Contemporary World Issues

Outsourcing

  Americans are not seeing economic growth and many believe outsourcing jobs to developing countries is a major factor.  It is true that Outsourcing jobs creates a large population of “under-employed,” a population who doesn’t see much of any benefits from their employers.  However, taking another look, outsourcing jobs also strengthens the economy by stimulating trade and creating more jobs.  Many economists agree that the economy benefits stronger from trade than it suffers from lost jobs, and many economists disagree.

Pros of outsourcing

 Cheap Labor

Increase in Productivity

 outsourcing jobs creates a stronger middle class in other countries which the American economy benefits from. Salaries increase because low paying jobs are outsourced leaving Americans with high paying jobs. As well, the number of jobs lost to foreign countries is minuscule compared to the number of new jobs our nation receives. “According to the Organization for Economic Co-operation and Development, the United States has the highest rate of reemployment of any member country by a factor of almost two. Over the past 10 years, 3.5 million private-sector jobs a year have been created, on average, for a total of 35 million new jobs, so most workers who lose their positions find another within six months” (McKinsey 1). Outsourcing is not a major factor of the number of Americans who are unemployed, or a factor that causes Americans to take lower paying jobs. The economy of the United States is strong because of its openness in the globalized world. Outsourcing allows the United States to find globalization advantageous. Outsourcing increases foreign competition, leading to the creation of many jobs. Outsourcing also creates jobs by allowing businesses to save money through cutting costs in order for the business to grow. The growth of American businesses means the creation of more jobs needed in bigger business. Companies to do not add to the unemployment rate, but they help Americans by keeping the higher paying jobs and eventually creating more jobs in a stronger business.

, outsourcing jobs results in the increase of productivity in businesses. Moving jobs to developing countries increases work hours as well as increase in amount of work done by each employee. Outsourcing allows business to obtain better control. An outsourcing partner as well as clearly stated procedures increases management of the business.  Through communication, an outsourcer can obtain the necessary control as well as monitor the employee’s work. A company can still keep a relationship with an employee if he is working overseas. As well, businesses are able to control operating costs. They cut costs in upgrading technology and training for those new technologies. Outsourcing not only reduces costs, but reduces the time it takes to reach profits.

The downturn of the economy is not due to outsourcing but other factors. “Economists say the drop in employment, however, is primarily explained by factors other than outsourcing, such as the bursting of the tech bubble and its effects on Wall Street, the general downturn in the business cycle, and the consolidation of retailing under mega-companies like Wal-Mart Companies” (Otterman 6). Other factors add to the downturn of the economy such as new technologies that have diminished the need for many jobs, as well as the impact of September 11 on the economy. Companies outsource in order to grow their businesses and be more profitable. Outsourcing stimulates competition and increases productivity by a large amount. The extra profit they receive from outsourcing jobs is going straight to them, which means it is going to the wealth of the United States economy. The money saved by these corporations is cycled back into the economy through investors. Outsourcing also helps the economy through increasing exports.  While more jobs are being outsourced to other countries, those countries look to America for resources such as computers or other services. The economy is becoming more globalized, and through outsourcing, America has a role in the world labor market. Through increasing trade, Outsourcing helps the economy.



 



Cons of outsourcing

Loss in control from lack of management

Language barriers

Loss of American jobs


Some believe that jobs that are outsourced to developing countries are not replaced, and that outsourcing causes the jobs that are left in America to receive lower salaries and lack benefits that they would receive if outsourcing was not happening. Outsourcing puts people out of jobs and creates this population of “underemployed.” The middle class is severely affected by outsourcing because hiring people in developing countries will always be cheaper for businesses. Moving jobs overseas increases labor supply which decreases salaries over the entire spectrum.

Outsourcing creates a lack of management in a company through the inability to take control overseas. When an employee is in another country, it is hard to keep control on him and carefully watch the efficiency of his work. You cannot keep track of the employee’s progress from day to day. In other countries there are also completely different laws which make managing development and security hard. It is too risky for a company to outsource because of the lack of management. Once a company signs a contract, it is hard to end it if goals are not met.

Few jobs are lost in the country when they are moved overseas. Some Americans are outraged by the millions of jobs outsourced, mostly in manufacturing and the information technology industry, because they believe it causes companies expect more work to be done for lower wages. A large percentage of Americans who lost jobs to outsourcing saw a cut in wages. Through jobs lost and the impact it has on lowering income, outsourcing degrades the value of life for Americans. They lose motivation when they see their jobs disappearing in their company. Outsourcing is the cause of the unemployment rate, and the reason unemployed Americans have a hard time finding new jobs. Because of the lost jobs, Americans are not spending. They are not putting money into the economy. When consumers are not putting money back into the economy, then the economy cannot grow.

  Works cited

Farrell, Diana. "Who wins in Offshoring?." International Herald Tribune 11 Nov 2008 <http://www.mckinsey.com/aboutus/mckinseynews/pressarchive/Offshoring.asp>.

  Lohr, Steve. "New Economy; Offshore Jobs In Technology: Opportunity Or a Threat?." The New York Times 22 Dec 2003 10 Nov 2008 <http://query.nytimes.com/gst/fullpage.html?res=9B04E4DE103FF931A15751C1A9659C8B63>.

  McKinsey & Company. "Who wins in offshoring?". McKinsey Quarterly. December 1 2008 <http://news.cnet.com/2030-1014-5096283.html>.

  Neurohr, John. Gibbons, Sean. "The Impact of Offshoring on the U.S. Economy: Policy Perspectives." 11          Nov 2008 <http://www.americanprogress.org/issues/kfiles/b81290.html>.  and help “dislocated workers” as well as extend the Trade Adjustment Act. 

  "Offshoring American Jobs: An Economic Catastrophe in the Making?." Progressive Living. 10 Nov 2008 <http://www.progressiveliving.org/editorial_offshoring_American_jobs.htm>.

  "Offshoring." Economic Policy Institute. 10 Nov 2008 <http://www.epi.org/content.cfm/issueguide_offshoring_faq>. 

  Otterman, Sharon. Council on Foreign Relations. December 1 2008 <http://www.cfr.org/publication/7749/trade.html#6>.


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