Friday, June 11, 2004

previous entry | main | next entry | TrackBack (1)

Same network, different worlds

CNN's Chris Isidore provides the most in-depth coverage of the BLS report showing that offshore outsourcing is responsible for a piddling number of lost jobs. Among other things, he has the only story I've seen that actually quotes anyone from the BLS.

Isidore's story provides a lovely contrast with to how fellow CNN employee Lou Dobbs ran with the same information on his show. Let's compare and contrast!

Isidore first:

Only a small portion of jobs lost in the first quarter were due to outsourcing of work overseas, according to a government report Thursday that's already being questioned by critics of the Bush administration.

The Bureau of Labor Statistics (BLS), in its first look at layoffs due to the relocation of work, identified only 4,633 jobs that were lost due to relocation of work overseas during the first quarter.

The jobs lost to overseas relocations were outweighed by 9,985 jobs lost due to relocation of work within the United States.

And both types of relocations made up just a tiny fraction of the mass layoffs that accounted for the loss of 239,361 jobs in the quarter.

The number of jobs lost to overseas relocations equals 2.5 percent of overall layoffs in the quarter, excluding seasonal job losses, while the domestic job relocations accounted for another 5.4 percent....

Josh Livens, an Economic Policy Institute economist, and critic of the Bush administration and corporate outsourcing of work overseas, said he is pleased the BLS has started collecting this survey data. But he's concerned it will be misused to minimize the impact of overseas outsourcing.

"It's interesting for a number of reasons, but it doesn't shed a lot of light on what's happening in the broader job creation and destruction picture," he said.

Read the whole thing -- Isidore does a good job of explaining the caveats to the BLS numbers, as well as giving critics an opportunity to make their points.

Here's how Dobbs treated the same information:

The government for the first time is beginning to track the number of American jobs lost to cheap foreign labor markets. A Department of Labor report released today finding that more than 4,600 American jobs were exported to those cheap foreign labor markets in the first three months of the year.

That report, however, is certainly incomplete. It does not, for example, count every job lost to a foreign worker. Companies that laid off fewer than 50 employees are not even included, and companies that employ fewer than 50 people in total are not included as well in this first government effort.

But it is certainly at least a long-awaited, much-needed beginning.

The government study also confirmed what we've been reporting here for more than a year, that the manufacturing sector has been devastated by the export of American jobs to cheap overseas labor markets. While corporate America increases its reliance on cheap foreign labor, a new report finds that outsourcing simply doesn't pay.

Lisa Sylvester reports from Washington.

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): The survey by the Bureau of Labor Statistics found off-shoring is still in its early stages with less than 3 percent of all job loss due to overseas outsourcing. But the trend is expected to grow.

A survey by "CFO" magazine asked corporate managers who have already sent work overseas whether they will increase off-shoring in the next two years. Sixty-four percent said yes. And white-collar jobs are increasingly in jeopardy.

To be fair, Dobbs and Sylvester did not out-and-out lie in their version of events. They just left out two one minor details: 1) The BLS survey suggests that the percentage of jobs lost due to offshoring was less than 2.5% of the total (sorry, my screw-up -- Sylvester did mention this -- Dobbs didn't); and 2) That cited CFO survey showed that 70% of respondents had no present or future plans to engage in any offshore outsourcing.

We here at salute Lou Dobbs for his unique ability to slant data that flatly contradicts his hypothesis -- as well as CNN's other reportage. Way to go Lou!!

For other treatments of this story, check out Paul Blustein in the Washington Post, as well as the New York Times and Financial Times. The Washington Post also has a nice round-up of other press treatments.

posted by Dan on 06.11.04 at 07:00 AM


You've just had an experience which is common to many. We listen to the news year after year, hearing many strange and fearful stories and wondering whether they are true. Finally one day we hear a news story on a subject where we have direct or personal knowledge - then we know.

posted by: Hunter McDaniel on 06.11.04 at 07:00 AM [permalink]

1) The BLS survey suggests that the percentage of jobs lost due to offshoring was less than 2.5% of the total;

Huh? Sylvester says: "The survey by the Bureau of Labor Statistics found off-shoring is still in its early stages with less than 3 percent of all job loss due to overseas outsourcing."

posted by: Al on 06.11.04 at 07:00 AM [permalink]

Lou Dobbs used to be a pretty reliable Republican. He seems to have done some research into some issues lately and changed his mind on a few things.

As I just said on the other outsourcing thread, I'm all for free trade. I bet Lou Dobbs basically is, too. It's just that when you start looking into some of the details you discover that the "free trade" game is rigged and not all that free after all.

