Back in October 2009, I wrote a Spend Matters post about bringing off-shored call center and transactional jobs back to the U.S. ("OURSHORE"). Having held various supply chain management roles for over 30 years, I understand the importance and competitive value of the global supply chain, but I strongly disagree that this type of global strategy should include call-center and transactional jobs, which can be executed as efficiently here as anywhere else. Research shows that up to 1 million such jobs have been off-shored to countries with low-cost labor pools, with the majority relocated to India. If the average annual wage for these jobs is $20,000, the cumulative loss to the American economy is now approximately $20 billion per year! If the average effective federal tax rate for these salaries is 15 percent, then $3 billion was lost from federal taxes, and another $1.5 billion from state and local taxes.
I think everyone would agree that the cycle of work, pay, and spend creates real and lasting economic stimulus. When you add the important (yet often overlooked) fact that a significant amount of personal income flows back into local communities, you start to realize how decisions to off-shore jobs have had a devastating effect on our economy. When you combine this with the resulting increases in necessary entitlements to the unemployed and under-employed in the U.S., it becomes difficult to understand why these decisions were made. With the current alarming level of unemployment in our country, it’s certainly becoming very easy to see why those decisions should not have been made.
Something we often don’t do well is to look at the effects of improving just a part of the whole. I was very fortunate to have enjoyed a 10-year association with Dr. Russell Ackoff, who passed away recently at the age of 90. The father of Systems Thinking, Russ was one of the truly great thinkers of the 20th and early 21st centuries. He was very generous with both his mind and his time, and he spent a fair bit of time helping me to understand the value of improving the system as a whole as opposed to improving just parts of the system, of synthesis over analysis.
By off-shoring jobs to low-cost countries, corporations thought they would improve their cost structure. I question whether any corporations that have off-shored call center or transactional types of jobs created any real competitive advantage or improved shareholder value. I have a few anecdotal examples that demonstrate that there was no real impact, and that some companies are actually worse off than they were before. As usual, Russ was right. Many times I heard him say, “If you improve the performance of a part in isolation, often times there is a decrease in performance of the total system.” There may have been some short-term gain for a function within a company due to the off-shoring of jobs, but the overall corporation didn’t improve, and the broader U.S. economic system was hurt.
In my last blog on this subject, I talked about my good friend, advisor, and business associate, Curtis Wynn, President and CEO of Roanoke Electric Co-Op. He and I recently have been very busy working on driving the return of off-shored call center and transactional jobs back to the U.S. We have launched a project called “OURSHORE Starts Here,” and are diligently working toward creating an incubator site in northeastern North Carolina.
To this end, we are pursuing as Executive Sponsors two well-known senior business executives, longtime residents of North Carolina who are associated with the Pharmaceutical Industry; we are working with the Economic Development Directors of two North Carolina counties who support our efforts; in February we will meet with a popular North Carolina Congressman to request his assistance; and finally, we are in discussions with a major call center developer who would help turn our proposal into reality. Our goal is to create a competitive call center facility as an attractive, cost-effective site to bring jobs back to “OURSHORE.”
If we are successful in North Carolina, this model could be used effectively in hundreds of other locations throughout the country, and could go a long way toward putting hundreds of thousands of Americans back to work. Stay tuned.