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India Outsourcers Find Back Door in Canada 717

Posted by samzenpus
from the close-all-of-our-borders dept.
securitas writes "Metro International newspapers Toronto edition reports that more Indian companies are opening back doors into the United States by setting up shop in Canada. The issue of outsourcing, offshoring and nearshoring has become a hot issue, with the 2004 presidential election less than a week away. Candidate John Kerry has said he will close the tax loophole that makes it advantageous to outsource call centers."
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India Outsourcers Find Back Door in Canada

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  • by grub (11606) <slashdot@grub.net> on Thursday October 28, 2004 @12:11AM (#10650162) Homepage Journal

    I guess that makes me an evildoer, eh? Ah well, at least Guantanamo Bay will be warmer than Winnipeg this winter.
  • by LWATCDR (28044) on Thursday October 28, 2004 @12:12AM (#10650165) Homepage Journal
    Blame Canada?
    • by securitas (411694) on Thursday October 28, 2004 @03:41AM (#10651214) Homepage Journal


      I'd like to point out that the story as posted edited out the attribution.

      Editors: Please don't remove quotation marks where they are necessary because that effectively results in plagiarism. The words in quotes are not mine. They belong to the reporter.

      Also, the reference to the interview with the Chairman of Satyam - an Indian outsourcer that has set up shop in Toronto - was removed. Knowing that Slashdotters often don't read the source articles, I included that detail as an incentive for people to read what the leader of a large outsourcing company has to say about this politicized business practice.

      Original post follows:

      Metro International newspapers Toronto edition reports that 'more Indian companies are opening back doors into the United States by setting up shop in Canada [metronews.ca].' The issue of outsourcing, offshoring and nearshoring has become a hot issue, with the 2004 presidential election less than a week away. Candidate John Kerry has said he will close the tax loophole that makes it advantageous to outsource call centers. The article includes an interview with Ramalinga Raju, chairman of Satyam Computer Services Ltd [satyam.com]., India's fourth-largest computer services firm.

    • I think you should blame your CEOs. They make billions every year, while their employee's make basic pay. Maybe I don't get it, but isn't it wrong, for management to make disgusting amounts of money, and decide they want more, by outsourcing to other countries?
      Why can't the employees just shoot their CEO's? ummm errr I mean push them down the stairs? We all know CEO's don't do much, other than try and look good. IF CEO's were good, wouldn't they lower their own paychecks to make product prices more compet
      • ... *sigh*

        Please learn something about business before shooting your mouth off.

        I think you should blame your CEOs. They make billions every year, while their employee's make basic pay. Maybe I don't get it, but isn't it wrong, for management to make disgusting amounts of money, and decide they want more, by outsourcing to other countries?

        We can argue whether greed is wrong or not, but let's not quibble over a moral issue. Contrary to popular belief CEOs do not make "billions". Many of them make a

  • by fembots (753724) on Thursday October 28, 2004 @12:12AM (#10650166) Homepage
    I think near-shore or off-shore makes no difference as they're still outsourcing, ie taking away jobs which could have been given to locals.

    Bush said druing a debate that he will let Mexicans to come to US to work legally, and gradually obtain residency. If this happens, the Canadian-Indian issue is small in comparison.

    Maybe the ideal "screening" is based on the percentage of employees' residency status, so if over 50% of a Canadian company is from developing countries, it's no deal.
    • by MaelstromX (739241) on Thursday October 28, 2004 @12:23AM (#10650250)
      What's so wrong about people seeking work that pays better than what they had originally? Just because they're of a different ethnicity than you, or they speak a different language, you think we should forbid them from coming here to work?

      News flash: People are people, some of us had the fortune of being born and raised in stronger economical and freer political environments, but to act like it's wrong for a person to find a better job somewhere and for a company to hire that person is completely antithetical to what freedom and our capitalistic nation is all about.
      • by Drakon (414580) * on Thursday October 28, 2004 @12:35AM (#10650344) Journal
        The argument is basically that illegal foreigners working in the united states have jobs which may have otherwise gone to unemployed americans, whome the government is supposed to represent.
        However, if they are working legally, then they have to be working at least at minimum wage, which means there is little or no incentive to hire them rather than an unemployed american citizen, which means that basically they're contributing to the economy. I believe maddox wrote something about this,
        • "If Bush wins the popular vote it's time for revolution. EVEN IF HE LOSES THE ELECTION."

