Outsourcing Ethics: How Should HR Professionals Address Job Displacement Concerns?

Outsourcing has been around for a while and has been a major success worldwide, with even small businesses considering outsourcing their back-office operations to other countries. A recent outcry from Americans regarding this is somehow justified in my mind. Some of them are losing their jobs because someone else in a developing country will do the same job for one-fifth the pay or even less.

Although some may argue that it works by taking advantage of the diversity of experience and knowledge, I am not completely sure whether it’s just taking advantage of economic demographics. I wonder if a company would outsource if they had to pay the same wages. Perhaps not, and that brings me to question the ethics in outsourcing.

It's not just I.T. anymore; lately, I have been getting offers to work for American recruiting companies, but I am not too keen on working long night hours.

What do WE as human resource professionals think about outsourcing?

The topic of discussion here is whether there can be some way to nullify this effect of outsourcing.

Sidharta,

Hi! You raised a very good point there. But it seems the direction you would like to pursue borders on ethical and moral issues on the matter. Am I right?

I have the privilege of being able to talk to an American businessman who is engaged in this business. He is doing exactly what you described. However, his motivation is twofold: one, to do business by pocketing the difference between the cost of labor in his country and my country; and two, to allegedly provide employment in a country where unemployment and low minimum wage is the prevailing labor market setup.

Outsourcing: A New Label for an Old Practice

I thought this phenomenon called outsourcing must be a brainchild of HR professionals. To me, outsourcing is just a new label for an old business practice called "labor contracting only," which is generally considered an anti-labor business practice. This is the reason why in our country, the Labor Code makes a very clear guideline on the matter.

On the other side, however, there is a lot of merit for small and big businesses to let other individuals and organizations make a business or earn an honest living doing the non-core aspects of their business operation. This will enable them to focus on their core business activities. Isn't it?

The Ethical Dilemma of Outsourcing

The only argument that logically springs from such an arrangement is what you have exactly raised, i.e., the legality, morality, etc., of transferring such jobs from one area to another, with one area losing their jobs, another getting them, with the businessman-broker taking advantage and pocketing the difference in labor market values around the world.

Quite an interesting topic for philosophy. This reminds me of the writing of Karl Marx on Capital and Labor Surplus Value.

Best wishes.

Ed Llarena, Jr. Managing Partner Emilla Consulting

Hi Gautam,

Yes, I agree that there is probably not much we can do as HR professionals. I also agree that corporations can be heartless when it comes to deciding who will stay or "where" they want to get their work done. But my question was this, "Is it right to outsource work to foreign countries only on the basis of cheap labor?" The difference in usual labor charges is huge. For example, the web hosting company where this site is hosted charges $100 per hour for support services. So you can imagine the difference when programmers in my company are charging less than $10 per hour.

Can We Counter Outsourcing Effects?

My question was whether there can be any way to counter this by means other than "stopping outsourcing." For example, some time back, there were talks about US lawyers coming and practicing law here in India. What kind of effect would that have? Can there be other ways where the overall effect of outsourcing can be nullified?

Coexistence and the Future of Outsourcing

The way I see it, I think there can be a definite way to coexist, where no one is harmed. I was reading an article a few days back where a brilliant US programmer was saying that he made a mistake in entering the software industry and that he should probably have done a business course. That's just sad.

But perhaps the saving grace for the employees in developed countries is that not all work can be outsourced. However, with the way technology is advancing, it may soon be possible to do anything or rather outsource any kind of work, not just back-office operations.

Regards,

Sid

I guess if the Indian Government dilutes or amends the stringent labor laws and promotes contract labor, the very idea of working for a foreign MNC will be abolished. India has one of the cheapest labor forces (not utilized properly due to ambiguous and loosely framed laws), plenty of resources, and the capacity for huge investments. The only bottleneck is the VISION.

I guess there will be a time in India when the HR department will be abolished, and the activities outsourced. It is high time the people of India become aware of the fact that other nations are growing on Indian money. Not only that... the potential human resources are flowing out of India. Hats off to the Employment Laws in India where people registered with the Employment Exchanges reach retirement age by the time someone locates the potential. I just wish the HRD/Labor Ministry of India would participate in this forum with its comments.

Best Regards,

Sonia K. Nair
Sr. Manager - P&A
GWIL - Gandhinagar, Gujarat, India

I come from the United States, and about a year or so ago, a large steel mill went out of business here because, from what I have heard, they have been outsourced as well. Thousands of people lost their jobs overnight in Utah. This has significantly harmed our local economy because many more people now need help, whether through unemployment benefits or being out of work and unable to find new employment. This, in turn, causes the rest of the area to suffer as well.

Impact of Outsourcing on Local Economies

Where I am originally from in Minnesota, USA, there is a snowcat maker called Polaris Industries. If they were to be outsourced or faced similar challenges, nearly all of Northern MN would be in a bind and suffer greatly. I don't see that happening in the near future, but if it were to occur, it would have long-reaching effects. The town of Roseau, MN, where it first started, heavily relies on the work that Polaris provides to the area.

Concerns About Job Loss Due to Outsourcing

I too wish that we wouldn't lose jobs to other countries because, in many ways, even if the money is better elsewhere, it still negatively impacts those in the home country. If a company were to move to the US near me, and I knew it was from another country, I would feel bad that all those people had to lose their jobs so that we could have this company here.