Managing Globalization: Economies Have a Stake in Where Companies Find Employees

In the midst of debates about migration into the United States and the European Union, big companies are finding the workers they need by sending work abroad. Indeed, the phrase "skills shortage" is becoming almost obsolete for businesses that span the global economy.

But the choice between immigration and outsourcing, while straightforward for companies, can have much deeper implications for the countries they call home.

Outsourcing abroad and the recruiting of immigrants for work often happen for the same reasons, among service businesses and manufacturers alike. Locals may not have the right skills to do the jobs that are available. Alternatively, they may not want the jobs that are available. Or it may simply be the case that foreigners would do the jobs more cheaply.

"Part of the pressure on some of the bigger companies to move work offshore is the more ready availability of well-trained workers, and usually at less money," said Hank Cox, a spokesman for the National Association of Manufacturers in Washington.

"They have such a hard time finding qualified workers here," he said. "I've had representatives of big companies tell me that they just pull their hair out trying to find people in this country who can deal with the mechanics of the modern workplace."

In the United States, the unemployment rate for professionals is just 2 percent, compared with 4.4 percent overall, without adjusting for seasonality.

In addition to outsourcing work overseas, Cox said, American manufacturers were lobbying for more temporary visas for highly skilled workers. And they are doing this despite the fact that their sector is shrinking.

"Even though we've lost three million manufacturing jobs between 2000 and 2003, more than half our members complain that they can't find qualified workers," he said. "We just need people with more education."

But though the motives for outsourcing or recruiting migrants may be similar, their economic consequences can be very different.

First, there is the question of where workers spend their money. Immigrants spend at least some of their wages in their new country of residence; outsourced workers do not. For that reason, immigrant workers - like any other kind - tend to bring a multiplier effect with them. More people working in a factory, service business or even on a farm means more people needing grocery stores, health clinics, gasoline stations and everything else.

Then there are pension contributions. Immigrants contribute to the retirement system where they work - at least when they work legally - while outsourced workers contribute only to their own country's system. But there can be a cost, in terms of the social services that immigrants might use. Microsoft's outsourced workers in China, for instance, cannot get subsidized day care back in Redmond, Washington.

New immigrants also bring talents and diversity that an economy otherwise would not have had, which can result in anything from innovative technologies to more varied restaurants. On the other side of the ledger, outsourced workers can bring valuable local knowledge into a multinational company. IBM's recently announced plan to invest $6 billion in India, for example, was intended to enhance local product lines as well as to provide services throughout the company's global operations, said Fred McNeese, a spokesman.

But perhaps most important, immigrant labor keeps capital - factories, offices and equipment - inside a company's home country, whereas outsourcing sends it overseas. When capital moves, it usually doesn't come back.

"What I always write in my papers is that migrants are double-complements in the areas where they go," said Alessandra Venturini, a professor of political economy at the University of Turin. "They expand production, but they also discourage the movement of capital outside."

The balance of these factors varies around the world. Even within the European Union, there were major differences among the situations of different countries, Venturini said.

"All the countries would like to go in the same direction, attracting skilled migrants and not unskilled migrants," she said. "But the supply is different."

In Britain, for example, the use of English makes it easier to attract high- skilled workers. It is also under less pressure than countries bordering the poorer East, she said, like Austria, Italy and Greece.

"The U.K. has more skilled migrants than unskilled migrants," she said. "The other European countries have a mix or the prevalence of unskilled migrants."

The welfare systems in those other countries come under more strain, because unskilled migrants tend to use more social services. But people who migrate to work are typically young and, except for women who give birth, do not use much medical care.

Venturini added that it was hard to figure out just how much immigrants cost, but what is known is how much they put into pension systems.

"They contribute a lot," she said, though she warned that countries experiencing lower fertility would need to find other long-term solutions to their pension problems.

Yet if the benefits of immigration are comparable to, or even larger than, those of outsourcing, they do not widen many multinational companies' access to workers. There are generally no limits to their ability to hire workers abroad, but immigration to wealthy countries is usually restricted.

That does not concern companies like IBM. "We're getting the skills where we need them, no matter where they reside in the world," said McNeese, pointing to India's annual crop of 30,000 information technology graduates. But it might concern the people who live in places where the choice between outsourcing and immigration would affect the economic future.