          See, this is where our Time of Troubles is going to start. REGARDLESS OF WHO WINS IN A WEEK, THE OTHER SIDE IS GOING TO SAY THAT THE WINNERS CHEATED AND WILL CALL FOR REVOLT. Think about that. We've brought this upon ourselves with our politics, our electioneering, and our untrackable unaccountable unreliable voting machines. Please, think before you act.
    • by QuantumRiff (120817) on Thursday October 28, 2004 @12:26AM (#10650279)
      If this happens, the Canadian-Indian issue is small in comparison.

      I think there are two different keys parts to this statement, (no, i'm not defending one candidate or another).

      The first issue is the location of the worker. A mexican immigrant that comes here to work, gradually gaining citizen ship, is contributing to the economy. His wages are taxed, and the things he consumes are local. i.e. he's going to be buying groceries, goods, renting a house, etc. All of this keeps the money in the US, and in a roundabout way, helps create more US jobs. (need more grocery clerks, more construction, etc.)Once they gain Citizenship, they have a vested interest in staying in this country, and continuing to work and consume.

      The second issue is the level of education, and the skill level of the jobs. There is a huge percentage of highly educated and/or skilled workers in India and Canada that are "taking" american jobs, and spending the money in their own country. The majority, (no, not all, but the vast majority) of workers from Mexico are relative unskilled laborers. They are not taking over $40k/year jobs with benifits. Of course, this does saturate the lower level, unskilled jobs, and drive their wages down.

      To get technical though, in the long run, sending the money to other countries raises their income, and lowers the value of the dollar, making american goods less expensive than before. Exports will go up, but profit will go down, meaning more jobs outsourced to get more profit, and down the downward spiral our economy goes!

      • Yes and no.. (Score:5, Informative)

        by goldcd (587052) * on Thursday October 28, 2004 @05:19AM (#10651559) Homepage
        ..what you say is correct, but there are other aspects to consider. A US company competes in a global marketplace, they're competing against products made all over the world. If for example an Indian company makes a piece of software similar to your entirely "made in the USA" product, their costs will have been much lower, they'll be able to sell it for less and nobody will buy your software - you're completely screwed. Outsourcing allows you to lower your costs, which isn't just trying managements evil attempt to fire you. Outsourcing also allows other advantages, you can exist as a small startup company in the US with a core R&D team and a great idea. When you've designed the product you can suddenly have a team of 100 in Bangalore coding like banshees for 6 months to make it a reality - and when you've got your product you can wave them goodbye. Without outsourcing you'd either be trapped as a small company, have taken years to code the same yourself - and miss your window of opportunity, have been bankrupted taking on US contractors or have taken on employees and either kept them on afterwards (bankruptcy) or laid them off. Because of outsourcing you're now a small company, with a great product you're selling around the world, making a tonne of money and paying a lot of tax into the US system. Point I was trying to make is that outsourcing isn't right or wrong, good or bad, it's another tool and if you refuse to accept it exists or use it if available you'll be screwed.
    • The main difference (and I'm stereotyping here; I'm sorry) is that Mexican labour usually comes in to do jobs that American's don't want to do, like pick lettuce and clean office buildings.

      FYI, Canada is already the second biggest outsourcer for U.S. jobs.

  • by havaloc (50551) * on Thursday October 28, 2004 @12:14AM (#10650179) Homepage
    He could of introduced plenty of bills supporting his current election platform as a senator, why didn't he? What makes you think he'll do it now if elected president? Just asking.
    • by skraps (650379) on Thursday October 28, 2004 @12:17AM (#10650203)
      That is a valid point, but we know for sure that Bush won't do anything about it as President. Kerry, we have reason to suspect that he may not do anything. But "may not" is better than "will not".
    • I guess he could by lying.

