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Bereta_Eder
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i dont think there can be "foreign" in the US cause everyone is "foreign" except the navaho.
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MichaeltheGreat
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Apolyton Grand Executioner
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mooning the house that Ruth built.
Oct 1999
time: 21:28
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There's a bunch of reasons, but management bloat is one issue - a lot of companies who don't move stuff overseas still find they can get by with leaner management to grunt ratios, and less levels of management.
A lot of it is "waitandseeitis" on the parts of both companies and capital finance.
There are some types of jobs that can be remotely outsourced, but a lot still require some form of physical presence, so they're not remotely outsourceable.
One of the big drivers for this offshore movement is not just labor costs (since you have startup costs and productivity issues), but preferential tax treatment for offshore affiliates of US companies. If you make tax treatment neutral for onshore and offshore operations, you reduce the incentive.
On the flip side, you can't have totally non-competitive pricing for fixed plant, labor, or anything else, in an open economy.
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MichaeltheGreat
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Apolyton Grand Executioner
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mooning the house that Ruth built.
Oct 1999
time: 21:28
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Some of these jobs definitely will be lost. Not necessarily to overseas, but to all sorts of pressures.
IBM is a good example over a long period of time. When I worked there in the early Silicon Valley days, there were some 16-17 distinct stratified levels of management from the CEO down to individual department managers. Unless you rated a personal staff (most fourth and all fifth level managers on up), second level managers on up just managed other managers in a civil-service style bureacracy. It was a huge amount of bloat, and a horrible leader to led ratio (using the Army's terminology). With mainframes being dominant, and IBM in a near monopoly position, you could get away with that inefficiency. With a breakdown in that sort of market dominance, you can't, regardless of foreign competition.
Exportable jobs are going to go until the costs and benefits more or less levelize. That doesn't mean levelization of wages, but overall costs and benefits, so there will still be wage advantages here. Overseas locations have a number of drawbacks compared to onshore offices, especially in terms of management overhead, customer service quality, etc., so you do have some duplication of costs.
All local costs of doing physical business in the US are high - office rents, taxes, wages, compared to most of the rest of the world, especially if countries offer tax incentives or other subsidies to draw business, while places like California look for new taxes and new ways to punish business.
Some things are still inferior in other countries - IT infrastructure and communications, for example, so a company moving overseas has to look at external investments it has to make.
Eventually, things will levelize, with downward pressure on wages here, office rents, etc. - the problem is worst for people with large debt loads, but the US allows those to be shed easily enough by BKs. This won't necessarily correspond to an across the board erosion of standard of living, but people doing crazy stuff now, like the California RE bubble, are going to be hit hard by a demand-driven softening in prices.
If some states and localities were smart, and the US equalized tax treatment to kill offshore tax-havens, this could actually be a boon for poorer areas of the US. Unfortunately, the biggest issue is the lobbying power of the foreign tax subsidy folks.
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12-06-2003 02:21
Isn't it obvious that they are secretly developing advanced WMD over there?
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