. So to save them a few extra dollars they compromise on quality.

But every outsourcing co. isnt low on quality. Google or Wiki names like TCS, Infosys and WIPRO. These guys are multi-billion dollar enterprises that play for more than cheap prices. They provide quality as well.

And the simple fact is that cost saving methods like outsourcing are a reality now. Without that no western company will be able to compete.

[pukhtana]

If all companies stop outsourcing, Firms will compete internally. How dependent is India on American outsourcing?

[KhalsaWarrior]

If all companies stop outsourcing, Firms will compete internally. How dependent is India on American outsourcing

?

Can you please elaborate? How did companies compete in the past without outsourcing?

Of course they can still compete, If all American companies stop outsourcing, the firms will compete internally with what they can.

Ok, let me try and answer how companies were competing earlier and why outsourcing is necessary.

Its stupid for me to say that before outsourcing companies werent competitive. They were. But outsourcing gives them better options. Connectivity and increased standard of resources in developing countries has given a new option to global companies. When they have a ready-made solution like outsourcing giving them 90% savings on certain services albeit at cost to quality, they most often go for it.

I know its a pain to talk to somebody in customer service who doesnt understand you well. But what the company evaluated before outsourcing that service is how much it will impact their brand, customer base and in turn, profitability. And they probably thought that the cost benefits were too good to be ignored.

Another thing that we forget is that companies use the cost savings and freed up labor (via outsourcing) to concentrate on its core services. So taking the telecom company example above - the same company will use its savings from outsourcing to install better connectivity to its mobile phone services users. And provide better services as well. But if the company is not doing the above, its just using up the profits for itself (owners/shareholders etc.).

here's list of benefits that outsourcing could/can provide -

• Cost savings — The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.[15]
• Focus on Core Business — Resources (for example investment, people, infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specialised IT services companies.
• Cost restructuring — Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.
• Improve quality — Achieve a steep change in quality through contracting out the service with a new service level agreement.
• Knowledge — Access to intellectual property and wider experience and knowledge.[16]
• Contract — Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.[17]
• Operational expertise — Access to operational best practice that would be too difficult or time consuming to develop in-house.
• Access to talent — Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.[3][18]
• Capacity management — An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.
• Catalyst for change — An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process.
• Enhance capacity for innovation — Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.[19][20]
• Reduce time to market — The acceleration of the development or production of a product through the additional capability brought by the supplier.[21]
• Commodification — The trend of standardizing business processes, IT Services, and application services which enable to buy at the right price, allows businesses access to services which were only available to large corporations.
• Risk management — An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.[22]
• Venture Capital — Some countries match government funds venture capital with private venture capital for start-ups that start businesses in their country.[23]
• Tax Benefit — Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.
• Scalability — The outsourced company will usually be prepared to manage a temporary or permanent increase or decrease in production.
• Creating leisure time — Individuals may wish to outsource their work in order to optimise their work-leisure balance.[24]