      I personally think Kerry's record shows that he has integrity, and that he'll at least try to keep this promise.
    • by Doctor Crumb (737936) on Thursday October 28, 2004 @12:36AM (#10650351) Homepage
      Could *have*, or "Could've". Not "could of".
  • by elid (672471) <eli.ipodNO@SPAMgmail.com> on Thursday October 28, 2004 @12:15AM (#10650194)
    If Dell outsources their tech support to Canada, at least I'll be able to understand the guy as opposed to the current situation....
    • by JamieF (16832) on Thursday October 28, 2004 @12:27AM (#10650284) Homepage
      not necessarily...

      User: it's a Latitude CPi-A.
      Tech: Got it, a CPi.
      User: no, it's a CPi-A.
      Tech: I heard you the first time, eh? A CPi.
      User: No, a CPi with the letter A.
      Tech: With what letter, eh?
      ...
      User: I think it's a boot virus.
      Tech: What's about virus?
      User: No, it's a boot virus.
      Tech: What does "it's about virus" mean? What virus, eh? ...
    • Re:Tech Support (Score:3, Interesting)

      I was doing a tech support call to Dell the other day to replace a DOA monitor. This item had a warantee under Dell's "Higher-Education Service Contract." Now, I only spoke to one person, so I can't comment on the entire situation. But for what it's worth, the guy on the other end spoke clear english, but he had a certain emphasis on vowels that struck me as odd. And when he was reading me back the letters, expanding each with a word for clarity, he said "...and 'p', as in Pierre."
    • Re:Tech Support (Score:5, Informative)

      by decipher_saint (72686) on Thursday October 28, 2004 @01:33AM (#10650709) Homepage
      If? [www.dell.ca]

      I guess thats one reason, but let me maybe present another one. The company I work for recently did some outsourcing to India, even though we mostly went through Chicago when the RFP negotiations were going on when it came to the nitty gritty (i.e. the "real" work) communication was a huuuuge problem. Even after we worked that out the quality of the code we got back was, let us say lacking (this might have just been this one company, but I'm just saying...). Anyway, by the time the project was done it cost us more and took us longer than if we had just hired local contractors to do it. Edmonton is kind of a weird place, there are at least four post-secondary institutions pumping out IT grads three times a year, putting it bluntly we have a lot of skilled IT people flipping burgers around town. Getting those people who are still keen on the IT industry (but don't want to move away) into low paying but IT-related jobs isn't exactly hard to do.

      Edmonton has always been an IT hub because of the Provincial Government (and the IT jobs it attracts), but in the last decade big IT firms have moved in and paled that aspect of Edmonton's IT community, firms like IBM, Microsoft, Fujitsu, BioWare, Intuit (etc, etc...).

      P.S. It's good to see NAFTA finally doing what it was designed to do, form an even stronger economic partnership between the Americas.

      P.P.S. If these Indian companies have indeed found a back door to profit in the good ole USA, you can be sure that the Canadian Revenue Agency will be sucking the life-blood from them if they are profitable. If there's one thing our Government knows how to do, it's tax the bejesus out of any pocketbook...
  • by Megor1 (621918) on Thursday October 28, 2004 @12:16AM (#10650195) Homepage
    As anyone knows who has hit someone in India the accents can be very hard to understand, Canadian accents (if any) are very close to americain ones so you might be able to get the help you need!

