Outsourcing – Don't Get Bangalored?
As the world has gotten “smaller” in terms of trade, outsourcing has become a hot topic in much political and economic debate in the United States. An Associated Press-Ipsos poll in May 2004, found that 69 per cent of Americans thought that outsourcing hurts the US economy while only 17 per cent thought it helped . President Bush’s chief economic advisor Greg Mankiw has stated “outsourcing…is something that we should realize is probably a plus for the economy in the long run” . While John Kerry has emphasized, that he is going to stop the outsourcing of American job . With the presidential election coming up, and the candidates giving mixed signals about the effects of outsourcing, it could turn
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Finally, I will also introduce the theory of immiserizing growth.
A glance at staticstics
Is the public concern over outsourcing valid?
The most cited official projection outsourcing is by Forrester. It is estimated that outsourced US jobs will grow from about 400,000 in 2004 to 3.3 million (recenty revised to 3.4 million) by 2015 which seems quite significant. But on a yearly basis this accounts for about 250,000 jobs but in perspective the number is small compared to the total US employment of 137 million. It actually only constituate less than 2 per cent of 15 million Americans who lose their jobs each year . Goldman Sachs estimates that offshoring has accounted for 500,000 million lay offs in the past three years. A study by Ashok Deo Bardhan and Cynthia A. Kroll at the University of California, Berkeley indicates that up to 14 million Americans now work in occupations that are at risk of being outsourced . Forrester also estimated that 300,000 US jobs have been outsourced. While the Commerce Department 400,000 new jobs, which leaves a net result of 100,000 new US jobs . In addition, an Economic Policy Institute in New York announced that 144,000 new jobs were created in August 2004 . Summarizing the numbers, it seems that outsourcing will have a positive effect on the overall US economy.
In that context, the increasing of outsourcing in the US is inevitable. The 2016 presidential candidates mentions about the negative effect of outsourcing to the US due to exporting of jobs to over-sea vendors. The outsourcing opponents claim that outsourcing is having a negative effect on the American economy, as one problem is solved by creating another problem. The jobs were taken away from the US, double the unemployment ratio and seriously impact to Americans, especially the disability.
It is believed that offshoring will have minimal effects on the employment rate in America due to the theory that when jobs are moved to other countries, the workers who have become unemployed will find employment as new opportunities are created. In reality, the adjustment will be difficult as proven by data collected by the Bureau of Labor Statistics Displaced Workers Survey in the year 2004. A survey showed that workers who were laid off between the years 2001 and 2003 remained unemployed at the beginning of 2004. It was also recorded that 43 percent of those who managed to find work earned the same pay as they did prior to being laid off, but the remaining 22 percent did not. These facts rely on the rate at which
Everybody has their own worries and opinions, so they choose to care about different things. Barbara Ehrenreich puts it this way, “The world may be flat, as New York Times columnist Thomas Friedman has written, but I always liked to think that I was standing on a bit of a hill” (608). The truth about outsourcing flies over the heads of many Americans, but hits Ehrenreich right in the face. She writes this article because it’s a journalist’s job is to take in new information that may be hard to understand or meant to be kept on the down low and convey it in a way that’s appealing to many. She implicitly blames CEOs and other high class positions for some of the more outrageous and negative outsourcing situations. Zakaria directly addresses this problem stating: “There is a growing gap between America’s worldly business elite and cosmopolitan class, on the other hand, and the majority of the American people, on the other” (622). America’s worldly business elite and cosmopolitan class are the ones that understand and control outsourcing, while the rest of Americans stay uninformed and are the real victims of outsourcing. Zakaria describes “the rise of the rest” as the third major tectonic power shift. His theory, which makes perfect sense, implies that these power shifts are a natural occurrence. According to Zakaria, the third shift shouldn’t hurt America and Americans shouldn’t feel threatened or worried by it. The thing that Americans should be worried about is the growing gap of power that exists between the elite business class and the rest of Americans. Because the higher class only looks out for themselves and only seeks profit for the firms that they control, many negative things are happening to the lower class, the biggest being the outsourcing of their jobs. This gap in power is what Zakaria thinks could hurt America and make it impossible to adapt to the more globalized world. Americans need
