Table of contents
Protectionist policies against some but not all…
Trump’s policies can’t change the math…
Quality is still king…
Offshoring still has a bright future…
Contributors
David Landau
Contributor
It is widely recognized that President Trump has expressed concerns about the use of offshore labor. During his first term, his “America First” policies focused on protecting U.S. industries and jobs, leading him to challenge certain free trade agreements and multinational economic cooperation efforts. He also implemented protectionist trade measures aimed at reducing America’s reliance on foreign markets.
Throughout his second presidential campaign, Trump has continued to emphasize his protectionist approach, indicating a commitment to maintaining similar policies in a potential second term.
As a result, many businesses that rely on or are considering offshore labor may view these policy directions with concern. Trump’s presidency could potentially influence trends in the labor market regarding offshoring. However, the situation is multifaceted and involves various factors beyond the scope of these policies.
Protectionist policies against some but not all…
During his first term, Trump passed a number of protectionist policies, including placing tariffs on imports, subsidizing local manufacturing, farming, and coal mining, and renegotiating multiple trade agreements.
Though clearly aimed at reducing America’s dependence on offshore labor, Trump’s protectionist policies were primarily focused on countering China’s extensive manufacturing sector. The tariffs and other legislative measures introduced during his presidency were aimed mainly at curbing what he and his administration perceived as unfair trade practices, intellectual property theft, and forced technology transfers.
Almost all of the regulations Trump put forward were aimed at ending the U.S.’s reliance on China’s low-skilled labor, and he never placed a significant emphasis on ending the use of high-skilled offshore labor by U.S. businesses.
Although Trump’s recently successful campaign has included increasingly vigorous language regarding tariffs and other measures to reduce unfavorable trade practices, it is still unlikely that the policies he puts forward during his second term will target any other country as aggressively as China.
Trump’s policies can’t change the math…
Trump’s policies can change a lot in terms of labor laws and practices, but to successfully compete with offshore labor, his policies would have to overcome an enormous disparity in labor costs. With savings that can exceed 80%, offshore labor provides extraordinary cost-cutting potential, and given the preexisting regulatory framework of the U.S., overcoming the difference may simply be impossible.
The federal minimum wage is $7.25 per hour, which has been in effect since July 24, 2009. However, this rate applies only at the federal level. Trump has little control over the minimum wage at the state level, and the state of California has a minimum wage that is more than double the federal minimum – $15 per hour. Furthermore, California has just passed a minimum wage of $20 per hour for fast food workers, effectively creating a new de facto wage floor throughout the state. Workers in California are now expecting a minimum wage of $40,000 per year, regardless of their profession. A business in California could hire a fully qualified offshore accountant for less than a fast-food worker. While the federal minimum wage may decrease under Trump, state-level minimum wages will likely remain unaffected. Given the direction they are headed, offshore labor will still provide a far more cost-effective alternative.
Trump may be able to pass tariffs to raise the cost of using offshore employees, but it is unlikely that he could ever raise them a sufficient amount to overcome the gap without harming our own economy in the process. We live in a world that is more interconnected than ever, and tariffs may create healthy competition with the U.S.’s competitors, but when used in excess, they can have devastating consequences, and Trump and his advisors are entirely aware of this.
Given the enormous cost-cutting potential of offshore labor, it is safe to say that offshore labor will still hold the same value during Trump’s second term as it did during his first term.
Quality is still king…
Trump’s policies historically focused almost exclusively on China, and even if put into full effect, they can’t change the cost-cutting power of offshore labor. But even if Trump could change the math and shift his ire to other nations, quality is still king.
Offshore labor offers businesses a level of value that is simply unmatched by domestic labor, even if costs do go up. A business that only focuses on building up a local workforce is missing out on the vast opportunities available to any business that goes with offshore labor. In today’s interconnected world, by using offshore labor, a business can get the best employee for the job no matter where they are in the world, adding new and powerful skills to their workforce.
Beyond just value and quality, offshore labor offers quantity. The U.S. has faced a significant shortage of labor in countless sectors including tech support, finance and accounting, media and marketing, and customer support. These roles are available in abundance offshore for a fraction of the cost, and many offshore workers are better trained and more experienced than their American counterparts.
Even if the cost of offshore labor were to go up during Trump’s presidency, quality is still first and foremost, and offshore labor offers some of the highest-quality employees on the market in the most in-demand fields.
Offshoring still has a bright future…
Trump has an anti-globalization agenda. His zeal for protectionist policies cannot be denied. His presidency could definitely create a change in labor market offshoring. Despite this, offshore labor still has a bright future.
During his first term, Trump’s tariffs and regulations were mainly aimed at China and its manufacturing sector. Other countries were left relatively untouched, and Trump did little to change our relationship with them.
Even if Trump’s policies were to change wages and increase tariffs, it is extremely unlikely that he could ever change them enough to upset the cost-effectiveness of offshore labor. If the cost of offshore labor were to go up, a quality employee would still be a quality employee, and offshore labor allows any business to access a quality employee anywhere around the world.
It is often said that “a rising tide raises all ships”. Trump’s first term saw strong economic growth, high investment gains, and robust business earnings. If his second term is as successful as his first, businesses will be able to expand with the growing economy, and offshore labor will always provide a cost-effective way to add skilled employees when the times are good.
No matter what policies Trump puts in place, businesses can and should always seek the best employees for the best wages, and that’s what offshore labor is all about.