Outsourcing and Urban Myth

Kudos to New York Times columnist David Leonhardt and his column today on the outsourcing of radiologists to India, “Political Clout in the Age of Outsourcing.”

Radiologist, accountants and other white collar workers are being worked into a frenzy of fear around outsourcing by politicians and the media.  Xenophobia and job loss makes great TV and Lou Dobbs of CNN has made a career from creating fear about outsourcing.  Leonhard talks reality.

Leonhardt writes about an investigation performed by MIT Economist  Frank Levy noting that,  "they were able to find exactly one company in India that was reading images from American patients. It employs three radiologists. There may be other such radiologists scattered around India, but Mr. Levy says, "I think 20 is an overestimate." "

My own opinion of white collar outsourcing is as follows:

1. Outsourcing  (aka offshoring) is a reality and can be a positive economic outcome of the global economy.

2. It helps developing countries by reducing brain drain and keeping educated high income workers local.  This is very important in creating a dynamic economy.  Imagine if all the Indian radiologists continued to move to the US, what does that do for everyone left behind in India?

3. It is a side effect of the zero marginal cost communication technology revolution that created the internet, revolutionized stock trading, and brought the whole world closer.  Outsourcing cannot be avoided - trying to do otherwise is just a waste of time and energy.

4. The simple fact is that global wages and prices will have to level out across the world.  Sadly, US and European workers are overpaid relative to the rest of the world.  If the US wants to do right by its citizens it should invest heavily in things that will make US workers more valuable.  Things like education and level the playing field for our employers by streamlining the tax system and implementing a national healthcare system that gets our manufacturers and service employers out of the healthcare business.  The US is the only developed country in the world without a national healthcare system.  This is a huge drag on employment.