  • by wintermute1000 (731750) on Thursday October 28, 2004 @12:16AM (#10650197)
    I think it's because there was a fad for awhile for directors of TV and movies to film in Canada, because it was cheaper, and for a little while a lot of places in Southern California were feeling it. But then prices started going up in the areas in Canada where filming was being done because there was awareness that there were lots of rich people there all of a sudden, and the locals acted accordingly. It'll balance itself out. At least, in my youthful optimism, I'm going to hope it will.
    • I predict that hollywood will become completely nomadic. It will move from unsuspecting town to unsuspecting town, leaving each one as soon as the locals catch on. I have seen these unscrupulous bastards already purchasing busses and vans! They are mobilizing.
    • Infact, our dollar has become much stronger. It is now currently trading at 81.7063 cents US, contrast this to Jan 2003 where it was trading at less than 65 cents US.
    • I think it's because there was a fad for awhile for directors of TV and movies to film in Canada
      Was a fad? Buddy, I've got news for you... there have been no fewer than three American movies filmed in my own neighbourhood (Canadian city), couple blocks away from my house. This place is cheap for the industry, they love filming movies in Canada.
    • It'll balance itself out.

      Yeah, and when it does, they move on to greener, leaner, poorer (or richer, depending on your perspective) pastures. Like a farmer rotating his crops. Many people would call this exploitation, unless you're one of the gaunt-faced people finally finding employment. Others just call it the reality of a free market.

      I'm sure there's a Ferengi law covering this. (And I'm sure somebody here might just tell me which one...)

  • by typobox43 (677545) <typobox43@gmail.com> on Thursday October 28, 2004 @12:17AM (#10650198) Homepage
    Did they follow proper disclosure procedures and report the backdoor to the Canadian government before submitting it to Slashdot?
  • splendid (Score:5, Insightful)

    by BungoMan85 (681447) on Thursday October 28, 2004 @12:18AM (#10650205) Homepage
    Why doesn't anyone ever talk about all the jobs being insourced [contracostatimes.com]? The real "Benedict Arnold" companies are those that move their headquarters overseas -- in the form of a rented office in Bermuda -- to avoid paying US taxes, not US-based companies with manufacturing centers in other countries. Those are the real tax cheats.
    • Yea, sad thing is if they couldnt take their HQ elsewhere, the taxes are so high here they would just move EVERYTHING. SO be glad they can do this otherwise Wall Street would flatline their stock.

      Taxes have to pay for that deficit ya know.
    • The reason that US companies move their headquarters is that the US is one of the only countries in the world to double tax corporations - we make them pay US corporate income tax on income earned both in the US and abroad. Therefore, they end up paying taxes to both the US and foreign countries on foreign earned income. Other countries only tax corporations on income earned in their country.
  • by phorm (591458) on Thursday October 28, 2004 @12:18AM (#10650206) Journal
    What tax loophole is this exactly? I know that the companies avoid certain expenses just due to lower wages offshore, but taxes too?

    If there is a loophole, closing it would mean more revenues for the government (plus for them) and/or less outsources (plus for us)
    • by LardBrattish (703549) on Thursday October 28, 2004 @12:33AM (#10650332) Homepage
      I think what we might be dealing with is fallout from the Free Trade Agreement with Canada whereby the Indian company sets up an office in Canada which then negotiates with the American company as a Canadian firm with all of the FTA related breaks but the work is actually carried out in India.

      I'm sure the Canadians view this as pretty ironic given that a similar trick was used by the Americans to destroy the Canadian car industry vis using the two FTAs with Canada & Mexico to sell Mexican built cars to the Canadians as if they were American for the purposes of tarriffs.

      And John Howard has just signed Australia up for an FTA with America - smart move John, we'll be thanking you for that one for the next 50 years. The only hope Australia's got IMHO is to sign a FTA with China & threaten America with mutually assured destruction if they try to play fast & loose with the terms of the contract. Note - first ever correct usage of the word "loose" in the history of slashdot
    • What tax loophole is this exactly? I know that the companies avoid certain expenses just due to lower wages offshore, but taxes too?


      Lower wages equates directly into lower taxes. You may not have noticed but the government taxes your wages. The less an employer pays for an employee the less taxes the government gets. Not to mention the secondary issues, such as the fact that overseas workers won't be paying US sales tax on bought goods.

    • by Quikah (14419)
      Money which a corporation makes overseas is not taxed if it is kept overseas. They basically say they are investing the overseas profits overseas. Without the loophole the company would need to pay the US tax rate on the money less any local taxes paid.

