THE NEWSLETTER

Today's Note From a Madman

Friday, January 28, 2005

 

I Don't normally print a letter I write to a television station, but this 20/20 report caught my eye. Besides "disrespecting" my man, Lou Dobbs, John Stossel also "disrespected" ABC News and should be brought to task. So here it is:

 

Re: John Stossel’s 20/20 Story on the “Myth” of “Outsourcing”

 

John Stossel Says:

“You may not like it that someone in India takes your customer service call, but outsourcing helps the middle class by bringing lower prices and faster service. Take E-Loan, for example. It gives customers a choice of whether to get their loan paperwork processed in America in 12 days or in India in 10 days. An incredible 87 percent of customers in the United States choose the faster loan processing offered by sending their paperwork to India”

 

And now, the Truth:

Okay, let’s take India. E-Loan might process a loan faster because their people work longer shifts for less money around the clock. So we get a loan approval 2 days sooner. But what are we losing?

·     Note: I refinanced my mortgage in one week at a major New Jersey bank in 2004. As far as I know, it was all done right here in the USA.

 

 

John Stossel Says:

“The Labor Department's price index for clothing has been going down and down over the past decade.”

 

And now, the Truth:

However, real wages have been going down over the past four years as well while the CPI (Consumer Price index) has been rising. For example, from 2003 to 2004, real wages went down by 0.8 percent while the CPI has gone up overall 3.3 percent. The CPI for apparel has, in fact, decreased by 0.2 percent from 2003 to 2004, but the real wage decrease is outpacing the apparel decrease by 400 percent!

 

John Stossel Says:

“Bill Portelli, who runs the California-based company Collabnet, says outsourcing has helped him keep his company alive in the United States. He has hired programmers in India who are paid less than half what he would have to pay American programmers. ‘It doesn't cheat Americans out of jobs. If I hadn't hired the people in India, I would have had to lay people off,’ he said. “

 

And now, the Truth:

A closer look at Collabnet shows a company that has been in business for only five years. Bill Portelli apparently never employed American software developers. The employees he has hired are more than likely his original employees. The John Stossel report made it seem like Collabnet has changed and saved their business because of outsourcing. In reality, those outsourced jobs were never in the United Stated to begin with. In fact, two of the six members of Collabnet’s executive board are either from India or are of Indian origin: Sridhar Murthy, the Chief Financial Officer and Dr. Gopinath Ganapathy Vice President, Engineering & President, CollabNet Software Private Limited in India. This was never an “American” Company to begin with.

 

Now let’s look at the flip side. I had a company that made buttons in the USA (On The Button, Inc of New York). My brothers and I started this company on 1990. We employed as many as eight full-time employees, plus 3 partners, a number of sales representatives (referred to as 1099 employees) and contracted out to as many as seven US button manufacturers. Even when the garments were being manufactured overseas, we had the buttons made here and then exported them.

 

Today, my company, which I no longer work at due to health insurance costs, has only 2 partners and zero employees. The manufacturing of most of the buttons is being produced overseas and drop-shipped to garment manufacturers overseas as well. The garments are then imported into the US.

 

We went from eight employees, 3 partners and about one dozen full and part-time sales representatives to two partners who work alone. The buttons are cheaper, but the quality isn’t as good. Health insurance has risen, while profit has decreased and there is no opportunity for expansion in the US.

 

John Stossel Says:

A Dartmouth study found that outsourcers actually create jobs in America at a faster rate than companies that don't outsource. The same study found that companies that outsourced abroad ended up hiring twice as many workers at home.

 

And now, the Truth:

The “Dartmouth Study” wasn’t commissioned by Dartmouth University. It was a study by Associate Professor, Matthew Slaughter of Dartmouth’s Tuck School of Business. And guess who actually DID commission the study? The Coalition for Fair International Taxation (C-FIT) commissioned it. And who are the members of C-FIT? There are 26 members of the C-FIT including Hewlett-Packard, Dow Chemical and Electronic Data Systems. Just ask the citizens of Houston, Texas what happened to their city when Hewlett-Packard outsourced their jobs. The 26-member coalition is lobbying for tax breaks, provided by Rep. Bill Thomas, the Republican Ways and Means Committee Chairman’s Bill, to keep jobs and money outside of the USA. Paying taxes outside of the USA does the USA and its citizens no good.

 

By the way, this wasn’t a Dartmouth Study. This was a study by a Dartmouth Associate Professor paid for by twenty-six interested third parties. Think of it like this: I’m a network engineer and I work for 123 Company in New Jersey. If a XYZ Company asks me to perform an evaluation of their computer network on my own time, that company couldn’t claim that 123 Company did the evaluation, even though I am an employee of 123 Company. What’s more, if the evaluation that I performed turns out to be incorrect, 123 Company can’t be held responsible for the work I performed at XYZ Company. Who would be held responsible if the report by Associate Professor Matthew Slaughter turns out to be wrong, or even worse, was based on misleading date provided by the 26-member coalition? Will it be Dartmouth University? I don’t think they’d take the rap for that one, but Professor Slaughter would be, and should be looking for a new job. Much like I would be if my computer network evaluation was wrong.

 

John Stossel Says:

It's true that in the last four years, America has lost more than 1 million jobs, but those were years when we had a recession. Look at the big picture. Since 1992, America has lost 361 million jobs, but during that same time we also gained 380 million jobs. Millions more than we lost.

 

And now, the Truth:

1.6 million jobs per year are necessary merely to keep up with population growth. Since 1992 there were an additional 19 million jobs created. That means that we are a few hundred thousand jobs short. If we just consider the last four years, we had a net job loss of one million jobs, and that doesn’t even include the population increase.

 

John Stossel Says:

That (the job “gain”) should be hopeful for people like Shirley and Ronnie Barnard. While it's true that they had to dig into savings and still worry about their long-term security, last year Shirley Barnard eventually found a new job as a secretary. The new position pays more than her old job at Levi's, and the Levi's work was harder — hot, noisy and physically difficult. She says that her new job is much easier.

 

Her husband and some other former co-workers are still looking for work, but she told us some of her former Levi's colleagues are now working in better jobs than they had before. "Some of them have got, really got excellent jobs that they would never have even left Levi's for if the plant hadn't closed," she said.

 

And now, the Truth:

Let’s see… Shirley and Ronnie partially exhausted their savings. Ronnie hasn’t worked since 1997, along with many of his friends. Shirley does like her new job better, as do some of her friends, her, for some reason weren’t interviewed for John Stossel’s piece. Its great that some of these people like their new jobs, but I’m guessing that most of them would have been happy to have kept their old jobs for life.

 

By the way, I used to buy Levi’s Jeans. I haven’t noticed their price going down. Have you?

 

John Stossel Says:

And what happened to that Levi's plant? It's now being converted to a college. There will be new jobs for faculty and administrative staff, and right now there are construction jobs for workers building the new campus. This won't be talked about on the evening news, but these jobs are a product of outsourcing too.

 

And now, the Truth:

The college is NOT a product of outsourcing. There was a need for a college and that college would have been built regardless of the Levi’s plant closing. John Stossel’s report made it sound as if the college closed and that was the impetus for the state of Tennessee to build a college there.

 

Let’s take this one step further. If the Levi’s plant was still in business, the college would have been built in another part of Tennessee and THAT community would have new education and construction jobs created. So, both communities would have more working people and everybody would be happy.

 

 Outsourcing IS a PROBLEM, Mr Stossel.  You have done an injustice to us all and have abused the license of the American Broadcasting Company.

 

Happy?

 

-Noah Greenberg


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-Noah Greenberg