Is outsourcing exploitation?

Just ask Indian shoemakers whether they would prefer to work for themselves or for an overseas company.

A few weeks ago I received an email from a friend in Mexico. It was a PowerPoint presentation of the conditions “beneath human dignity” in which people in Mumbai are subjected to in a shoe workshop. Everyone overseas expects to see such things after watching the Oscar-winning film Slumdog Millionaire.

The presentation had been made by a businessman there after a trip to India. He had come here thinking of outsourcing the shoe making process for his company to a top-quality producer in this country. Apparently, he decided not to go ahead and went back home. His email was intended to spread the message that outsourcing means exploiting poor people.

I beg to differ.

It is true that many people in Mumbai work under conditions which, in other countries, would be considered sweatshops. And it is true they do it for an extremely low salary -- just a couple of dollars a day. But it is very far from the truth that giving business to those companies is cooperating with evil.

First of all, it is a fact that the quality of the products and services is generally high. Thus the companies outsourcing get the benefit of high quality at a good price. As New York Times journalist Thomas Friedman put it in his bible of globalisation, The World is Flat: "Rule #6: The best companies outsource to win, not to shrink. They outsource to innovate faster and more cheaply in order to grow larger, gain market share, and hire more and different specialists -- not to save money by firing more people".

By outsourcing they are getting someone else to care for a process which does not involve their core business. In this way they will be able to concentrate on innovation and marketing. This applies to outsourcing in any field: shoe-making, software and web-development, call centers, etc.

Now, what about the people working behind the outsourcing? Just imagine that company X, which employs 50 of these shoe makers (mochis as they are called here) goes out of business:

Each of these mochis would then have to set up his own shop as other thousands of mochis in the city do. He would be sitting in a corner protected from rain and sun with some rags as a roof. The “shop” is barely 3 by 3 feet and perhaps just 4 feet high. They are very efficient, working with both arms and legs (thus they need to be sitting on the floor), and don't charge much... perhaps Rs. 10 US$0.20) for a 15-minute job. Hopefully he will get enough clients so as to make 2,000 or 3,000 Rupees ($40 to US$60)in a month.

This is not really too bad, but the guys in the outsourced workshop are better off. It is true they still sit at the floor and work in a cramped space. But this is how they learned their job in the first place. Besides, those fellows have a stable job; they have accommodation (the workshop itself); their salary is secure and thus their children can go to school... The accommodation factor is very important, even though they may not get to see their family for the full week. Otherwise they would have to spend about four hours a day in jam-packed public transport and spend a few precious Rupees in the process.

I have used shoe manufacturing as an example, but a very similar line could be drawn for other labour-intensive manufacturing processes, or even for services where professionals work.

Contributing to those businesses as clients is certainly not cooperating with something against human dignity.

However, what is against human dignity is maintaining the status quo instead of improving things. The point is that those shop owners, the producers, should help their employees to improve their standard of living. Employers should take care that their workers are getting a fair income, that their children are able to attend school, that they are able to spend some time with their family, they improve their skills, that salaries are not delayed, that their debts are not overwhelming, etc.

At the same time, of course, the business has to run smoothly and make a good profit. It is not easy, and unfortunately, at times it doesn't happen. Bosses want to retain their employees at the lowest possible cost, not helping them and not giving them an opportunity to develop.

Here is where a conscientious client can put some pressure to ensure that the boss takes care of his employees. This is already happening. Many clients demand that their providers improve working conditions and quality of life of employees. A proof of this is that now outsourcing to India is now more about high quality rather than cost.

Xavier Rodrigues is the manager of a company in Mumbai for the coordination of outsourced projects. email: xavier@ecam.co.in

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