Outsourcing as an Economic Indicator

Filed in archive Outsourcing News on September 24, 2009

© Michiel2005

In yesterday's Business Week, Mehul Srivastava described a decline in salaries and turnover in Indian firms, no doubt caused by the declining economy. That certainly parallels the global recession - particularly in areas such as technology investment and long term deals.

Ultimately, it will be interesting to see whether offshoring becomes a leading or lagging indicator of labor market growth over the next two or three years. On the one hand, one could expect that firms will be reluctant to grow their own staff - instead relying upon outsources to pick up the slack as markets improve. On the other hand, there is lots of cheap, readily available skilled labor in the U.S., and companies may decide to grow their internal or on-shore outsourced relationships prior to moving offshore.

After the recession is finally behind us, however, we will have some empirical data as to whether offshoring acts as a leading indicator to labor rebounds or lags behind it. Then, economists may have a new indicator to rely upon when predicting the end of difficult times.