I found this opionion an interesting read:
Lou Dobbs--A Eulogy

On personal experience with outsourcing versus the BLS numbers I can make a small contribution, too. My company employs around 2000 people. We've had many layoffs over the last two years (perhaps 600 people total). But things are picking up again - a hiring freeze was recently lifted, and a project to establish some sort of offshore presence in India is under way. I don't know all the details, but it sounds like they want to just have the offshore operation as a general resource made available to any department that needs some extra programming done.

Then last week my company laid off another 60 people or so, many of them programmers. I bet those don't count as being outsourced, because there is no immediate connection between their jobs going away and the planned offshore operation in India - it's not as if the exact same work they were doing will now be done by someone in India instead. They are just not desperately needed right now, their work will be distributed among other people in their groups, deadlines may be pushed back a little, but not much. But if demand for programming happens to pick up again, we'll just have to send it to India instead.

Note I'm not saying the reporting is fudged or even incorrect - the new operation in India will fall under that category Dan called "jobs created de novo overeas that may have been created in the U.S. instead were it not for the outsourcing phenomenom". But in addition they still seem to correspond to jobs that were lost here.

The real joke, though, is that our new offshore operation in India may never actually do anything useful at all. It is simply not practical or efficient for small groups here to send small batches of work to India when the load becomes higher again. It takes about as much time to manage it as it takes to do it ourselves - we have tried it before, and the results were disastrous.

So what will happen? They will have these programmers sit in India twiddling their thumbs for a while. Then they will decide they have to do something and make up a project for them which otherwise wouldn't have been done (and probably for good reason!).

So what it really comes down to, from my point of view, is that Management is worshipping the offshoring god(dess?) - destroying jobs here and ultimately wasting money at the same time.

By all means, there shouldn't be any laws against such foolishness. There is no way to regulate any of this sensibly. But Dan and you guys who are writing in the abstract here and cheering on the outsourcers, please be aware that you are supporting efforts that in practice often range from nonsensical to counter-productive.

posted by: gw on 06.11.04 at 07:00 AM [permalink]


I agree you have a point.

One thing we should get clear on though is that India is not another United States sitting over there just waiting to take our jobs. It's a completely different culture, one which does not in general encourage taking the initiative. In many ways it is not a threat to our economic future. There are many things we are able to do which Indians simply won't be able to do, in this generation at least.

Much of business is like war: things do not go according to plan, screwups happen left and right, and decisions have to be made on the spot to deal with all this. Americans are good at these things and it simply won't be possible to ship this to India. Indians are in general best suited for taking the drudgery jobs that good American programmers don't want anyway. When I see a lot of Indians involved with new innovative projects on Sourceforge I'll be worried.

My belief is much of this will sort itself out. Of course outsourcing is the fad du jour and the VC's are pushing everyone to have an India plan. But like all of these fads it will eventually be discovered to be vastly overrated and then there will be a period where pessimism swings too low and no one wants to outsource. Eventually the right balance will be found. The jobs that are best done in India will be done in India. The jobs that involve personal contact, quick change of direction, and on-the-spot innovation will be done here.

I think the truth is that the computer itself is more of a threat to our jobs than the Indians can ever be.

posted by: WichitaBoy on 06.11.04 at 07:00 AM [permalink]

WichitaBoy: My belief is much of this will sort itself out.

In the very long run, yes, quite possibly.

But it seems that Management takes an awful long time to learn from past outsourcing disasters.

I think it's quite possible that a few American companies will be run into the ground by failed outsourcing projects. They are becoming less, not more, competitive as a result of their outsourcing. (Note I said "a few" - I'm not suggesting this is a general rule, and there are most certainly some great counter-examples. But I wouldn't want to take a guess which one is the more common outcome - more or less competitiveness.)

And now, can someone tell me why this post is no longer linked from the main page? Surely this wasn't due to my complaint that there were too many outsourcing threads?!

posted by: gw on 06.11.04 at 07:00 AM [permalink]

"While corporate America increases its reliance on cheap foreign labor, a new report finds that outsourcing simply doesn't pay."

I don't understand this line at all. The survey shows that 90% of companies that outsource are saving money, and 64% of them plan to outsource more. How does that demonstrate that outsourcing doesn't pay?

posted by: Xavier on 06.11.04 at 07:00 AM [permalink]

Correct me if I'm wrong on this, but it seems to me that the 2.5% figure on outsourcing is deliberately deceptive if not a flat-out lie.

From reading the background reports (I didn't read the study itself) it seems that the only job losses they attributed to outsourcing were those in which a specific position within a company was eliminated and out-sourced.

However I suspect that what really happens is this: A company previously doing business with a US-based service provider of some sort (say an accounting firm, computer programmer, aircraft repair facility etc., etc.) chooses instead to go overseas to acquire the service that they previously obtained domestically. The US accounting firm, or programming firm, or repair facility then goes bankrupt or lays-off large numbers of employees due to the lost business.

Unless I misread the BLS study, none of these lost jobs would be counted as having been lost to offshore outsourcing.

