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, which allegedly jeopardizes 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 (assuming a central bank issuing money), 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, and likely insufficient.

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.

4 COMMENTS

  1. Thank you, Miss Woiceshyn, for your excellent article. (I recently found your site and subscribed, gratefully.)

    You are right, and it’s good to read someone defending the morality of freedom, especially these days.

    Interestingly, I just watched the five-part YouTube video/talk by Dr. Stephen Hicks (feed://www.stephenhicks.org ) on the issue of rent control. You probably already understand the issue, why rent control, although it seems to benefit renters, short-ranged at least, it is bad for everyone involved, landlords and renters and everyone actually (given the dampening/attack on the rental market and the principle of rights), but I thought I’d mention it in case you might be interested. It’s a good presentation, the kind that I think there needs to be more of, giving both sides of the argument, yet ultimately coming down in favor of the morality and practicality of freedom. People need to see that the moral is the practical, but they need to understand just why that is. This is so in principle, whether the issue is rent control or outsourcing.

    Here’s the YouTube page for his talk, if you’re interested:

    Although freedom is to the benefit of everyone (excepting power-lusters and those that want to mooch or loot), too many do not understand how and why that is so, and I think that Dr. Hicks does a good job of showing how the incentives work politically given the dominance of the morality of altruism in our culture – the politicians are short-ranged power seekers, looking to be elected or re-elected, and most people are short-ranged and blinded by altruism, even if they’ll ultimately see the light. Our culture will have to change before we get the kind of politicians we truly need.

    Thank you, again.

      • You’re very welcome, Jaana. Thank you.

        I have just read you latest post, “Do capitalism and egoism cause buildings to collapse and crush workers?,” via my email subscription, and I was thinking about commenting. I did not realize, when I posted my comment along with the YouTube URL for Dr. Hick’s presentation, that his video would actually show up here on your site. I assumed that it would just be a link to the video.

        Dr. Hicks now has another excellent video discussion on minimum wage laws, including the ethical, political and economic arguments on both sides, along with the consequences of such laws. Excellent presentation. Below is the link to his site for the post instead of a direct link to the video on YouTube. (On his site he includes the video in full along with links to the five parts on YouTube.)

        http://www.stephenhicks.org/2013/04/29/minimum-wages-business-ethics-cases-series/

  2. There is detail tyranny in rent controls.
    In the Greater Victoria area one very small landlord had to re-admit tenants who had damaged the apartment, because he had somehow incorrectly checked the Reason box in paperwork as wanting the apartment for relatives, thus had to give longer notice. IOW the bureaucracy protected bad people by its refusal to recognize the actual reason. That’s typical of bureaucracies.

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