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A long time ago, I started writing about “Offshoring — the pros and cons from a social and commercial perspective”. I promised then to delve deeper in three subsequent posts, and this is the first of those long-overdue posts:

Off-shoring is not only ethical, it’s a socially responsible and progressive step.

That’s a claim that’s going to get me in hot water! (And even I would place a couple of caveats on that statement.) But, done properly, off-shoring is, at the very least, acceptable. Whereas the patriots chanting “Keep our jobs in Australia” bay for the blood of any executive who considers off-shoring, I put the case that to blindly condemn any off-shoring is primarily selfish, and potentially immoral and inhumane.

Each side of the debate relies upon certain foundational assumptions to validate their case, and these assumptions are rarely consciously explored or questioned. But in this, the second of my series of posts on the topic of offshoring, I seek to turn the spotlight on these assumptions and argue that, to offshore or not to offshore is fundamentally a question of entrenching or rejecting human inequity.

We want to maintain inequality — that’s what fuels our lifestyle.

In the developed world our lifestyles are supported through the vast inequities between our own economies and those of developing countries. It is a fact that China, Philippines, Taiwan and other such developing countries can engage labour for a tiny fraction of our local employment costs, and these vast inequities enabls us to purchase an LCD computer monitor for one fifth of the average weekly wage, or an iPad for about one week’s wage. By contrast, the ‘average’ human being (by which I mean, the majority of the developing world’s population) could not realistically expect to pay for such a luxury in a lifetime. Where can a Chinese citizen source products that are produced by somebody working at a fraction of their own wages?

When we walk into a retail shop and pick up a bargain, we generally don’t protest about the off-shoring of manufacturing — we’ve pleased to reap the benefits of low cost labour, as long as it’s out of sight. But when our local textile manufacturers close factories, or we start to feel fearful about job losses because a telecommunications provider is outsourcing their call centre operations to India or Philippines, we close ranks and start to noisily protest about the ‘injustice’ of offshoring.

In reality, we’re playing a constant juggling act to preserve the inequities between national economies without hurting our own financial well being. We want to have our cake and eat it too.

The fact is, we want the luxuries that come from purchasing cheaply produced commodities overseas, but when this principle starts to send ‘too much’ business overseas and erode local jobs we decry it because we’re feeling some pain.

But what stance would we take if we looked with compassionate eyes at how ‘the other half’ lives?

The reality is that over 3 billion people live on less than US$2.50 per day, and they desperately need economic growth, more jobs, better wages, and so many of the things we take for granted. To redress such inequity will involve some pain and sacrifice. It will require acknowledgement that people outside our own nation are real people too, and should not be intentionally subjugated to our wants and desire.

Having enough money to put a roof over your head and food in your children’s mouths is a basic human right. And it will inevitably involve a net flow of funds from developed economies into developing economies.

It will involve accepting that offshoring is an acceptable and ethical practice (again, see my caveat below) as it boosts developing economies and increases job opportunities.

When economies grow their own population starts to earn and spend more, average wages go up, and progressively the cost differential between our developed labour costs and the developing labour force costs will be reduced. This starts to make our imports more expensive, both in relative and absolute terms, and reduces the number of luxuries consumers can afford to purchase. Essentially it results in a gradual increase in the standard of living in developing countries, and a reduction in our own spending power and, consequently, the extravagance of our own lifestyles.

Eventually, some kind of equilibrium is theoretically reached. An equilibrium where the inequities are diminished, and the average standard of living for billions globally is improved. An equilibrium where developed economies have to tighten their belts a little, and become less consumeristic.

Caveat Emptor

Buyer beware! If you’re a corporate executive, manager, or business owner looking at ways to reduce costs and improve your competitiveness in your own local economy, I believe off-shoring is a valid alternative to consider. But it’s validity stems from the benefits it delivers to developing economies. So it’s important to maximise those benefits for the communities to which you’re off-shoring.

One of the ‘evils’ that many developing countries are guilty of is putting the wealth, control and power in the hands of a very limited number of individuals, whilst continuing to exploit the poorest people within their own country. You will quite rightly come under attack from the public if you get too greedy when you off-shore, and accept such individual profiteering in a bid to get only lowest possible cost base from your off-shore workforce.

I believe that the responsible approach is to take an active role in evaluating the employment practices of your off-shore partners, the contribution such companies make to their own local communities, the occupational health and safety standards maintained, and the overall flow-on of economic benefits to the employees and communities.

Ultimately, downward pressure on our local cost centres is a natural result of inequity, because other countries can deliver a wide range of services far cheaper than we can do it locally. Off-shoring to developing countries serves to assist developing economies and reduce inequity. This is commendable — but be a proactive rather than reluctant part of the solution: ensure that the business opportunities you provide to your off-shore partners are structured in such a way as to maximise the benefits to employees and communities.

Off-shoring is not (or need not be) unethical. But it will be uncomfortable for the public in developed countries.