CNN’s business news anchor Lou Dobbs has been attracting a lot of attention to his “Exporting America” segment with persistent attacks against American companies “offshoring” to low wage countries. He claims that greedy American companies are sending high wage jobs—such as software development—overseas. But, as in many cases, the outcry seems to be catered to appeal to emotion rather than based on facts.

Mr. Dobbs accuses American technology companies as being guilty of racing to the bottom by outsourcing to India where workers make $8000 a year against which Americans cannot compete. Such accusations are hurled without considering the changes that are happening in the technology industry. For example, in the Seventies and early Eighties, software development meant hotshot loners or small teams spending days and nights whipping out unique software applications. In the Eighties developing simple window applications would take many hundreds of hours. Nowadays, off the shelf software components can easily be downloaded and put together to create complex applications in an infinitely lesser time. The task of testing complex software, which needed multiple workers some years ago, can now be automated and needs much less human intervention. Common protocols and web services have made it very easy for transmitting and processing information. The innovations and commoditization of software has led to tremendous increases in productivity in all industries.

A few years ago, most of us would have trudged up to the local post office to pick up tax forms. This later evolved into using tax software packages brought at the local store and now we can file taxes on the web, without even having to go to the local store to purchase the software. By Dobbsian logic, we should be crying about the job loss for all the intermediaries, from tax advisors to the local store salesman to the post-office workers employed to handle your tax mailing. Outsourcing to other countries also achieves the same effect of lowering costs by increasing efficiency and allowing companies to better direct their resources here in America.

Considering the furor and panic raised by Mr. Dobbs, one finds that the total number of jobs that have been sent overseas is miniscule when compared to job losses due to technology change and productivity increases. If for a moment, we were to assume that there were no low-wage countries available, the jobs in high tech would still be in the process of adapting to the innovation and standardization in the industry.

Increasing Automation
This lowering of entry point for software development, due to innovations, has allowed many experts in other areas to more easily adapt software to their own specific industry, leading to an expansion in the availability of software tools and bringing efficiency to more sectors. Previously, one would call a credit card company and a live person would be needed to give the necessary information. These days the phone system is automated and the same information is now also available on the web. The number of workers needed to answer phones for customer support has dropped dramatically. The bulk of the jobs that are being outsourced to countries such as India includes tasks such as creating applications using the software components created in the U.S., testing, call-centers, back-office paperwork processing etc. Most of these outsourced jobs are not going to exist in the next few years with the ongoing rapid standardization and innovations. The Indians know it too, so NASSCOM (the Indian Software Companies Association) is asking its member companies to cut some of their call center employee hours from eight to six and a half hours so that the employees can pursue further studies and help reduce attrition. What is happening in the technology industry is nothing that has not happened before in other sectors like manufacturing. The number of workers required today to produce a ton of steel is a quarter of the workers that were needed to produce the same amount in the seventies. The reduction in jobs in other manufacturing areas is also because of tremendous productivity gains.

It must also be pointed out that the loss of jobs in China due to changes in technology is much more greater than in the U.S.

Count the Dollars coming back
Mr. Dobbs fails to consider that the dollar is the reserve currency of the world and economies like China and India have been hoarding up on dollar reserves. These reserves are reinvested in U.S. Treasuries, which in turn helps to keep interest rates low in the U.S. Low interest rates have allowed businesses and millions of Americans to refinance, and has put money in the pocket of all Americans. Mr. Lou Dobbs probably knows all this.

It may well be that whipping up paranoia about job losses to cheap overseas labor increases his ratings, but Mr. Dobbs is doing his viewers a disservice by not informing them of the whole picture.

The real issues are the ones related to improving the science and math education in this country, reforming the social security system to handle the coming demographic shifts and cutting the runaway spending by the federal government. But alas, it is easier for Mr. Dobbs to focus on compiling lists of companies and knocking down straw men in his rush to increase his ratings.