Thursday, June 4, 2015

Why We Don't Need to Produce More IT Workers In America

There are lots of highly educated information technology professionals in places like India.  They are able to do much of the work that is done by domestic information technology professionals.  They are also willing to work for much less money than American IT professionals.  This article describes what Disney did to reduce the cost of information technology labor.  Disney replaced much of it IT staff in Florida with professionals from India who received temporary visas which have been made available under the assumption that we have a shortage of IT professionals in America.  The replaced IT professionals at Disney were required to train the less expensive professionals to do their jobs in order to receive their severance allowance.

What happened at Disney is not unique.  American corporations are outsourcing much of their IT work to less expensive countries.  Some of the work is outsourced directly to the subsidiaries of US firms like IBM and Anderson Consulting,  and some of the work is performed by consulting firms in the US who recruit less expensive IT professionals with temporary visas to replace more expensive American professionals.

One can't fault US corporations for taking advantage of lower cost professional labor which is available in India and many other low wage countries.  Their mission is to increase shareholder value and this is more easily done by lowering costs than it is by increasing sales.  The US government could place limits on this practice but that would be inconsistent with the mission of US corporations which is to increase profits and shareholder value. Some economists, like Greg Mankiw from Harvard, argue that placing limits on this practice would interfere with free trade.  Importing labor is not different from the import of other commodities which are freely traded.

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