Is Outsourcing Ethical?

Randy Cohen, the resident ethics columnist for the New York Times Magazine, responded to a query about whether a long time unemployed IT worker should take a job setting up an offshore help desk, considering that once up and running, the present help desk employees will be out of a job.

The anonymous job applicant heroically is inclined to forgo this job offer, having seen a relative suffer the effects of outsourcing, and he believes he has a greater ethical duty to fellow citizens of his country (this is actually a misuse of the concept of ethics; while he may have a greater obligation toward fellow citizens, it is a different kind of obligation, beyond the purview of ethics — see below). In order to fulfil his duty to his fellow citizens, he is willing to forgo this sorely needed job.

His wife agrees with the ethical assessment, but disagrees with his willingness to forgo the job, since forgoing the job will not achieve the desired results, as it will not prevent the outsourcing from taking place. Therefore, he might as well take the job.

Finally, Cohen disagrees with both of them, as he believes there is a greater ethical duty toward the residents of India or whichever country to which the help desk will be outsourced to, as outsourcing will give jobs to people who would otherwise remain stuck in a vicious cycle of poverty. In Cohen’s words:

Americans do not enjoy moral precedence over Indians. Some people feel we have a greater ethical duty to those closest to us — our neighbors — but in an era of global trade and travel, that is a recipe for tribalism and its attendant ills.

Drawing from the wisdom of Judaism, who is right here?

Three Questions

There are really three questions to consider here. First of all, is what Cohen labels tribalsim really unethical, or at least a recipe for ills, as Cohen writes, or is it a duty, as the anonymous job hunter posits?

Secondly, there is the economic question. Outsourcing is really not different from any other type of innovation that brings increased efficiency. The tractor, driven by a single farmer, can plough a much larger piece of land than a plough pulled by livestock. Should technological innovations be prohibited? Should international trade be banned?

A corrolary of the economic question is that when we forgo the benefit of some innovation or of international trade, we force consumers to buy more expensive goods, and thus make them afford less. Is it ethical to make consumers bear the burden of the job safety of local workers?

The third and final quesion is, if, unlike Cohen, we find no fault in what he derogatorily called tribalism, must the anonymous job applicant forgo the job, or is the wife right, that since someone else will take the job, he might as well do it?

Tribalism

In one of the verses regarding our obligations to the poor, the Torah exhorts (Deuteronomy 15:11): You shall open your hand wide to your brother, to your poor, and to your needy, in your land. This is one of many proof texts from which we learn that we must first help those closest to us (“your brother”), then those who are more distant relatives or strangers. Likewise, we must first feed the poor of our respective communities (“your poor”), before taking care of the poor elsewhere (“in your land”).

Clearly, the Torah rejects Cohen’s disdain of “tribalism.”

The reason why the Torah rejects Cohen’s disdain of “tribalism” is that this is, a heart, not an ethical issue, but a social contract issue. No member of society bears any ethical obligation to create jobs for others or otherwise boost the economy. That is outside the realm of ethics, and is really in the realm of equity and lovingkindness.

Authorities who struggled with the fact that some of the obligations of tsedaqa (variously translated as charity, justice or equity) apply only to fellow members of the religion, indeed came to the conclusion that these obligations stem not from ethical, but covenantal obligations.

Thus, we are particularly enjoined to feel responsible for our Jewish brethren, for we are all one close family and their hope for salvation out of their ordeals (Maimonides, Matnot ‘Aniyim 10:2). Since all Jews belong to the Jewish society, we also bear mutual responsibility, as others would also support us in our times of need (Abarbanel, Deuteronomy 16:6). Furthermore, it would be particularly cruel and heartless not to hear the cries of those who are closer to us (Maimonides, Sefer haMitsvot, Lo Ta’asse 232).

By analogy, Americans should first and foremost care about the well being of other Americans, and within America, Mineapolitans should first and foremost care about the poor of Mineapolis, for example.

Ethics would preclude us from closing our eyes when sweatship employees in India or China are abused, but when we consider job security r job creation, we leave the realm of ethics and enter the realm of covenantal societal obligations.

Conclusion: Randy Cohen has no ethical hook on which to hang his personal biases here.

The Economics of Protectionism

Economists teach us that the economy isn’t a fixed sized pie. Through trade and technological innovation, market players can concentrate most efficiently divide the production efforts among themselves, and by producing more efficiently, the entire pie (the economy) will grow, leaving more for everyone.

Well, more for almost everyone. For while economic theory tells us how to enlarge the pie, the spoils are not necessarily divided up equally or equitably. Some people may adapt insufficiently to new marke conditions, and suffer from the new competition.

So is trade good or bad? It’s both. And the measure in which the good offsets the bad or vice versa is not preordained. First of all, this measure varies based on the market power of the different market players. I.e., on the ability of workers and competitors to retain a portion of the market or to acquire new markets. Secondly, what to one person is merely a nuissance will be a tragedy for another person, and societies are not necessarily willing to put up with all teh vagaries of trade.

