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The Backlash

The only thing that will make the furor over offshoring worse is hiding from it.

Not since the North American Free Trade Agreement debate, when Ross Perot evoked the “giant sucking sound” of U.S. jobs pouring into Mexico, has offshoring attracted so much angry attention. Today, the debate over the decision to outsource jobs to other nations has taken on the tenor of a crusade, pitting corporate “Benedict Arnolds” against the American worker. Companies claim to be impervious to the uproar, which they chalk up to election-year political rhetoric. In an exclusive CFO magazine survey, the majority of CFOs who are currently offshoring say that the backlash against sending U.S. jobs overseas has had no effect on their plans. In fact, they say, negative publicity is at the bottom of their list of offshoring risks.

But the public outcry may be scaring them a bit more than they care to admit. Some companies have delayed signing offshoring contracts. Many more refuse to discuss their offshoring efforts, and have asked their offshoring providers to do the same.

This reticence may fade in time. But whether it evaporates as the economy improves (as 49 percent of our survey respondents expect), ends with the election (as 17 percent say it will), or reflects a long-term change in public attitude (15 percent), the current “duck and cover” response is only making matters worse. And since they clearly have no plans to stop offshoring, CFOs need to do a far better job of making their case.

Companies have been offshoring — loosely defined as relocating U.S. jobs to lower-cost overseas locations — for decades, if not since the beginning of the Industrial Age. This time, however, the jobs they are sending overseas are high-paying, white-collar ones formerly held by people who expected their college degrees to protect them. In fact, 47 percent of survey respondents said the majority of the jobs they moved overseas paid $50,000 or more before they were offshored, and 19 percent of respondents said 100 percent of the jobs they offshored paid $50,000 or more.

Proponents argue that the United States, as an innovation powerhouse, will yet again invent its way to new levels of prosperity and employment, and that jobs will be created in industries that haven’t even been dreamed of yet. However, as companies increasingly begin to offshore more-creative, judgment-based tasks — like analysis or research and development — critics of this theory (including some of the CFOs we surveyed) worry that this time, U.S. industry may be offshoring the Golden Goose.

All these factors — angry white-collar workers, concern that the United States may lose its creative edge, a seemingly jobless recovery, and a pending Presidential election — have converged to add fuel to the argument most people ignored in the 1990s. Democratic Presidential candidate John Kerry has proposed altering the corporate tax laws to encourage companies to keep jobs in the States, and President George Bush has indicated he may be open to expanding to service workers the benefits of the Trade Adjustment Assistance program, a federal program created to help manufacturing workers who lose their jobs to offshoring or import competition.

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