Monday, January 26, 2009

A Different View of Outsourcing

This post can be used to illustrate the following Keystone Economic Concepts:
1. We all make choices.
2. There ain’t no such thing as a free lunch.
3. All choices have consequences.

4. Economic systems influence choices.
8. Quantity and quality of available resources impact living standards.

I suspect that if you discuss trade issues with your students, the term 'outsourcing' gets bandied about with reckless abandon. People will discuss how cheap labor undermines the ability of other people to work and earn a good living. But I suspect the folks using the term restrict its use to the arena of foreign labor.

Today's issue of The Wall Street Journal has an interesting article about the number of cities and towns that are outsourcing work - to nearby prisons. The inmates provide a wide variety of services in many towns and cities, at no or reduced cost. Now that state budgets are being hit by lower revenues because of the recession, some prisons may be consolidated - removing a source of cheap or free labor for the same towns that use them. This means the town will have to cut services or pay higher prices to provide them.

I think it woudl be interesting to ask students what they feel about this type of outsourcing. I was surprised by the extent to which some small towns depend on the nearby prison as a labor pool. Here are some questions for the students:
1) Should prisoners provide service to the nearby community at no or reduced cost?
2) What does this choice mean to ability of other people to secure good-paying jobs working for local government?

The practice is old (how many movies have you seen with scenes of "chain gangs"?). Is it right?

I look forward to your comments, and I invite you to share your students' thoughts.

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