Thoughts on outsourcing bill before Congress

Last week an ITA member company asked for the ITA’s position on an outsourcing bill proposed by Senator Durbin. I responded the same day with some quick thoughts, and share that below for anyone that’s interested:

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ITA is not predominantly a lobbying organization; we exist to help our member companies grow and to impact economic development for the region. To that end, occasionally we have advocated on behalf of member companies. There have been times I’ve testified in Springfield, and trips where I’ve accompanied member companies to Washington.

We have not taken any specific position regarding Senator Durbin’s proposed legislation (nor have we been asked to study it carefully on behalf of any member company, and I have not personally read it).

That being said, I am happy to offer you a few random thoughts, with the caveat that these are not particularly researched, I am firing them off with a few moments break between other projects, and they should not be considered a definitive point of view.

Global outsourcing is a complex and easily misunderstood economic force. It is tempting (especially when America has high unemployment) to respond with emotion and knee jerk reactions, both for and against continued outsourcing.  But I think the facts belie any sort of emotional or easy response:

  1. Unemployment in America is not because of a lack of IT jobs today; the phone calls we get to ITA every day are from companies desperate to find high quality talent to hire, not from engineers looking for work. Unemployment is mostly from other sectors (i.e. manufacturing, etc); any public policy that conflates IT job outsourcing with manufacturing job outsourcing is not well considered.
  2. Most experts predict a significant shortage of information technology candidates to fill demand over the coming decade. We simply aren’t educating enough kids in STEM education to fill the pipeline, and this country will face a far greater crisis when demand far outstrips supply of innovation workers.  Much of my recent work with the ITA has been around this problem: we’ve helped launch a new high school focused on educating future tech entrepreneurs, and we’ve spent a great deal of time recruiting engineers from our local universities to join Chicago companies.
  3. Outsourcing overseas is a completely different issue than offering visas to attract smart talent to this country to join our innovation economy; conflating the two and trying to discourage both as a “way to protect American jobs” is wrongheaded.  The number of bright people who move here, get educated here and go on to create technology ventures and jobs is astounding, and we need more of that, not less.
  4. Many (most?) entrepreneurial, small technology startups turn overseas to find talent today; this actually increases the number of jobs and the amount of wealth that is created in America, and in many cases those ventures wouldn’t have been able to launch without global partners.  So it is also dangerous to create public policy that conflates “large companies sending jobs overseas” with smaller companies that use global development teams to create jobs.
  5. More than most industries, software and technology companies tend to have customers throughout the world, and have a direct interest in the global marketplace. I am personally not a protectionist, and I’m not sure I’ve ever read a respected economist who advocates for protectionism, especially where global markets already exist.

So, you asked for a position on “tax breaks for US companies that outsource tech work to foreign countries”.  Phrased the way you worded the question, I would have to say I’m against giving such companies tax breaks. But I don’t think the question is a fair one, nor, maybe, is the underlying public policy that is being considered very well thought out.

Government can and should use tax policy and regulation to discourage bad actors in the marketplace, but developing a public policy without considering the points above (and no doubt many, many more learned ones) only elicits emotional response and restrains our economy in ways we could probably all agree is bad.

At the end of the day, I fully understand why tech companies would oppose the proposed legislation, but I also understand some of the reasons the legislation was offered. I simply think this calls for a surgery with a scalpel instead of a bayonet, and more rational debate

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