Unemployment and Offshoring

Say I wanted to build a technology research company from scratch. I would hire all of the principal analysts and core management team (including IT) from US sources. All of the accounting, admin, international sales, research associates, call center sales, editorial support, translation services, report production, and IT services would be hired from offshore sources on the cheap. All I need is the talent at the top. How attract great people when the I can’t afford to fund, out of operations or my initial seed money, health insurance and a retirement program for three years or more? I can’t. [ John Robb ]

John Robb’s bit really addresses one of the main reasons that I’ve finally decided to throw in the towel and admit that I’m now more of a Democrat than anything else. The biggest reason for my change is that the Democrats seem to be the only party likely to address serious healthcare reform.

Much media attention has been given to outsourcing and many people have directed hostile attention towards both American Companies and Indian workers for “stealing” good paying American jobs, or the current “jobless recovery.” So many of these complaints focus only on the salary differences between the US and India, when they should be looking at the COST difference between employing an American worker and someone abroad. Because of our employer funded healthcare system, an American’s salary may not be the greatest cost of hiring him.

With many healthcare benefits approaching $600 a worker/month, we’re quickly talking about an additional $8-10,000 a year on top of other benefits. Add in dependent benefits, prescription drugs, etc. combined with our other benefits and we’re easily adding $15-20,000 to every workers salary. This doesn’t even account for providing office space, parking, computers & training, etc.

Imagine the effect that shifting healthcare away from being a per-worker tax would have on employment. Instead of encouraging companies to send jobs oversees to avoid taxes, we’d encourage them to keep them here since they pay for American’s benefits already, and it makes Americans relatively cheaper.