US economy could take a big hit if Trump administration decides to cut outsourcing

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The “Buy American, Hire American” policy announced by Mr. Donald Trump at his commencement address may have been met with applause, but the fact of the matter is that it could hurt the US economy quite badly.

Qualifications for the IT and ITES industry:

The primary industry under which jobs are outsourced from America is Information Technology or IT, and its sister industry of Information Technology Enabled Services or ITES. The reasons that millions are jobs are sent overseas are to save on costs and to hire people with the necessary skill set and education to make this industry work in an efficient and affordable way.

IT and ITES helps corporate America to function without a hitch. The primary job creator and employment generator in America is the corporate industry, which does not require people with Scientific, Technological, Engineering and Mathematics (STEM) qualifications. STEM qualifications are required in order to keep the IT and ITES industries running like clockwork.

Foreign Students

The problem could solve itself if more American citizens were qualified to work as IT and ITES professionals at the same salaries (when cost to company is considered), but the cost of living and tax laws in America could result in these employees being grossly underpaid and overworked.

Almost all STEM courses in America’s universities are occupied up to 60% with foreign students seeking a better education. This means that 60% the technical workforce that’s eventually generated from American STEM courses will hold foreign passports, meaning that they will have to be hired on Visas – contrary to the “Hire American” part of the plan.

Short term implications

If America decides to sever all bonds with regard to outsourced work, American IT companies could fail due to a lack of workforce, high salaries for those they do manage to hire in America, higher operating costs, and eventually higher costs for their customers. If an American IT company falls due to these reasons, it is very likely that an Indian IT company will take its place, run all operations in India itself, and sell its services to corporate America, which will crumble if left without back-end support from IT companies.

Currently, the Indian and US Economies are inextricably linked at the IT and ITES sectors, and a crude attempt at an all-out severing of this connection could prove disastrous to both economies.

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