Outsourcing an "Inevitable Aspect" of Capitalism But Has Limits, Prof. Kerry Pannell Tells NPR Affiliate

May 20, 2005

kerry pannell.gif May 20, 2005, Greencastle, Ind. - [Download Audio: "Outsourcing's Inevitability" - 239kb] "This is an inevitable aspect of the capitalist economy we live in, and we're not going back from globalization," Kerry Pannell, associate professor of economics and management at DePauw University, said on Bloomington, Indiana National Public Radio affiliate WFIU this afternoon. Dr. Pannell spent the hour-long program discussing the "outsourcing" of American jobs. "We have to deal with it in ways that reduce the volatility for workers; the risk for workers right now is quite high."

Pannell told host Will Murphy that financially-troubled firms are finding enormous cost savings in sending jobs -- from manufacturing to call center operators -- to other countries where wages are a fraction of what American workers earn. [Download Audio: "Vulnerable Workers" - 194kb] "In the past, workers have been very vulnerable to entire industries perhaps leaving, or companies going under. But this is a situation where the company is going to come out of bankruptcy, but there's going to be a lot of pain on the employees. So, the government has to step up and help up," by providing assistance -- including continuing education and job re-training -- to workers displaced by outsourcing. "The government has always been a stabilizing force, and I think it can be in this case as well," she added.

Professor Pannell was joined on the program by Kenneth Dau-Schmidt, professor of labor and employment law at the Indiana University School of Law in Bloomington. She described how McDonald's is testing a concept in which it outsources its drive-through attendants to an order center in a state where wages are lower ( [Download Audio: "Technology-Enabled Savings" - 580kb]).

But, Students Walking.jpg the DePauw economist believes, [Download Audio: "Limits of Outsourcing" - 603kb] "There are limits to how much outsourcing is going to continue." Although one analysis estimated three million American jobs could be lost to the phenomenon over the next ten years, "I think that's on the very high side of things, because there are organizational limits to shifting jobs to India. For example, some companies just aren't going to be big enough to take advantage of moving all of their business processing to India; it's just not gonna be worth it to be halfway around the world. Communication technology is good, but you still sometimes want face-to-face contact with people. Dell [Computer] has actually brought back some of its outsourcing back to the United States because small business owners were interested in having more face-to-face contact. They didn't want to deal with somebody in call center in Bangalore."