Wednesday, September 01, 2004

Outsourcing is Pruning America

Market Week blog offers a unique view on outsourcing as the pruning of American jobs. In other words, America moves low return business to lower cost labor sources to focus more on higher return businesses.

"In America we 'prune' low return businesses and invest in high return businesses. The textile industry in the USA is another case in point. Over time textile manufacturing moved from Great Britain to the Northeast of the USA, then to the Southeast of the USA in order to keep labor costs down. Now the textile industry is moving overseas to low cost producers. Textiles are a business with a very low return on invested capital and cost advantages quickly turn into price advantages. Price advantages turn into sales as consumers seek to get the most for their dollar."

"As painful as this process can be for individuals and communities the likely outcome is not that all of our jobs move overseas. Who aspires for their children to work in a broom factory, or to make clothespins? The USA will continue to retain high value added jobs and prune low value added jobs."

"We all benefit from pruning from lower cost of goods, a broad array of products in our stores. The Chinese make lamps, toys, consumer appliances and sell them to us, and they buy Boeing Jets, Cisco Routers, Intel Microprocessors, Disney Movies, and Coca-Cola."

"Off shoring or outsourcing of low valued added jobs is how we prune the dangerous dead wood here in the USA. It is why we enjoy one of the highest standards of living in the world. It is necessary. Without it our productivity will falter and our standard of living will fall."

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