Tuesday, June 25, 2013

Outsourcing: 'Savings' Don’t Tell the Whole Story

Politicians have justified awarding contracts to overseas companies based on numerous savings they claim it will produce. That does not take into account the wages lost by workers who otherwise would have been employed on the project. It does not take into account the taxes those workers would have paid — from state and city income tax to Social Security and unemployment taxes. 

It does not take into account the multiplier effect, all the related benefits derived across the economy from the daily purchases made by people with jobs. It does not count all the state and local taxes that employed workers pay for schools and highways.

Nor does it take into account all the tax revenue that New York State and City government will have to expend for unemployment, health care and other costs run up by people who have no jobs.

In short, what may look like a "savings" is anything but.
  • If people don't have jobs, they don't make money.
  • If people don't make money, they don't buy things.
  • If people don't buy things, there is less demand.
  • If there is less demand, then companies don't produce goods.
  • If companies don't produce goods, they don't need employees. 
  • If people don't have jobs, they don't make money... 
What is clear is that New York is losing exceptional opportunities to create good-paying jobs at home during a time of high domestic unemployment.

With millions of Americans unemployed, underemployed, working part time because they cannot find a full-time job, or so discouraged they gave up looking for a job; when millions are out of work for the longest period in our history; when millions are in the process of losing their homes because they were unable to keep up with mortgage payments after corporations eliminated their jobs or they were forced to absorb runaway medical bills; New York is providing work for a foreign construction companies -- and shipping more our tax dollars overseas.

Peter Coyne
President, ElectricWeb Communications