I guess it's the difference between having your job outsourced overseas DIRECTLY or INDIRECTLY. However if you lose your job because someone in India is now doing it, I'm not sure it really makes a meaningful difference except to the BLS.

posted by: Kent on 06.11.04 at 07:00 AM [permalink]

“But it seems that Management takes an awful long time to learn from past outsourcing disasters.”

Sometimes outsourcing does not work. Why should this be surprising? There are no guarantees that any economic activity whatsoever will be successful. Your confusion is mostly due to limiting the concept to international trade. What about outsourcing between a firm in Oklahoma and one in Texas?

posted by: David Thomson on 06.11.04 at 07:00 AM [permalink]

“I think the truth is that the computer itself is more of a threat to our jobs than the Indians can ever be.”

You are right on target. The increasing computerization of our economy will make us wealthier---and some admittedly will also have to find new employment. The gods of creative destruction exact a cruel price. The same thing happened to those working in the horse and buggy industry when the automobile came onto the scene.

posted by: David Thomson on 06.11.04 at 07:00 AM [permalink]

For years before his departure from CNN due to a management dispute and even when he returned after a change in said management, Lou Dobbs was a paragon of reason and economic orthodoxy. What's changed with Lou is not so much his underlying philosophy but the market he serves. When CNN owned cable news he could expand his company's market base by being the conservative mainstay juxtaposed to the center-left reportage that was the bulk of CNN broadcasts. Now that Fox is dominating the news watching habits of conservative audiences CNN is left to orient its coverage to serve the information needs (and prejudices) of its largely liberal audience. What we need to remember is the Lou above all else is a businessman and he's supplying a product to his target market. When that target market changes, so does Lou.

posted by: Arik on 06.11.04 at 07:00 AM [permalink]

David Thomson: What about outsourcing between a firm in Oklahoma and one in Texas?

Actually, the kind of outsourcing I'm talking about (i.e. programming work) doesn't work well within the US either. But since domestic outsourcing of programming work is usually a lot MORE expensive than doing the work oneself, a company would usually only engage in it when it doesn't have the resources (and can't hire them in time) to do it itself.

There was a lot of this during the dot com boom - start-ups burning through their VC money in the hope of getting first to the finish line. There was a lot of domestic outsourcing happening then, and a lot of failed start-ups went bankrupt as a result.

Arik: Now that Fox is dominating the news watching habits of conservative audiences CNN is left to orient its coverage to serve the information needs (and prejudices) of its largely liberal audience.

That's an interesting hypothesis. I thought that CNN started leaning to the right to compete with Fox News.

posted by: gw on 06.11.04 at 07:00 AM [permalink]

I heard a probably unproveable statistic once that the majority of NPR listeners are actually conservatives. Having that kind of a listening base hasn't dampened their enthusiasm.

posted by: Ann on 06.11.04 at 07:00 AM [permalink]

GW, how could CNN executives lean to the right? What would all their friends say at the cocktail parties? I watch CNN on occasions and I haven't noticed a real change in their treatment of conservatives or conservative ideas. That's fine, they have their audience and so does Fox. After all, if their job isn't to sell advertising, then what is it? God Bless them.

P.S. Heck I've even heard an advertisement for conservative ice cream on Michael Reagan's show. When will this Red/Blue divide end?

posted by: Arik on 06.11.04 at 07:00 AM [permalink]

My daughter had a close call recently when her firm outsourced several software maintenance jobs to India. However, she feels it won't take very long before many of these jobs will be repatriated due to cultural differences.
Lou Dobbs is a very effective communicator; I think he over-played the out-sourcing card--- especially when I noticed that, due to his over-enthusiasm, he lost it a few times while on the air.

posted by: Ken Bond on 06.11.04 at 07:00 AM [permalink]

The numbers you tout are skewed badly.

A good number of IT workers (in many corporations, nearly 2/3 of total IT force is comprised of consultants/contractors). Many of these are independents who subcontract out to a "pimp" firm, er, consultant firm. People don't get "laid off" from those jobs, their contract is completed or terminated.

So I would say you have to multiply the number by a factor of 2 or 3 to get an accurate representation. That is, if you place creedence in

On an personal level, I don't need to look at statistics and flawed surveys – everyday I drive by two facilities that used to employ my services that have sent 5-10K jobs overseas and/or supplanted American workers with temporary visa workers. And within a half hour drive of my house, I can tally nearly 20K programmer jobs gone.

Look no further to college major selections where computer science and engineering degrees are dwindling. They're falling rapidly because youth that have contact with elders that work in the profession have shared the bad news and many have diverted their studies. Is this good for the U.S.A. long term? I don't think so.

posted by: naum on 06.11.04 at 07:00 AM [permalink]

Post a Comment:


Email Address:



Remember your info?