      A WSJ journal article about this is posted here [interesting-people.org].
    • by Peyna (14792)
      Basically moving subsidaries and what not to places like the Cayman islands or Bermuda and avoiding paying taxes on the profits.

      decent article [theroyalgazette.com] on the subject.

      It's not about outsourcing jobs so much as tax sheltering.
    • by pavon (30274) on Thursday October 28, 2004 @01:02AM (#10650542)
      Basically, the current tax laws for American companies operating overseas is a mess, and does have loopholes. The way I understand it,

      * Companies do not have to pay US taxes on foriegn operations, until (unless) they bring it back to the US.

      * If you pay taxes in another country and the US you can get deductions on your US taxes to account for this double taxation.

      These two individually are not that bad, but thanks to the complexity of the tax code and fancy book-work a company can take advantage of both simultaneously. Ie they pay taxes only in the foreign country on their foreign operations, but at the same time, they get deductions in their US taxes, even though there is no double taxation. So essentially the US tax payer is paying part of their foreign taxes for them. This is what Kerry means when he says he want to close loop holes that force you to subsidize the outsourcing that is taking your job.

      He plans to simplify the tax code, which as you said would bring in some revenue, and use that to decrease the overall corporate tax rate. It would also illiminate the relative penalty on bringing money back into the country, verses keeping it (and thus investing it) abroad. I can't find the document I read that explained this plan well - both the bullet point, and detail plans currently on the John Kerry site are fairly vague.
  • by Kenshin (43036) <kenshinNO@SPAMlunarworks.ca> on Thursday October 28, 2004 @12:20AM (#10650224) Homepage
    Candidate John Kerry has said he will close the tax loophole that makes it advantageous to outsource call centers.

    Good thing there's only Call Centres in Canada, then. (Spelling loophole?)
  • by Ars-Fartsica (166957) on Thursday October 28, 2004 @12:21AM (#10650237)
    The US has two free trade agreements with Canada, so get used to finding out what agreements Canada has with other nations..they will quickly become agreements with the US by transitivity.

    Also please remember that the US has spent the last twenty five years literally ramming free trade down the world's collective throat (admittedly, an effort made on behalf of the financial elite, not workers).

    • by Brandybuck (704397) on Thursday October 28, 2004 @01:24AM (#10650669) Homepage Journal
      Except for the fact that what politicians call "free trade" isn't free at all. These are micromanaged trade agreements running hundreds or thousands of pages long.

      Like "deregulation" and "privatize", the term has been twisted by the politicians to prevent the public from ever wanting it. It's orwellian language redefining in action.
    • The article only explains half the story. This is actually worse, and I had been expecting it for somtimes.

      This is how Canada is a backdoor to the US:
      You'd think that because Canadians are cheaper (slightly) that they are using Canadians to do Americans jobs.

      Having lived there, I can say that nope, this isn't how it works at all, its worse than that!

      Here is what they are doing: (basically, they are moving the Indians to Canada, to outsource them on US projects, because it is easier to get an Indian to Ca
      • maybe we are just expecting to be over paid. Why would Indians in canada get paid less than Canadians? They both have to pay the same for their stuff. Just because you arn't willing to work that cheap doesn't mean someone else shouldn't be able to.
        Personaly, I like having cheap tech support workers because even if they don't know much more, they are still better than talking to a computer. And, they can pass me up to somone who doesn't need a script if the script won't solve my problem.
        Not to mention th
      • Canada has a very lax foreigner friendly and immigration policy. Especially if companies go waving around money about 'investing in Canada', the Canadian govt. will buy into it, because they (think) that this will create Canadian jobs rather than destroy them.

        What are you smoking? Yes, Canada is friendlier and the way to get a Work Permit is a lot easier than doing this in the US, but "easier" doesn't mean they just roll over.

        I am currently sitting here for almost 2 months waiting for my new Work Permit

  • Exchange rates (Score:2, Interesting)

    by Colin Smith (2679)
    Far more important. The dollar is weakening, Americans are getting cheaper.

