> Recent Article in Mckinsey – “How Germany can win from Offshoring” is the latest in a series of articles on benefits of Offshoring.

Mckinsey believes Germany will not be able to gain as much as US from
offshoring jobs to India or Eastern Europe. The key reasons being
inflexible Labor laws and negligible capital investments in offshore
companies in India & Eastern Europe.

A few numbers for the so inclined:

US Maths:

Mckinsey Global Institute (MGI) research says for every 1 US dollar
outsourced to India, The global economy gains at least 1.45 USD
dollars.

Out of this Indian economy is estimated to be gaining at least 33
cents through wages paid to labor, gain for Indian suppliers and
additional Tax revenue to Indian Govt.

US economy is estimated to be gaining at least USD 1.12 for every US
dollar outsourced. The benefits is through cost savings to US
companies, supply of additional hi-tech equipment and services to
India, repatriated earnings by US companies having capital Investments
in Indian Offshore companies, and indirect benefit of redeploying
labor in higher value jobs.

Germany Maths:

Germany seems to be not so lucky when it comes to repatriated earnings
and redeployment of labor. While Germany does not have major capital
investments in any offshore companies, it’s unemployment rates are
soaring at 1.4% leaving out any scope for redeployment of labor
displaced by offshoring. For every USD spent Germany seems to be
gaining only 0.8 USD.

These numbers, if are backed up by sufficient data, have important
lessons for Germany. Protectionism, Inflexible labor laws are major
obstacles to higher economy growth around the world. Developed and
mature economies are no exception.