Improving our skill capability by leveraging global scale of sourcing providers

We’re not making enormous profits and then forcing Australian staff we’ve just sacked to train incompetent but much cheaper overseas replacements, says Westpac – we’re

“improving our skill capability by leveraging global scale of sourcing providers,” a spokeswoman said.

Bravo. I like the way that sentence in no way responds to the allegation that they are in fact reducing their “skill capability” by hiring cheaper, less qualified staff to fund obscene executive salaries.

Just out of interest – and obviously I’m not an economist – what would be the negative effect of offering tax incentives to companies who employ, say, 90% or more of their staff physically in Australia?

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14 responses to “Improving our skill capability by leveraging global scale of sourcing providers

  1. By coincidence, yesterday I was reading on the NY Times about how and why iPhone manufacturing has all moved to China:

    http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html

    Chinese factories pay their employees peanuts and force them to live in dormitories so that they can be quickly woken up in the middle of the night for just-in-time changes to the product line. Working conditions that (rightly so) would get a US or Australian factory shut down.

    We aren’t going to solve this problem with incentives. We need penalties for Western companies that offshore jobs to locations that don’t apply similar work practices to the jobs that were lost. Sometimes offshoring is the right thing to do, but it should be done in a way that improves conditions in the developing world rather than turning them into a slave caste.

  2. Splatterbottom

    Seems to me that this is a good thing. It provides employment in third-world countries.

  3. Not so great for our economy though SB.

    Just remember – all costs of business can be cut: all parts of a business subject to budget slashing EXCEPT for executive salary. That’s the only part of any business that must, by definition, continue to increase at all times and under all conditions.

    Capitalism is now well and truly bumping up against the limits of its use as an all-encompassing economic philosophy.

  4. This is a difficult one for me.
    I know the parents of, and to a lesser extent, the person who is probably one of the team responsible for this decision.
    Belinda’s parent are lovely, kind and generous people in my local community and my half a dozen encounters with Belinda have shown that she is the same.

    Still, this is something that should be condemned.
    Gail Kelly is a wolf in sheep’s clothing. As a South African she has no loyalty to this country’s citizens and it’s showing!

    Cheers

  5. I’m all for increasing employment in third-world countries, even high tech jobs like my own. I also think they deserve 40 hour work weeks, overtime, safe working conditions, paid vacations, the right to live where they want rather than company dormitories, and all the other things that I take for granted after a century of industrial bargaining and improvements to employment laws. A company that exports jobs explicitly to avoid its responsibilities to its employees should receive nothing but contempt and be fined into non-existence.

  6. This is just the start of the rot. They will keep this up (Companies that is) until they get their man/women back in the lodge. The château’s and the yachts, the copious amount of top notch plonk drunk by these shysters has to be paid for by somebody. It ain’t gonna be by the exec’s (no change there then) A certain margin of profit is allowed for, and anything or anybody that gets in the way of that ultimate goal, will be terminated for a much cheaper model. That model being some poor coolie schmuck in China.

    Yep I can see them all now sitting in the old Melbourne club ordering up the gin slings and quaffing down the champers with gay abandon, and complaining to Jeeves the waiter, about the cost of labour. I guess the only change is, they’re not allowed to kick ol Jeeves up the arse for having creases in his jacket. But carry on.

  7. Splatterbottom

    Mondo: “Not so great for our economy though SB.”

    This is just petty tribalism. Sharing economic opportunities to participate in the market has lifted hundreds of millions out of abject poverty in a way that billions of dollars in foreign aid couldn’t and didn’t didn’t.

    “Capitalism is now well and truly bumping up against the limits of its use as an all-encompassing economic philosophy.”

    True it is that the effectiveness of market economics is being diminished as the the unproductive government sector crowds out the productive private sector and governments willfully subvert the operation of the market.

    Keynes said that in the long run we would all be dead. True it is that the long run is here and Keynes is dead. The problem is that we have to live with the consequences of his meddling policies.

  8. “Just out of interest – and obviously I’m not an economist – what would be the negative effect of offering tax incentives to companies who employ, say, 90% or more of their staff physically in Australia?”

