In His State of the Union, Obama Offers A Hopeful Suggestion: Insourcing

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By Joe Guzzardi

Joe is a CAPS Senior Writing Fellow whose commentaries about California's social issues have run in newspapers throughout California and the country for nearly 30 years. Contact Joe at joeguzzardi@capsweb.org, or find him on Twitter @joeguzzardi19.

The writer's views are his own.

January 28, 2012

During his State of the Union address, President Obama sent mixed messages about offshoring and non-immigrant visas. On one hand, he appealed for green cards to be automatically issued to any foreign-born U.S. college graduate.

Said Obama:

"Others come here from abroad to study in our colleges and universities. But as soon as they obtain advanced degrees, we send them back home to compete against us. It makes no sense."

The idea of giving permanent U.S. residency to overseas students with degrees in science, technology, engineering and math has become increasingly popular on Capitol Hill and among pro-immigration lobbyists.

On the other hand, however, during his speech Obama encouraged manufacturers to embrace insourcing---that is, bringing jobs that had been outsourced to other nations back to the U. S. The administration is said to be working on a package of tax incentives and loans to help make it happen.

A trend toward insourcing, although slight, is already underway. According to recent studies, American technology jobs have increased somewhat. A Forrester Research 2011 hiring analysis found that 131,000 services and software development jobs were added in the U.S. last year. Unfortunately, this small gain was more than offset by the decline in high-tech manufacturing employment. The National Science Foundation reported that since 2000, those jobs have dropped by 28 percent. [U.S. Tech Firms Add Jobs Despite Automation, by Patrick Thibodeau, Computer World, January 23, 2012]

But insourcing could eventually provide a significant boost to U.S. employment. Obama pointed to GalaxE. Solutions, a New Jersey-based IT services firm that opened a Detroit office two years ago and launched a program called "Outsource to Detroit."

Worldwide GalaxE. employment is 2,000 include a staff in India and China. But the company forecasts an expanding domestic IT services market. Currently, 150 people work in its Detroit office. By 2015, the company expects to employ 500.

Ryan Hoyle, GalaxE. Solution’s global recruiting director said the IT services market is shifting from finding the lowest price point offshore to improving the quality of product. [Obama Wants Less Offshoring as Vendors See U.S. Shift, by Patrick Thibodeau, Computer World, January 19, 2012]

Another company anticipating a U.S. IT services expansion is Systems in Motion which has nearly tripled its employee base over the past two years to 190. The company, which has offices in Ann Arbor, Michigan and Freemont, CA projects that it will have 1,000 five years from now. (See a television segment from Dan Rather Reports on Systems in Motion here.)

The relationship between outsourcing and the steep decline in American employment is unarguable. In many fundamental ways, outsourcing has reshaped the nation.

Although the steps taken by GalaxE. and Systems in Motion are tiny, they’re pointed in the right direction and therefore encouraging.

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