[00:09.32]and high-tech functions like computer programming,

[00:12.71]to low-wage worker pools in places like China,

[00:15.80]India, and Indonesia.

[00:17.50]So long as the overseas staff speaks good English and does the job,

[00:21.38]the reasoning goes,

[00:22.75]U.S. customers don't much care whether the people

[00:25.34]who take their telephoned catalog orders

[00:27.61]are sitting in Boston or Bangkok or Bombay.

[00:30.82]But the crushing effect of offshoring - as outsourcing is sometimes

[00:35.57]called - on those who've lost good-paying jobs is obvious.

[00:39.89]As The Economist magazine put it in an article last year:

[00:43.67]"America's pain, India's gain." Newsweek magazine asked, "Is Your Job Next?"

[00:50.18]Little wonder offshoring has become a red-meat

[00:53.03]issue for angry trade unionists and their supporters.

[00:56.45]After his victory in the Iowa caucuses last month,

[00:59.47]Democratic presidential candidate John Kerry railed against

[01:03.36]federal tax incentives to companies that outsource jobs.

[01:06.96]"We are not going to give one benefit or

[01:12.18]one reward to any Benedict Arnold company

[01:15.35]or chief executive officer who take jobs and money overseas and stick

[01:20.17]you with the bill. That's over," he said.

[01:22.98](The name of Benedict Arnold,

[01:24.96]a general in the American war for independence

[01:27.95]who switched his allegiance to the British,

[01:29.64]is a common epithet meaning traitor.)

[01:32.52]Addressing a crowd of industrial union members in Washington recently,

[01:36.98]Tom Daschle, the Democratic leader in the U.S. Senate,

[01:40.40]blamed outsourcing for what's been called the jobless

[01:43.54]recovery from a recession of two years ago.

[01:46.42]During that time the U.S. stock market has rebounded,

[01:50.12]but two and one-half million manufacturing jobs have disappeared.

[01:54.34]"George Bush says the economy is creating jobs. But let me tell ya,"

[02:00.13]said Tom Daschle. "China is one long commute. And let me tell ya,

[02:05.93]I'm tired of watching jobs shift overseas."

[02:09.42]But it's not just disgruntled Democrats who are worked up.

[02:13.20]In the generally conservative Farm Belt state of Indiana,

[02:16.69]Republican senator Jeffrey Drozda championed a bill that passed,

[02:21.37]39 to 10, recently, that would prohibit the

[02:24.54]outsourcing of state contracts to overseas firms.

[02:28.14]Instead, Senator Drozda says,

[02:30.66]unemployed or under-employed Indianans should get the jobs.

[02:34.94]"It does state in the bill that all work under the contract

[02:38.76]must be erformed in the United States," he said.

[02:41.68]"And at least eight other states are looking at doing

[02:45.06]the very same thing because this is what I deem a national crisis."

[02:50.71]The offshoring issue smoldered without exploding for years,

[02:54.31]Senator Drozda says, because it was always assumed blue-collar

[02:58.27]workers thrown out of work could retrain for sophisticated,

[03:02.23]highly paid technical and service jobs.

[03:04.75]Now many of those jobs are moving to India and Pakistan and China as well.

[03:10.15]Just ask Laird Carmichael.

[03:12.31]He's executive vice president of a company

[03:14.69]called International Outsourcing Services.

[03:17.57]It has headquarters in Indiana,

[03:19.87]runs a large assembly operation on the Mexican border in Texas,

[03:23.65]and spreads $250 million in manufacturing and

[03:27.54]data-processing work each year to centers in Mexico,

[03:30.85]China, France, and Slovakia.

[03:33.16]Mr. Carmichael describes himself as a red-blooded American whose customers

[03:38.09]are doing what comes naturally in a capitalist system - outsourcing

[03:41.98]in order to keep costs down - however and wherever they can.and people are evolving into higher-paid jobs."

[03:46.48]"I've watched companies that I've done work for in contract manufacturing that,

[03:50.51]had they not done some portion of manufacturing outsourcing to a lower wage base,

[03:56.48]would have gone out of business,

[03:57.89]given their competitors," said Mr. Carmichael.

[03:59.76]"All of this is coming down to providing businesses

[04:02.75]and consumers with lower-priced products.

[04:04.84]And I'm an optimist.

[04:05.92]I think people in the United States are continuing to change and evolve.

[04:09.41]Despite all the rhetoric you hear, nothing's black and white,

[04:12.07]and people are evolving into higher-paid jobs."

[04:14.45]Economist Marvin Kosters at the American Enterprise Institute think tank agrees.

[04:19.81]When a company like Delta Air Lines can save $15 million a year

[04:19.92]by moving its basic reservations operation to India and the Philippines,

[04:25.21]he says, the result is a more efficient U.S. economy with greater output,

[04:28.99]lower prices, and satisfied customers.

[04:31.58]He says resourceful Americans will develop new kinds of jobs

[04:35.18]to replace even high-skills positions that are moving overseas.

[04:39.90]"Ten years ago, we would never have dreamed that

[04:43.75]we would have so many people working in information technology,

[04:47.75]right? Ten years from now,

[04:49.94]wedon't exactly know where the job expansion is going to occur," said Mr. Kosters.

[04:53.44]But Phillip Bond, the U.S. undersecretary of Commerce for technology,

[04:58.94]ventures a guess.

[05:00.13]He argues that innovation in emerging fields like biotech and nanotechnology,

[05:05.53]fueled by double-digit increases in spending on research and development,

[05:09.89]is what he calls the seed corn for the future that

[05:13.34]will more than offset the loss of jobs to offshoring.

[05:17.23]"We just need to make sure we're ready to get the breakthroughs out of the

[05:20.33]university and federal labs as fast as possible, commercialize them,

[05:24.22]and put our people to work," said Mr. Bond.

[05:25.80]"The model for the United States is pretty simple:

[05:31.38]We want to be the headquarters of innovation

[05:33.94]for the world. And if you go to Armonk, New York,

[05:36.31]to the headquarters of IBM; or Redmond, Washington,

[05:38.62]to the headquarters of Microsoft;

[05:40.31]or down in Austin, Texas, at Dell Computer,

[05:42.68]those headquarters towns are doing pretty well

[05:44.34]because they are the focal point of innovation.

[05:47.83]We want to be the innovation headquarters for the world."

[05:50.03]Mr. Bond and economist Kosters argue that strengthening the economies of

[05:56.08]less-developed nations is not only the American ideal;

[05:59.57]it also helps make those countries better customers for U.S. goods.

[06:03.74]As Mr. Kosters puts it:

[06:05.94]"The moral case for outsourcing in that sense is

[06:09.83][that it is] good for everybody involved."

[06:11.81]Sixty percent of America's 1,000 largest corporations do not outsource.

[06:17.32]Some cite the difficulty of managing far-flung resources,

[06:21.20]fear of negative publicity, and security concerns.

[06:24.70]In one infamous incident,

[06:26.68]an overseas analyst handling U.S. medical records threatened to display

[06:31.46]them on the worldwide web if his pay dispute was not resolved.

[06:35.17]Still, the Forrester independent research

[06:38.05]firm estimates that more than three million U.S.

[06:40.86]service and high-tech jobs and $136 billion in wages

[06:46.48]will move to India, China, Russia,

[06:48.67]the Philippines, and other overseas centers over the next 15 years.

[06:53.03]The Forrester study predicts that by decade's end,

[06:56.12]executive stature will be measured,

[06:58.39]not by the number of employees managed but by the number of contracts outsourced.