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Outsourcing 101: How to save jobs

Academic economic forums have the tendency to be deadly boring: Think Carl Sagan reading the tax code on Vicodin.

But a globalization roundtable last week at Georgia Tech proved the exception. If you've happened by a television or glanced at a newspaper in the last couple of years, you know that outsourcing American jobs to India and China has become the scourge celébre of the mainstream press and the cause celébre of financial papers; how many jobs you've moved overseas says just how well a company's doing. Journalists don't have any trouble putting their fingers on the problem. It's as obvious as your local unemployment line.

EarthLink, for instance, recently laid off 2,600 employees, some of whose jobs were outsourced overseas, and went from a $100 million loss to a $100 million gain in a single quarter — though some take issue with those numbers. But solutions to globalization and outsourcing are tough to find in your local newspaper.

The panelists at the April 22 forum at Tech — Georgia State University Professor Emeritus Donald Ratajczak, former U.S. Rep. Cynthia McKinney, and Ravi Kalakota, author and CEO of eBusiness Strategies — made it clear that globalization and outsourcing can't be stopped, even as the three represented different points on the political spectrum. It's a basic, albeit unpopular, economic principle: Where labor is cheapest, jobs follow.

As Kalakota explained, an American company with a 100-man IT team can save nearly $9 million annually by moving operations to India, and that includes benefits. So there are no quick fixes. Outsourcing is "going to create a lot of short-term problems," Kalakota says. Translated, that means more job losses. And no one has a clue where job growth will bloom in the U.S. economy.

But there are solutions, and not just the unrealistic campaign promises of renegotiating trade treaties or trying to ramrod trade terms down the throats of Third World countries.

Here's the shorthand version offered by the panelists:

- Eliminate tax breaks for companies that outsource. The current problem is that major U.S. corporations managed to change the tax code to give themselves breaks for moving jobs overseas, and American taxpayers shouldn't be subsidizing it.

- Do away with the 28-week unemployment benefit. That worked in the old days, but when faced with having to get more education or retraining to find a new job, 28 weeks doesn't cut it in this job market. And the change to, say, a 52-week benefit could be funded by companies that move jobs overseas — with the companies paying into a pool that's matched by the federal government.

- Increase consumer information. Consumers deserve to know where their products are made and what the work conditions are like in those countries. That could create more demand for U.S.-produced goods. Also, add a healthy dose of morality to the government's own purchasing policies by simply requiring it to buy products from countries where employees aren't subject to exploitative conditions, for example.

We're not yet far enough into the political season that candidates are offering much in the way of specifics on outsourcing. But when the campaigning heats up, it will be up to voters to make sure their would-be officials talk about real solutions like the ones discussed at Tech — and not the feel-good B.S. we've heard from U.S. Sen. John Kerry, D-Massachusetts, and President Bush.

After all, your job may be next.





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