The real reason for outsourcing is macro economic efficiency. In true free trade its the last denominator that companies can do nothing about internally as its an external factor.

Like it or not its the reason why china should not float their currency and the reason why countries like Singapore have managed to survive in a very competitive technical sector. In countries Like the US,UK and Australia you may pay an engineer more but the engineers themselves don't benefit due to the high living cost. The high living cost is attributed to the high proportion of non-productive sectors in an economy compared to productive sectors. Productive sectors would include the likes of Engineering,manufacturing, mining,agriculture while non productive sectors are largely the finance sector and bureaucratic sectors. In essence productive sectors support the non productive sectors(eg you cant eat money if there are no farms).

I will give you an example of what has happened in Australia recently. In the last 10 years the cost of house ownership(and thus rent) has gone up hugely. Incomes have gone up to match, but once the cost of paying for a house is taken into consideration, what is left over in the income has not gone up, often down. Take two people bidding for a house. In order to get the desired house each bidder goes to the bank to secure the loan. Thus due to bidding competition each will try to obtain the highest possible loan possible but from the same bank. Thus the bank increases the price of housing by giving larger loans and increases its profits due to interest on the loans. In the end the productive sectors of the economy must provide high pay jobs to support the high value loan to provide the bank with a profit.

So why should a company pay for bank/financial sector profits when in a country with a lower cost of living they could pay the same amount and the engineer would benefit much more as they would actually retain the wealth. Otherwise if the company does pay the engineer less the engineer would still attain an equivalent living as one on a much higher income in a high living cost country.

Take a country like Singapore for example. Here the government heavily controls housing. Singapore doesn't have much choice if you look at the population density however they have benefited greatly due to maintaining a low living cost. Essentially the government here controls 90% of the housing as government housing. In order to get his housing you get a government loan which is not designed to make the government profit. They call it subsided housing, but its not really subsided. The prices of houses cover the construction cost, they just don't provide profits to the financial sector through high interest loans that artificially inflate house prices through competitive bidding.

The result is you can hire an engineer for a lot less in Singapore than you can in the US and the engineer still has an equivalent life.

The second example is China. As a developing country china has a very low cost of living. In much of the country no one expects to gain a high level of profit from housing. As a result in these areas you can set up a manufacturing company and by default be competitive due to low living costs. Should the Chinese government float their currency, from the point of view of foreign-non Chinese currency, the cost of living will rise dramatically. Through this rise, locals would suffer from an increase in relative living cost due to the lost competitiveness. They only institutions set to gain are the financial ones as they will make massive profits of the rise in the Chinese currency. That profit has to come from somewhere and thats the productive sectors of the world economy. i.e. engineering.

Thus when you see outsourcing, don't blame the engineering companies- they are in a loose loose scenario. If they don't, they loose due to foreign competition, if they do they will fail due to a faltering local economy.

Blame the non productive financial institutions, the naive governments who have no idea what macro economic efficiency is( do you really think that Bush has that one in his vocabulary) and the general public for caring.

If free trade is here to stay then in the end unless western countries improve in the macro economic efficiency there will be no engineering left in the west. When will we learn.