    HTH

    Not that I think Bush has a clue what he's doing. A one trick pony who isn't even very good at that trick.

  • but you can always move there and outsource them http://www.kaminternational.com/main.asp [kaminternational.com]
  • Why not close all business loopholes and perhaps create a flat business income tax? This way there's no weaseling out of it somehow. Wouldn't this increase tax revenue? Perhaps only on businesses making over a certain amount, since small businesses could be hurt.
  • IT industry is following in the footsteps of the Auto industry.

    It started with outsourcing of Auto manufacturing jobs to Japan because they could build better cars cheaper. All that remained in the U.S. were few design jobs. This led to a decrease in in the number of auto jobs in the U.S. and a downward pressure on auto job salaries.

    However, soon the manufacturing costs in Japan rose and they found they could serve their customer better and make their cars cheaper if they opened auto plants closer to th

    • However, soon the manufacturing costs in Japan rose and they found they could serve their customer better and make their cars cheaper if they opened auto plants closer to the customer.

      The result is that majority of Toyotas sold in the U.S. today are built right here by workers who get paid lower than before.

      Same thing might happen in the IT industry.


      Doubt it...

      It cost time and $$$ to ship raw materials to Japan and it cost more time and $$$ to ship the finished product back. Thus it makes perf
  • by brandonp (126)
    I really fail to see any real solution to this issue being presented. Tax loopholes won't erase the fact that there are qualified workers in a cheaper business environments. All the tax loophole becomes is a Red Herring for the real issue. Let's come up with serious and real solutions to this. A. India has very qualified workers B. They are very will to work and will work for a lower wage C. The end result usually comes out to be similiar to what would be done in the U.S. I'm not sure what could be
  • give me a break (Score:5, Insightful)

    by asv108 (141455) <{alex} {at} {phataudio.org}> on Thursday October 28, 2004 @12:38AM (#10650368) Homepage Journal
    "Candidate John Kerry has said he will close the tax loophole that makes it advantageous to outsource call centers."

    First off I'm voting for Kerry, but the idea that new legislation is going curb the tax advantages of outsourcing is ludicrous. So lets say Kerry does pass such a bill, what will happen? Large companies will simple open up offshore subsiaries to skirt the law, similiar to what Haliburton did under the leadership of Dick Cheney, by having a Caymen islands phantom corporation in order to business with nations like Iran.

  • by stilbon (69689) on Thursday October 28, 2004 @12:40AM (#10650389)

    from an old episode of This Hour Has 22 Minutes

    An Apology to Americans
    By Reporter 'Anthony St. George' (Performed by Colin Mochrie)

    Hello. I'm Anthony St. George on location here in Washington.

    On behalf of Canadians everywhere I'd like to offer an apology to the United States of America. We haven't been getting along very well recently and for that, I am truly sorry. I'm sorry we called George Bush a moron. He is a moron, but it wasn't nice of us to point it out. If it's any consolation, the fact that he's a moron shouldn't reflect poorly on the people of America. After all, it's not like you actually elected him.

    I'm sorry about our softwood lumber. Just because we have more trees than you, doesn't give us the right to sell you lumber that's cheaper and better than your own. It would be like if, well, say you had ten times the television audeince we did and you flood our market with great shows, cheaper than we could produce. I know you'd never do that.

    I'm sorry we beat you in Olympic hockey. In our defence I guess our excuse would be that our team was much, much, much, much better than yours. As word of apology, please accept all of our NHL teams which, one by one, are going out of business and moving to your fine country.

    I'm sorry about our waffling on Iraq. I mean, when you're going up against a crazed dictator, you want to have your friends by your side. I realize it took more than two years before you guys pitched in against Hitler, but that was different. Everyone knew he had weapons.

    I'm sorry we burnt down your White House during the War of 1812. I see you've rebuilt it! It's very nice.

    I'm sorry for Alan Thicke, Shania Twain, Celine Dion, Loverboy, that song from Seriff that ends with a really high-pitched long note. Your beer. I know we had nothing to do with your beer, but we feel your pain.

