Tuesday, December 28, 2010

Outsourcing Goes Viral

In December 2010 the Hewlett-Packard Company decided to go the way of their competitors International Business Machines Corp., Accenture PLC and Dell Inc.
They will be opening call centers in India. Of course this means closing call centers in the United States and ultimately firing U.S. workers.
So, what do you expect?

There are four mitigating factors:
1.      Taxes on these companies are outrageous.
2.      Customers do not really care as long as they get the lowest price. (They say they do, but they don’t)
3.      Tax friendly policies in India
4.      Cheap labor pool in India

These factors make it difficult for even the most conservative companies to choose to stay in the U.S.
As taxes on the super rich (multi-billion dollar club) climb even more companies will leave. When it becomes cheaper to ship a product from India or China than to make that product in the U.S., the choice becomes very clear although not easy to stomach.
Unfortunately, these folks think of the bottom line first.
There is no legislation that can keep this from happening. The only way to stop it is to make it palatable for these companies to make the choice to stay in the USA.
Tax policy is a big deal. I know a lot of my friends think that we should raise taxes on the super wealthy, and I understand the sentiment completely. The problem is that as we do that more and more companies will outsource. Down the road, it will not be outsourcing, but flat out leaving.
What do you think?
P. V. Street 

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An American Democrat