The comments threads rage over at Brad DeLong's site. Again, it looks like many are blaming outsourcing for the dreadful state of the U.S. job market.
Wired magazine has a cover article on outsourcing in India. It has to be taken with a big dose of salt because Wired has a history of jumping uncritically on every bandwagon. Techno-optimism is so 1999. Nevertheless, this article seems to be one of the few that dares to imagine how outsourcing might not be so terrible after all.
I think the Wired article is right in one respect: outsourcing is not going to go away, despite what politicians may may imply. In the long run, orthodox economic theory says we'll all be better off for it.
But what about the short run?
I've said it before: jobs would not be much safer if there were no outsourcing. Companies that have outsourced would have got rid of employees anyway. (Outsourcing just allows them to continue doing some things they would have stopped doing otherwise.) Proposals to punish companies for hiring people in India are beside the point. Just because they don't hire someone in Bangalore doesn't mean they'll hire in New Jersey. (Those few companies that would because they work on government contracts are the exception to the rule.)
Seems to me that people are forgetting that software engineering (never mind IT) is a big field currently going through a recession. It's so big that I think the law of comparative advantage applies inside it. Even if people in country X have absolute salary advantage in every single area of software engineering, it still makes sense for them to specialize in those areas where they enjoy comparative advantage.
I don't think it makes sense for a software engineer (like myself) to move to a radically different field. I think it behooves us to understand the market. For example, according to the Wired articple, Indian outsourcing companies like to boast that they are SEI level five, know the CMM inside-out and do everything by the book. Seems to me that's an approach designed for the big, unwieldy projects of yesterday that used to crash under their own weight.
That still leaves plenty of room for other work where the normal CMM approach is deficient. The whole CMM approach is based on repeatability. A high CMM level really doesn't help you that much if you're trying to do something for the very first time. It doesn't help that much on small projects where the overhead is likely to outweigh the risks that overhead is designed to mitigate.
I think the Wired article is right in another respect: innovation is where the U.S. enjoys its comparative advantage. I also believe that software engineering is a young field with plenty of scope for innovation. That does not mean anyone can be complacent, not even in India. I think Aparna Jairam, quoted in the Wired article, has it right:
The good times for Indian IT workers won't last forever. And when those darker days arrive,
We should just keep moving with the times and not be cocooned in our little world. That's the way life is.