If you landed back in Canada this week from outer space, or even southern Florida, you’d be forgiven for thinking you’d hit a wormhole in time and that it was actually 1990. A debate is raging about whether business should outsource jobs if it makes the business more profitable. Wait, you might think, we settled this long ago. And except when it becomes campaign trail rhetoric in America, we understand that outsourcing is not a bad thing.
Or is it? We want jobs in Canada, and we want good high-paying ones at that. So why not insist they all stay here? Even at the expense of profit? Quite simply, because it would be the path to ruin.
It’s in the DNA of a business to want to grow. To do that, businesses work extremely hard at maximizing efficiency – to pay as little as possible for their cost of production, and get as much as they can for their end product. It’s also in the nature of a free market that the end product price is destined to fall as new competitors find ways to operate even more efficiently and drive prices, and profit, down for all. Smart businesses invest in new or better products that they can charge more for, and the cycle starts again. It’s a dance that has done more for human prosperity than anything else in history.
It’s called capitalism, and it isn’t a dirty word.
As our world became more connected and global, and as trade opened new doors, businesses found that efficiency could be found anywhere. Labour is where it started, of the manual kind. Workers who could be paid less somewhere else displaced workers earning more at home. Manufacturing came next, but there really isn’t a limit to what can be outsourced. And, increasingly, the efficiency isn’t just about cost but expertise.
Information technology workers displaced in Canada are being replaced not by cheap Indian workers but by better ones. India has emerged as a centre of excellence in applications development, for instance, and so a business needing the very best in that field will seek it out. That may be bad news for a Canadian IT worker, but it’s very good news for the economy. (The sideshow about hiring temporary foreign workers is just that – a sideshow. That program is not about outsourcing jobs but about importing labour or expertise not available in Canada.)
When businesses save money – and boost profit – good things happen. Because it’s in their DNA to grow, money saved by business is money invested – in new products, in workers, in research. And higher profit means higher returns or dividends to investors.
Further, a job moved from Canada to India creates a new kind of prosperity. It creates a job in a country we sell goods and services to, increasing the opportunity for our businesses to flourish even more.
No one would dispute that the person who loses a job in Canada, as it shifts to another jurisdiction, suffers in the short term. But if the shift were from Ontario to Alberta, would the outrage be as great? Longer term, the effect is the same. The now displaced worker needs a new plan and an economy dynamic enough to create new jobs. And a dynamic economy isn’t created on paper or by central planning – it’s created by allowing the natural forces of capitalism to work.
Canadians would do more for our future prosperity by worrying about how productive and skilled we are, rather than hanging on to jobs we aren’t the best qualified to do.