That is why all societies regulate trade. Some regulate it more, some less, but all regulate it. And all regulation ends up consing consumers, because they pay through higher prices for the protection afforded to local companies, local workers, more environmentally friendly producers, etc.

So for Cohen to claim (wrongly) that precedence of one’s own group over other groups is immoral, a disdainful form of tribalism, Cohen would have to eschew almost all trade protectionism. That means no quotas, no subsidies, no tax breaks and no research grants for promoting innovation. Such a world would be ruled by ruthless competition.

A society is free to choose this kind of ruthless competition, but all societies on our gren (or not anymore so green) earth choose to maintain at least some protectionism. And yes, we pay for that protectinism, either directly or indirectly. But with the increased prices caused by protecionism, we buy security. Mutual security, for example. The security that factories will not suddenly close when the Yen or the Huan drops by a few percentages, making production in Asia suddenly so much more attractive, until it rises a few points, shifting production back West, and making both the Western and Eastern workers very apprehensive and fearful for the stability of their jobs.

Ultimately, every society probes the tradeoffs between protectionism and its attendant cost, and on the societal level it is usually not immoral for a society to choose a certain level of such protectionism, be it featherlight or draconian.

This, too, is generally not a matter of ethics, so Cohen is wrong here, too. The only ethical matter here would be politicians lying or hiding the true cost of protectionism and freetrade, respectively, in order to push their favorite type of policy without regard for the general population.

The Covenantal Question

So what should this anonymous prospective IT worker do? On the one hand, his moral intuition is right; he has a covenantal imperative to care about the well being of his fellow American IT workers, but, as his wife argues, by refusing the job, he won’t make a dent in the company’s outsourcing plans.

This is a bit tricky, but I believe that as an individual cannot possibly prevent the outsourcing, as he is in no position to guarantee the covenantal rights of the workers, he is therefore absolved from any culpability when he takes the job. The wife is right, because ultimately, this is not a problem that can be solved at the individual level. It is only on two other levels this can be solved: on the societal, political, regulatory level, and on the level of company management.

How to Manage Innovation

At the heart of this entire ethical and covenantal quesion is the question of managing innovation. It would be absurd to prohibit progress, and even trade is part of that progress. But on the other hand, the suffering of those who, through competitive pressures lose their job, is very real.

So it would seem that the most reasonable way out of this conundrum is to posit that society should not prevent, but soften the negative impact of progress. I suggest the following model.

The company, by having entered into a contractual employer-employee relationship, has entered into … a relationship with them. While it would be absurd to prevent the company from becoming more efficient, forcing it ultimately to become victim to the more succesful competitors, nonetheless, by abruptly inroducing innovation, the copmany would be causing real suffering to its charges. It would therefore be most uncharitable to simply fire them. In fact, it would also be very bad for employee morale, however unfashionable it is West of the Atlantic to consider this matter.

So, it would seem that the company may have a charitable obligation to transition its workers into other jobs, rather than dumping them. It would be up to the company to retrain them, if necessary, and they should be given priority regarding new positions the company may offer.

However, none of this is within the realm of ethical questions, unless he company is breeching its contract. Instead, this issue falls within the realm of covenantal obligations, and to a certain extent, it is up to society to decide in what measure to enshrine such worker protection in the law. However, when society does decide to protect workers (without excessively burdening the employers – both sides need consideration), then it does fulfil the notion of charity and equiy, of tsedaqa.

The highest level of tsedaqa is not to give a man a fish, but to teach him to fish, i.e., to help people find jobs. Protecting workers as they transition between jobs, especially in industries undergoing massive changes (like widespread outsourcing) surely qualifies as this highly raiseworthy form of tsedaqa, which society is responsible for implementing in an appropriate fashion. But our poor IT worker need not bear the burden o society’s failure to protect his fellow IT specialists.

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2 Responses to Is Outsourcing Ethical?

  1. Jon Baker says:

    If he has been out of work for a long time, doesn’t he have an ethical duty to support his family? Charity begins at home, and all that?

    • Arie Folger says:

      Absolutely. But, if, as both he and Randy Cohen claim, this is a black and white ethical issue, then it would be unconscionable to fulfil one responsibility while transgressing another responsibility. My argument, with which you implicitly agree, is that the wife is right, and this is not an ethical issue, therefore, his duty to his family takes precedence. The reason why it is not an ethical issue, is, as I argue, that (a) it is not, it is in the purview of reciprocal covenantal obligations, and (b) therefore, it really doesn’t play itself out on the level of the individual: as long as society doesn’t regulate that activity, it is not unethical, and therefore, as you say, his duty to his family takes precedence.

      Of course, your formulation also leaves another possibility open, namely, should/could one seal when his family is going hungry and he has failed to find employment despite making an honest effort. I believe such petty theft is permitted in some societies, I vaguely recall Brazil having laws about this, to protect the poorest members of society. I did not touch that question, and in fact, we do not know how the cha has been feeding his family for the nine months he has been out of work. Is that where you were heading in your comment?

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