October 31, 2005

Prof Examines Job Offshoring Problems

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For some Cornell students about to enter the job market, the word “outsourcing” sends a slight shiver down the back.

Prof. Gary Gereffi, sociology, Duke University, spoke to a full audience Friday afternoon in Warren Hall about trends in overseas outsourcing and the implications for nations riding this global wave. A specialist panel featuring Prof. Susan Christopherson, city and regional planning, Prof. Shelley Feldman, development sociology and Prof. David Lee, applied economics and management, followed Gereffi’s discussion with related insights on outsourcing.

Gereffi began his lecture, called “The New Offshoring of Jobs and Global Development: Who Wins, Who Loses and Who Calls the Shots?” by distinguishing between the terms “outsourcing” and “offshoring.”

While the two words often go hand-in-hand, Gereffi explained that outsourcing is a company’s “make versus buy decision” and offshoring “refers to … moving from a domestic location to an overseas location.”

What appears to be a recent commercial phenomenon of replacing domestic employees with overseas, discounted-wage workers is, in fact, nothing new. As early as the 1960s, American companies outsourced basic factory jobs to developing countries.

The difference today, Gereffi suggested, is that white-collar jobs are also on the line. Companies hand over routine service work, advanced business services, original design, branding and innovation to overseas employees.

“By the year 2000, [there was] this idea that everything can be outsourced,” Gereffi said.

He offered some modern examples, such as Dell and IBM paying Taiwanese companies to design pieces of computer hardware. Likewise, Dell customers who call the support desk will almost always find themselves speaking to a technician with a foreign accent, he said.

“This is by no means just a U.S. phenomenon,” he added. “This is a major issue in all advanced industrial countries.”

Even more striking, some countries that receive outsourced work in turn outsource it to their neighbors. India, often viewed as a goldmine for technology outsourcing, actually delegates some of its work to neighboring countries that boast cheaper labor markets.

Companies have also become more sophisticated in coordinating their supply-chains, according to Gereffi. While many electronic companies send overseas workers parts to assemble together and ship back, other organizations like Nike and Liz Claiborne contract with local producers to make the goods with local materials at local factories.

According to him, these increasingly complex supply-chain relationships are best explained by different governance models, which offer a more integrated framework for understanding outsourcing in terms of the chain drivers behind it.

For companies like Nike that are industrial leaders, one drawback of outsourcing is the potential leakage of technology secrets to suppliers. Korean and Taiwanese suppliers to Nike are interested in using the company’s technologies to produce shoes for domestic markets, while Nike wishes to prevent suppliers from learning its trade secrets.

“Korean suppliers find a way around it. [They] develop for Nike and make their own footwear to sell to Korean markets,” he said.

Similarly, China is seeking ways to upgrade from its status as a supplier to industrialized countries. In addition to diversifying its exports and focusing growth in mid-tech and high-tech export categories, China also has supply-chain cities, according to Gereffi. Cities specializing in one apparel item such as men’s wear, ties, underwear of jeans are not uncommon.

“China produces something like one third of all the socks in the world,” Gereffi said.

Most of these footwear pieces are produced in Datang, which he called the “sock city.”

Because of its enormous contribution to world exports, China also faces intense scrutiny from labor rights organizations. Currently, whether or not to establish itself as a leader in workplace standards is a big debate in China; this change would make these standards an asset of Chinese factories rather than a liability, Gereffi said.

For Americans, however, innovation remains their country’s core strength, and they must keep ahead of the technology curve.

“[Students should] enter the job market realizing you need to retool your skills,” Gereffi told The Sun.

Besides training American workers whose skills are outdated and offering workshops at community centers on the latest technology developments, the United States must also change national development strategies in line with the recognition that “free trade” is not a viable strategy for balancing exports and domestic production, Gereffi said.

Audience members had differing perspectives on whether U.S. employees should be worried about losing their jobs.

“A lot of people are concerned about it. The question is what kinds of jobs are being outsourced,” said David Brown, director of the Polson Institute for Global Development.

Brown pointed out that despite the country’s concerns over outsourcing, the United States is still a net importer of labor.

“I think employees everywhere should be worried about outsourcing, not just [in] the U.S.,” said Sudeshna Mitra, grad. “They might be getting [jobs] today, but what about tomorrow?”

Prof. W. Ronnie Coffman, chair of plant breeding and genetics, was more optimistic. “Worrying’s just a part of living,” he said.

Gereffi’s lecture was part of the Polson Memorial Lecture series.

Archived article by Xiaowei Cathy Tang
Sun Senior Editor