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07/08/2007

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sxk

Agreed. Removing labor limits will establish an inevitable equilibrium between jobs here and those that are outsourced. This will reduce the risk of flight of jobs to low-wage countries purely out of cost considerations.

PS- I don't see Dr.Becker's post yet.

Lawrence Indyk, University of Kansas School of Law

To mitigate the concentrated effects of outsourcing on certain layed-off employees the U.S. government has grant and retraining programs to ease the transition on those who would be most effected. These programs might be moderately effective in the case they were designed for - that is, low-skill, low-pay, factory labor, where learning another trade would not require a long time and a small subsidy may adequately compensate for small wages.

But the case of high-skill, high-pay professionals is different for each factor. Perhaps unemployment insurance is the only adequate program for these workers.

jimbino

Posner says,

"If Microsoft purchases software from an Indian company, the effect on American jobs is no different than if it hires Indian software engineers to work for Microsoft … in the United States."

I heartily disagree. If all of IBM were outsourced to India, we would indeed effectively be outsourcing American jobs, but they would be jobs of CEO, engineer, secretary and janitor—a broad spectrum of jobs, not even considering the broader spectrum of jobs that include the nurses, cooks and clerks to service all those employees. However, when we allow H1-B visa holders to compete specifically with American hi-tech workers, we are effectively targeting the hi-tech worker for reduced wages or job loss, while at the same time improving job prospects for every other worker in the country. I don’t know about you, but targeting me for attrition calls for me to think about practicing some hi-tech attrition of my own.

Don’t they ever let economists get out and walk around some?

Nelson

However, when we allow H1-B visa holders to compete specifically with American hi-tech workers, we are effectively targeting the hi-tech worker for reduced wages or job lossHi-tech work can be done anywhere in the world. It's not a matter of "allowing it" unless you're talking about genocide against foreign hi-tech workers, which I hope you're not. By keeping hi-tech workers out we're effectively saying "go do it somewhere else." It would be much better to do the work here and receive the benefits of consumption, taxes and learning from each other that residency offers us.

Chris

Judge Posner,
I agree with you that the view of those who support freer trade but not more open immigration policies is illogical, but I cannot help disagreeing with the idea that “the effect is the same”. When the United States enacts policies which create a double standard in which we allow the relatively free trade of goods and services (NAFTA, CAFTA, etc.), but not free immigration we invariably lose some production—that is the recognized cost of business when markets liberalize. Failing to take advantage of the human capital available to us by keeping out well-qualified workers, however, exacerbates this problem in a way that the opposite combination (open immigration and more protected trade) does not.
By paying the cost of liberalization, but denying ourselves the rewards in the form of the skilled labor from other nations, we actually incentivize outsourcing high-skill jobs to foreign countries. As companies face more difficulty finding high-skill workers in the United States, the cheaper labor available in foreign countries (which we refused to let in) provides a compelling alternative. Critically, when the companies hire foreign workers in foreign countries the supply of money domestically held decreases, slowing the economy. If we hire a worker from a foreign country to work in the United States, however, a more substantial portion of their income remains in the United States (even if they send all disposable income home, they still need food and shelter).
Consider the mirror of that scenario—a more protected economy with open immigration which, while still not optimal, can pull human capital from foreign nations in with the promise of higher pay (which the United States could still offer, even in a more protected economy). This creates more competition in the job market and forces some innovation on the part of these workers. While still less than optimal, even this type of policy is preferable to our current system.

jimbino

Nelson is total wrong, of course, in his sNelson is total wrong, of course, in his assertion that hi-tech work can be done “anywhere in the world.” Anywhere in some other world, perhaps, but not in our world where the wage-multipliers like investment in capital and research are chiefly in the United States. And does he imagine that Google can just move its servers to India? And I’d like to see an embedded software engineer in India test his software on a prototype located in Cedar Rapids.

Sure, we could imagine a world in which Cedar Rapids were in India (not a bad idea), but lots of hi-tech work can nowadays be done only in the USSA. Indeed, if I could do my work in other countries, I'd be out of Amerika in a flash!

Watches

Yes microsoft is moving it's R&D dept to Canada because of issues in the USA i think that for R&D the main flow should be toward innovation and not language!

Robin 'Roblimo' Miller

I just got some quotes from friends of friends in Delhi and Bangalore for some Web coding and design work, and their bids were just barely competitive with local designers and coders here in Bradenton, Florida.

India is no longer cheap. Other countries may be, but I need to save at least 50% off *small-town* U.S. labor costs to make the inconvenience of offshoring my work worthwhile.

My end solution = more automated Web site production, with better software tools, done locally.

I'm a small-timer, not an IBM or Microsoft that can afford to spend millions on experiments that might or might not work. When I spend a dime, I need to get back 11 cents (or more, hopefully a LOT more) or I go broke. :)

Edward

"Americans who are opposed to free trade don't mind as much when Americans buy from foreigners as when they hire them, though the effect is the same."

I'm not sure who you could be referring to here. I think most people who oppose free trade understand this simple calculation. The proof would be that companies like Walmart, who buy practically all of their products overseas, are more vigorously opposed than Microsoft.

Anonymous

"Americans who are opposed to free trade don't mind as much when Americans buy from foreigners as when they hire them, though the effect is the same."

I'm not sure who you could be referring to here. I think most people who oppose free trade understand this simple calculation. The proof would be that companies like Walmart, who buy practically all of their products overseas, are more vigorously opposed than Microsoft.

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