    Off the top of my head, it would have a similar effect as any other form of subsidy. A tax incentive would have to be substantial to offset any losses already being made (also taking into expectations about future value of the dollar) by companies who were on cusp of moving work offshore to change any decisions. Those that employ the majority of their workers here would continue to do so, thereby reducing government revenue through tax loss.

    The overall loss would be borne by the Australian consumer/taxpayer who would bear the cost of the allocative inefficiency (deadweight loss) resulting from this intervention. While this loss would be very small at an individual level, economy-wide it is likely to be substantial (Hence the amount dollars that successive Australian governments have thrown at the car industry here).

  9. narcoticmusing

    Ah, SB you confuse once again the role of the public sector and just label it as bad, as if it contributes nothing economically or otherwise. Meanwhile, corporations get ridiculous levels of welfare, citizens (real humans) are poorly protected from these faux-identities, and the gap between the rich and the poor is once again on the rise. A debate for another time perhaps. Clearly no link with outsourcing to other nations who, as pointed out in the comments, are being exploited rather than utilised.

    Nothing to see here, move along.

  10. True it is that the effectiveness of market economics is being diminished as the the unproductive government sector crowds out the productive private sector and governments willfully subvert the operation of the market.”

    You really can’t make this stuff up.

    So true SB the government really got in the way of companies like Halliburton didn’t they? And of course there was the bail out of the greedy banks by the public sector.

    If you spent any money on your education SB it was surely wasted. I mean I least have an excuse for being a little confused at times, I left school in grade six. But as I say, carry on.

  11. Oh wow another

    government sucks!!!!!!!

    OH YEAH? WELL CORPORATIONS SUCK MORE

    debate, how enlightening.

    Of course some of the people on the left wing side of this argument are complaining about corporate welfare while others are openly advocating corporate welfare in the form of tax breaks. Hopefully you’re all at least self-consistent 😛

    And yes, it would have massively detrimental economic effects Jeremy, the deadweight losses jose talks about being just a small part of the problem.

    Denying employment opportunities to people overseas is silly. Conditions overseas are often quite awful, its true, but the best way to deal with this as Westerners is to pressure the multinationals we buy things off to give their staff better conditions (this vote-with-your-consumer-dollar approach has a strong proven track record of effectiveness). There are also probably some gains to be had lobbying our foreign offices to push for multilateral labour rights deals. Employ rampantly nationalistic protectionism to our economy = dumb approach.

    The Australian government helping Australians hold down jobs is on the other hand obviously part of what they can and should be doing, contra SB’s Ayn Rand-esque bullshit waffle about the “unproductive public sector.” Its simply that, at the margin, tax incentives for “onshoring” are one of the least cost-effective ways to spend government revenue to achieve employment objectives. Its not a bad policy because of some stupid right wing slavish ideological argument, its bad policy because the numbers absolutely do not stack up, and essentially never will in any case like this.

  12. This is just petty tribalism. Sharing economic opportunities to participate in the market has lifted hundreds of millions out of abject poverty

    To be fair – the primacy of my concern with the state of Australia’s economy is less about ‘tribalism’ and more about self-interest.

    I don’t want to see Australia stratifying into a third-world-esque society with a 0.1% ruling elite, a shrinking middle class and the rest of us living on the poverty line – even if doing so marginally increases the standard of living in other parts of the world.

  13. narcoticmusing

    Westerners is to pressure the multinationals we buy things off to give their staff better conditions (this vote-with-your-consumer-dollar approach has a strong proven track record of effectiveness).

    Because that has worked so well in the past

  14. Those that employ the majority of their workers here would continue to do so, thereby reducing government revenue through tax loss.

    Well, you’d then make up for that with a tax increase applying to all companies here. The net effect would be that Australian companies here would pay the same tax as now, unless they were offshoring their labour – then they’d pay more.

    The only reason they’re offshoring is to pay staff less and with fewer rights. I don’t see why that’s not something the Australian government should object to.

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