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During his campaigns, President-elect Obama had more than once spoken about keeping jobs within America for the Americans. The statement, though part of election rhetoric, has been the subject of much consternation since. Especially, within the global services industry, which rests on the concept of global delivery of technology and business services. There is a palpable sense of alarm amongst companies and countries that have this industry as its mainstay.
While the initial messages (from Nasscom, BPAP, etc.) are no doubt congratulatory, it fails to shield the apprehensions on whether Obama would stifle the industry to death. Far from it. These fears are unwarranted.
First, Obama's statements were directed at the manufacturing industry and not the technology or business services industry per se. Second, Obama's statement — "Will stop giving tax breaks to companies that ship jobs overseas, and start giving them to companies that create jobs in the U.S." — is interesting but baffling. Do the Fortune 100 companies that outsource billions of dollars of services currently enjoy tax benefits because they are outsourcing jobs? Not to our knowledge. Assuming that under Obama's term, companies do get tax breaks for keeping jobs within the US and the others are penalized with higher taxes, what kind of a mechanism would it take to administer the rule? The endeavor is impractical. Also, if companies are penalized with an outsourcing tax, the economics of outsourcing would still outweigh the increased taxes. Surely, there are other pressing priorities for the President than collect a few billions in taxes from companies that choose to stay globally competitive. Third, Obama's statements suggest that the U.S. is overflowing with talent who are being deprived of rightful access to jobs in the U.S. This is hardly true in the case of IT and engineering skills.
Remember that Obama is a huge proponent of high technology and very well understands its impact on business and life. He also understands that political ideology cannot always prevail over economic models. Interestingly, Obama himself conveyed his appreciation of the inevitable trend of globalization in these words: "Revolutions in communications and technology have sent jobs wherever there's an Internet connection that have forced children in Raleigh and Boston to compete for those jobs with children in Bangalore and Beijing. We live in a more competitive world, and that is a fact that cannot be reversed." Surely, this one went beyond mere election rhetoric aimed at the rust-belt.
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