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Outsourcing = End of good life in West? June 4, 2010

Posted by John M McKee in "John M McKee", business and career coaching, business intelligence, business strategy, Business Success Coach, Coaching, Tech Republic, Tempur-Pedic, The Four Windows Process, women in management.

Worried that outsourcing will ultimately reduce our standard of living and put all the good years behind us?  In this blog, author and executive leadership coach John M McKee discusses the prospect. Then he provides an opportunity to ensure it doesn’t happen.


I recently fired-up a subscriber of my Online Leadership Program. Based in Australia, he is in the final stages of a PhD thesis in Leadership & a senior executive. He clearly thought my advice on outsourcing was off-the- mark.

He wrote: “Yes I agree that lot of organisations are moving off-shore, your sea change. An interesting anecdote that goes along with this is the Sydney (New South Wales – Australia) law firm decided that they could move all but a few of their secretarial serviced to the Philippines and terminated their Australian staff. May be good for the firm but sux for Australia’s unemployment …

..consider the strategy of off-shoring customer service concepts. ..as we (OECD) countries go down this path and wages increase, workers will eventually become Unionized and the standard and cost of living goes up in the target country at the detrimental cost of the recipient country. So the target country’s standard of living improves to be equal to that of OECD and the source countries standard of living goes down. When the playing field is equal, where do you go then to reduce your costs? It probably won’t affect you, I may suggest you will be retires and living well and all the secretaries are living on the bread line as poor pensioners because in Australia 9% of wages is put into superannuation for retirement.

Sure CEOs today can generate additional benefits at the cost of their people, but what about the cost to the country’s economy today and into the future with an aging population. Profits are generated by costs, and CEOs are drive by profits.

He makes a good observation, however it presumes that we in the Western Nations continue to do nothing beyond what’s going on today.

I think that’s unlikely.

The trend he described, in which the source country has a reduced standard of living while the target country witnesses an increase; is one that is growing quickly.  It may be inevitable if not recognized and dealt with by governments, academic facilities, and business people.

For the next generation and those who are affected by outsourcing, the best opportunity is to move into an arena that cannot be “replaced” by cheaper labor elsewhere OR by a computer.

That creates a new wave of the so-called “creative class” in the West.  If more are educated or re -trained to create (and that creation could come by computer, or otherwise) we can continue to lead and grow the other countries successfully.

When asked by parents what should they do for their kids education, this is what I tell them.  And I finish my advice by saying that, otherwise the West will be left in the dust by countries that have cheaper human costs and newer tech environments such as India, China, or Brazil.



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