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Is Outsourcing a Moral Practice?

When I told my husband that I had to write this post defending outsourcing, he suggested the title “I love foreign workers.” Admittedly, that would be more attention-grabbing, but I stuck with the more descriptive heading. Why do I want to defend outsourcing as moral? The Royal Bank of Canada (RBC) has been under attack in the social media because its supplier, an IT outsourcing firm iGATE Corp. has brought in temporary foreign workers for training, to replace 45 workers in RBC’s Investor Services division in Canada. Eventually the jobs will be transferred abroad. RBC is defending itself by stating that its suppliers, not the bank itself, is hiring foreign workers, and that not all 45 jobs will be lost as RBC is working diligently to “assist workers through the transition.” But this defense is not good enough.

The critics in the social media are shaming RBC for moving Canadian jobs overseas, thus allegedly jeopardizing the employees’ livelihoods, and they are threatening to take their business elsewhere (presumably to more nationalistic banks, if they can find some). RBC’s meek defense will not placate these critics or the government. Federal minister of human resources and skills development, Diane Finley, has reportedly stated that RBC contracting with iGATE to replace Canadian workers is unacceptable, and the government is investigating and determining the next steps.

RBC and outsourcing in general need a moral defense, one that explains why outsourcing is right and why the bank—or any company—has the right to do it. Banks offer us valuable financial services: they safeguard our savings and pay us interest on our deposits; they give us mortgages so we can buy homes, and other loans and lines of credits so that we can finance other purchases such as cars, home renovations, tuition fees; they finance companies that employ us, or a business of our own. Without banks, we would have to resort to storing our cash under the mattress, which does not earn any interest, and depend on friends and family for loans; which would be too cumbersome, too risky, or not sufficient, at least for mortgages or business loans.

In order for banks to exist and offer all the financial services they do, they must be competitive. This means that they must control their costs and operate as efficiently as possible—or they will go out of business, replaced by more efficient competitors. The role of banks is not to provide (guaranteed) jobs for home-country employees but financial services to their clients, and to do so profitably. Therefore, banks should hire those who are willing to do a job competently at the lowest salary, wherever in the world they may be. This is the moral thing to do—because it is good by the standard of human well-being.

Hiring employees who are willing to do the work at the lowest salaries—such as workers in developing countries where the cost of living is much lower—naturally benefits the bank (its shareholders) because it remains competitive and profitable. But it also benefits all the employees of the bank, whether in the home country or elsewhere, as the bank is thriving and continues to employ them. Clients of the bank, both individuals and businesses, also benefit from the competitively priced financial services that make achievement of their goals possible.

But what about those home-country workers, such as the 45 employees in RBC’s Investor Services division who will lose their jobs? They will also benefit, despite the temporary hardship that the job loss will cause. The fact that RBC will remain competitive means that the bank can afford to help them to find jobs elsewhere. It also means that the bank will be able to finance other businesses (and their cheaper, better products), which means more job opportunities for the laid-off bank workers elsewhere. It also means that everyone in Canada, including these former employees, can enjoy competitive financial services—as opposed to fewer, less innovative, more costly services that less competition in the banking sector would mean.

This is why I love competition and foreign workers—they are good for all of us. RBC and any other company should be free to outsource as much as they want—because it is moral.

  • http://www.facebook.com/stephen.shantz.7 Stephen Shantz

    This argument falls apart when one acknowledges that RBC and other large Canadian banks and Corporations demand the government restrict competition from foreign service providers. AND demand endless Welfare handouts from the state.
    Now…. If RBC (and other corporations) are willing to forgo state aid of any and all forms, open up the boardrooms and Main streets to Cheaper Senior staff, Directors, CEO’s and service providers from third world countries, then by all means, fair enough. Till that point this is nothing more than a horrible attempt to justify incompetent business management and wage theft.
    Tell me, Why has Senior management pay rocketed up while dividends and net ROI has remained so poor?
    Sorry but you’re just supporting the kleptomaniacs and deliberately ignoring the obvious.
    The question is why; useful idiot or vested interest?

  • The Thorn

    I posted yesterday a comment to Jaana’s article that partially disagrees with the author and today is vanished. Is that the rule on this discussion forum ? If you partially or totally disagree with the author you get censored and your comment is removed ?
    That is sad and disappointing.

  • southc0ast

    Since when is outsourcing equated to foreign workers? I am well aware outsourcing occurs frequently amongst domestic enterprises without having to go “offshore” . Outsourcing is more often an outcome of an organization realizing a particular activity is not part of its core competency. Whether it is HR, facilities management, running a help desk or network management, these functions are frequently outsourced as an organization realizes it cannot afford to build up these cost centers at the expense of those products and services customers pay for. Of course, if one examines the ever increasing cost of doing business, most all paths lead back to the state and those direct or indirect costs imposed on commerce for the purpose of funding government’s contrived justifications.

  • http://www.infinit-o.com/ Alleli Aspili

    Well, this question has always been present in the business world. I’m not surprised that there are still certain individuals who think that outsourcing isn’t good in a lot of ways. Big news may change somebody’s mind but in my honest opinion, outsourcing is moral as long it is done right.

  • http://www.capitalismmagazine.com/ Capitalism Magazine

    Your post would only be removed if it was rude. Observe other posts that disagree completely are not removed. Try reposting it again.

  • http://www.geopolitics.us/?p=1645 Libertas !

    So whatever is expedient for the bank is by definition moral. That’s an interesting moral standard you’re advocating.