Fair enough, that was not the best example.

But I'd also observe that since business owners have to capitalize the wages of the machine operators producing injection molds, then there is an advantage to outsource the whole operation.

Comparing a procurement manager and a CNC operator [the person running the milling machine making a mold] paid the same amount, the CNC operator has a bigger negative impact on the businesses' bottom line, because the business can't expense most of the CNC operator's wages in the current tax year, whereas the procurement manager is generally accepted as fully deductible expense.

Of course, the labor that went into making the mold is effectively built into the acquisition price of the mold, so you haven't gotten rid of it by outsourcing it.

But, by building it into the price of an outsourced mold, one can delay the purchase of the mold to next year to improve the P&L this year, but you can't similarly delay the wages of the tooling operator to a later date.

So, when a CFO is looking for a way to improve the P&L in a given calendar year, there's an incentive to cut operators who build factories, tools, and other assets that have to be amortized, and replace them with more flexible outsource options.

Of course, part of the reason mold making left the US is wages are lower outside the US. But I'd say the current situation with software engineers is a datapoint that demonstrates the impact of expensable versus amortizeable labor on employee retention. It could be that if the tax code is not fixed, the same "CFO logic" would lead to more and more software being outsourced over time, as management is an immediate expense, but software engineers are not.

I suppose one can then argue, why should software engineers get special treatment compared to tooling operators; but then I would counter-argue that perhaps tooling operators should have gotten better treatment so we could have retained more of them in the US.

source?