    And finally on behalf of all Canadians, I'm sorry that we're constantly apologizing for things in a passive-aggressive way which is really a thinly veiled criticism. I sincerely hope that you're not upset over this. Because we've seen what you do to countries you get upset with.

    For 22 minutes, I'm Anthony St. George, and I'm sorry.

  • by Bigbutt (65939)
    It won't last. As someone else pointed out. Hollywood used Canada for a while until the locals wised up and prices went up.

    The difference is that Canada has a significantly better quality of life than the average Indian. So the Indian company can pay an Indian call center employee 8,000 a year, he'd still have to pay a Canadian call centre employee 30,000 or 40,000 a year. This is vs a call center employee here making 40,000 to 50,000 a year. (All WAG's, recent tech support position advertised on dice.com
  • Pot Kettle situation (Score:5, Interesting)

    by niall2 (192734) on Thursday October 28, 2004 @01:00AM (#10650527) Homepage
    If I hadn't been through all of this election I probably wouldn't have believed my eyes. This report [tommcmahon.net] from last February from people in Wisconson finding Caller ID signatures from Canada for the Kerry Election Call Center? Makes you wonder if there will be political loopholes in any laws similar to those for the National No Call list.

  • Sad how ... (Score:4, Insightful)

    by mi (197448) <slashdot-2012@virtual-estates.net> on Thursday October 28, 2004 @01:25AM (#10650675) Homepage
    the supposedly liberal crowd, that would often complain about the rich countries not giving enough aid to the poor ones, quickly rushes to highly illiberal views depriving the poor of ways to build honest wealth through honest work.
  • *sigh* (Score:3, Insightful)

    by EmagGeek (574360) <gterich@ao[ ]om ['l.c' in gap]> on Thursday October 28, 2004 @07:53AM (#10651986) Journal
    Ok, first of all, it is not this phantom tax loophole that makes offshoring attractive - and it's not as if this tax "loophole" even exists. It is not a loophole at all. What makes it advantageous for taxes is that the US cannot collect income tax from people who don't live and work in the US. Duh! That's not a loophole, it's just the law. We will never be able to close this loophole because we cannot collect income tax from foreign citizens working in a foreign country.

    Moving on. The factor that really makes offshoring attractive is that, for a call center as an example, the labor and utility costs are so much less. An American might demand $12/hr to work at a call center, which is expensive for someone who just reads a script over the phone all day. On top of that, the company has to pay for real-estate (which is ridiculous in this country right now), insurance (which is also ridiculous thanks to frivolous lawsuits), payroll taxes (FICA, Medicare) which are high because of government fat, high utilities due to high cost of energy in general, and a host of other factors that makes low-income jobs difficult to maintain in the US.

    What makes these things cheaper in a place like India? Well, first of all, a dollar in America goes a long way in India because of the exchange rate and the differentiated standard of living. Something that costs $10 to buy here costs $1 in India, including labor. Second, India itself has a hugely growing economy and infrastructure, and for American businesses to participate in building that growing nation, they have to have a presence there anyway. India has a very nationalist government and they won't allow foreign companies to simply walk in and take money out of the country. India needs call centers for India, too, and those call centers by Indian law must be located in India. Also, Indian law also requires things that are sold in India to have some % of Indian-manufactured content. So, for infrastructure companies to sell their goods, they have to have a presence there as well.

    India's nationalist policies are working well for them because they are a growing nation. There is so much stuff to be done and sold there that it is worthwhile for companies to locate jobs there. Nationalist policies often work for rapidly growing countries because it keeps money in the country. However, once that nation is mature, those companies and the jobs they brought will leave just as quickly as they came. This is why nationalism does not work in a world where it is easy to move resources around, or in a matured nation that is in a state of continuation rather than development.

    This is also why nationalist policies will not solve our outsourcing "problem." There really is no solution because we cannot control what is going on in other nations. The best we can do is do what we've always done - persevere. I've been fortunate enough to keep my job even though I can definitely see my job going to India in the next 24-36 months. I will have to get another one, which is why I am training for it now and not later.

