Ethical Issues of Offshoring/Outsourcing

Ethical Challenges with Offshoring

Karlis LucsAndrejs PašņevsGurubhaskar C.Vishal Verma

November 22, 2012Riga Business School, Riga LV

Why are we here?

Offshoring brouhahaDifferent stakeholders, expectations

No one approach is right

3 things

JobsWorker conditions

Environment

1st issue: Job Export

What do the people think?

Loss of jobs = unethical move

What does media say?Goldman Sachs is set to cut 250 jobs across its

global operations as it moves some work to India.

Tax break fuels anger over outsourcing-related layoffs in Fla.

Forrester Research: Outsourcing jobs outflow estimated to hit 3.3 million by 2015.

What do economists say?

Short term job loss = cheaper goodsCheaper goods = more money savedMore money saved = More money

spent elsewhereMore money spent = new jobs

What’s the truth?

Semi skilled workers – worst affected1/3 No job

1/3 Less money1/3 Life’s the same!

What’s the truth?

Lose-Win?China ≈ Germany

min 25k yuan/yr - 77% (2008) 10% (2015): FDI(2003) = 82x FDI(1983)

What’s the truth?

Offshorers ≠ Biggest job creators (2% - 1990 - 2008)

Increased efficiency = More hirings than layoffs

(2000 – 2007)

What’s the truth?

Low unemployment?1983-10.4%, 1992-7.3%, 2008-5%

SMEs save the day

So what’s the conclusion?

Offshoring ain’t all that bad.

2nd issue: Work conditions

What do people think?

Offshoring = bad work conditions = unethical

What does media say?

Forced to stand for 24 hours, suicide nets, toxin exposure and explosions': Inside the Chinese factories making iPads for Apple

H&M, Walmart, Abercrombie & Fitch, the Gap, Nike, Limited Brands, Calvin Klien, Phillip Morris, Victoria’s Secret, KYE, Forever 21,

Aeropostale, Toys ‘R’ Us, Hershey’s

What’s the truth?8 Samsung factories

>100 hrs overtime; 36 hrs legalSalary = ½ overtime money

Standing work – 11 to 12 hrsNo labor contracts

What’s the truth?

10 Foxconn factories>50% dispatch workers

Local min. wage300 hrs/month

Max median age: 32

What’s the truth?

Top 10 factoriesMin. wage not sufficientOvertime = 36-160 hrs

Exceedingly high labor utilization; one action every 3 seconds

No labor contracts1/3 workers < 18

Here’s the proof

http://www.youtube.com/watch?v=pOg8QbKEkL8

http://www.youtube.com/watch?v=Jk-xqPKOxl4

What do the workers feel like?

Chinese least job-satisfied among Asians despite max. jobs

Only 49% consider their job ideal

So what’s the conclusion?

Offshoring hurts people.

3rd issue: Environment

What do people think?

Offshoring = bad environment = unethical

What’s the truth?

Top CO2 emitters: China, US, EU, India, Russia

What’s the truth?

Offshoring = low CO2 emission from US

What’s the conclusion?

Offshoring = Movement of carbon footprint

Offshoring = Pollution anyway!

4th issue: There is no 4th issue

Final Picture+ve stakeholders -ve stakeholders

Jobs Companies (short run) Home people (short run)Home people (long run)Host peopleHost govt.

----------------------------------------------------------------------------------------------------------------------

Worker Home businesses Host peopleConditions

-----------------------------------------------------------------------------------------------------------------------Environment Home businesses (short run) Everyone

Home people (short run)

Thank you!