The NewStandard ceased publishing on April 27, 2007.

CEOs Rewarded with Generous Pay Hikes for Outsourcing

by C.P. Pandya

An annual report from a progressive Washington think tank shows that CEOs of companies that outsource labor to workers abroad are paid more than their more domesticated counterparts.

Chief executives at US companies that outsourced jobs overseas received a 46 percent salary hike last year, more than five times the average CEO raise. Meanwhile, ordinary workers' paychecks remained largely unchanged.

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The Institute for Policy Studies, a progressive Washington, DC-based think tank, and United for a Fair Economy, a Boston labor advocacy organization released a report Tuesday called "Executive Excesses 2004."  Their study found that CEOs of companies that outsourced jobs received large award packages from company boards, but on average, regular workers saw pay boosts of only two percent in 2003.

In dollar terms, the study found that the average pay of CEOs at the top 50 outsourcing companies was $10.4 million last year, compared with the $26,899 salary earned by the average American production worker in those same companies.

The report also found that CEOs of the companies studied make on average 3,348 times the mean income of Indian call center workers at outsourced shops.

The debate over the impact of outsourcing on the US economy has been skewed by election-year politics, playing largely along partisan party lines.

Republicans have largely seen outsourcing as a way of cutting company costs by hiring cheap, white collar labor in developing countries such as India and China. They have argued that the flight of jobs overseas has not contributed to a net loss of jobs in the US because corporate productivity has increased, since the economy emerged from recession in late 2001.

Democrats have largely taken a nationalistic stance, asserting that "American jobs should be for Americans first," and that people in the developing world should not have access to those jobs. Moreover, Democrats argue that sending jobs overseas is detrimental to the economic recovery in the US because new jobs have not been created in replacement.

Outsourcing has been a boon for the small groups of white collar workers in developing countries hired by US firms, but the nature of the debate there too has been politically and socio-economically charged.

The groups' findings, however, point to the corporate effects of outsourcing on income distribution more than the macroeconomic effects. "The fact that leading outsourcers make more money than average CEOs is one more reflection of a perverse system that rewards executives for making decisions that may improve their bottom line while hurting workers and communities," the authors write in the 11th annual survey.

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The NewStandard ceased publishing on April 27, 2007.

C.P. Pandya is a contributing journalist.

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