    This really is a sink or swim situation, and the choice lies with each individual. One cannot be dead-set on a specific job at a minimum rate of compensation. If you are flexible, willing to learn a new profession, and willing to relocate, you will be able to find employment. The jobs are out there. The unemployment rate has been falling steadily since the post-9/11 peak, and is lower now than it was for the first 4 years of Clinton's presidency. Historically, the unemployment rate has fallen in between 5 and 7%, which occasional excursions outside that range both above and below. Right now it is 5.4%.

    What we're seeing is a shift away from technology jobs because that period of growth is over. The explosion of the Internet is what gave us the first period of prosperity, and now we're in a period of continuation. Time to find something else to do.
    • by bstarrfield (761726) on Thursday October 28, 2004 @10:02AM (#10652957)

      It is a sink or swim situation. However, when the ship suddenly plunges, it's difficult to avoid being sucked in. Your wages, your job, are dependant not just on your abilities and efforts, bu the state of the entire (in this case) American economy. Being a good mechanical engineer on the Titanic probably didn't help so much when the ship hit the iceberg.

      As many people have said on Slashdot, and on more academic boards, the entire point of outsourcing is to lower labor costs. That's it. Nothing else. Nothing more. A capitalist system exists primarily to generate a return to those who own the capital. Cutting labor costs increases the capitalists returns. No, I'm not speaking from any Marxist point of view here. Read Adam Smith.

      India's policies work do to the low pay of their workers. Nothing more. Not a policy choice, but a cheap labor force due to a massive and desparate population. So, do you really think American workers can compete against about two billion Indian and Chinese workers? The only way we can do that is to have our own wages plunge to a level that would be difficult for most American's to imagine.

      As wages fall for workers facing international competition, wages fall in other fields. Think of this: if the automobile factory closes the next town over, business probably won't be that good. When we combine outsourcing with a taxation system that encourages the concentration of wealth, we can foresee serious structural problems in the American economy. I've tried to think of a simple way to explain this - maybe the greatest evidence is the fact that American real wages have been flat for thirty years, despite incredible increases in productivity.

      Jobs are out there - but job quality, measured in wages and in hours, is falling. If your job is outsourced, its unlikely - and against economic theory - that you'll be able to find an equivalent job in the same field and roughly the same locale for the same wage. And as the Democrat's have been happily pointing out, the new jobs being created pay far lower than the ones lost.

      Other employers understand outsourcing, and they'll be happy to give you a lower offer. Of course, your bank doesn't care about outsourcing and your mortgage stays the same. So does your health insurance, children's tuition, etc. So your in serious trouble.

      I have a question for all of our fun Libertarian economists on /. If immigration to the US averages about 200,000 per month, and the Administration claims that 1.7 million jobs were created in the last four years, how many new jobs were available for the native population? Guys, unemployment statistics are easily manipulated. I'd recommend you visit the Bureau of Labor Statistics site and, well, read between the lines. Alos, please consider that unemployment statistics only count those who are receiving unemployment benefits. Once you've exhausted your six months, you're no longer unemployed, you become a "discouraged worker." Off the roles, out of thought. Same thing occurs if you take a low wage job - say go from being a chip designer to a chif fryer. Still counts as a job.

      I have to say this: The government of the United States exists to protect the welfare of the American people, not to protect the welfare of the wealthiest American's bank accounts. And the two are not one and the same.

  • Tax loophole? (Score:3, Insightful)

    by Richthofen80 (412488) on Thursday October 28, 2004 @01:19PM (#10655412) Homepage
    Candidate John Kerry has said he will close the tax loophole that makes it advantageous to outsource call centers.

    So Kerry is going to close that pesky tax loophole that allows indian and other workers to get paid a fraction of what US workers make?

    The reason outsourcing is profitable is because workers are willing to work for a lower wage outside the U.S. That's not a tax loophole.

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