Many businesses in United States manufacture their product overseas. This involves manufacturing products outside United States where the labor cost is cheaper. Because of cheap labor, it is often more economical for a U.S. company to manufacture overseas and pay the shipping costs than to manufacture in the United States. For a company, the savings may be substantial. However, there are negative impacts on U.S. employment, as many jobs in the United States are being outsourced and replaced by overseas positions. The manufacturers outsource production projects to save time, money or resources. The manufacturing is outsourced so as to remain competitive and maintain a steady work flow. Without outsourcing, manufacturing costs could escalate to the point at which no product would sell and all employees would have no work. Outsourcing comes
Despite that an excessively excellent image of outsourcing was provided to individuals one or two of years back, the truth check they were confronted with shattered the dream badly. Recent statistics reveal that over four-hundredth corporations are concerned either in experimenting or are already engaged in shifting their services overseas in search of low-cost labor and services that are being provided by countries like China and Bharat. Such efforts have left native market labor at extreme disadvantage wherever they're finding it vastly tedious to create each ends meet, leave behind the back-breaking burden of taxes they're being obligatory to. With over four-hundredth major company executives registering their opinion by discouraging the method of outsourcing the controversy that was antecedently being won by the
A large majority of the American people are against outsourcing because it leads to fewer jobs, unemployment, and the negative impact it has on our economy. Moving a company to a place with cheaper labor and such causes thousands to lose their jobs and it also leads to less jobs that Americans can have. Outsourcing is only good for big businesses, not the people who work there or the smaller businesses around. It also has a negative impact on our economy. Although you are producing things at a cheaper price and selling it on the cheap doesn't mean people are able to buy it. If you get rid of jobs and cause unemployment, less people can purchase things and circulate our money. Our economy is built on the fact that people are able to purchase products. When that goes away
It ends up putting our country farther into its trillions of dollars in debt. “Eight of the biggest U.S. technology companies added a combined $69 billion to their stockpiled offshore profits over the past year, even as some corporations in other industries felt pressure to bring cash back home (U.S)”. Eight of the top technology companies,including Microsoft, Apple and Google, now account for more than a fifth of the $2.10 trillion in profits that U.S. companies are holding overseas. “The amount of unrepatriated foreign profits reached $2.4 trillion, according to Citizens for Tax Justice, allowing companies to avoid up to $695 billion in taxes
The phenomenon has created major suffering for many American and as this outsourcing continues to spread, Americans will demand action (R. Hira 2008, p-95). The book also adds that scholars Ralph Goory and William Baumol have shown that even when the basic model of the economics are used trade does not make both the trading partners better off. The trading in one country will have a negative impact while trading in other country will have a positive impact. The country with negative impact will definitely affect its economy. United States economy being the world’s largest economy; historically, it has maintained a stable GDP growth, a low unemployment rate, a high level of research and capital investment funded by both national, and because of increasing saving rates, increasingly by foreign investors. But offshore outsourcing has increased the unemployment rate dramatically in the decade. And so the economy worsened day by day.
While outsourcing may be beneficial to some of the companies partaking in it, the general consensus is that it ultimately proves to be harmful to the American workforce. The act of outsourcing and shifting many company call centers and technical support teams, or “low skill service jobs,” to foreign countries reduces jobs for those that could truly benefit from them within our own country. The unemployment rate has dramatically increased, and continues to rise, compared to what it has been in years past; yet there are numerous companies which still insist on handing over these “low skill service jobs” to people in other countries such as India. The most obvious and logical reason for outsourcing is reducing costs; people are working for
The U.S. economy has seen many hardships within the last decade. The economy has suffered from a recession that is still threatening to cripple some Americans and unemployment has been at an all time high. People have lost homes and jobs and many businesses have gone bankrupt simply trying to survive. However, in the midst of this economic crisis some companies have managed to survive. Many companies, approximately 36% of them, have found a way to avoid economic collapse by cutting costs (Job Outsourcing Statistics, 2014). One of the most popular cost reducing strategies of our time is called outsourcing.
As with so many global trends, there is significant disagreement over the implications of global competition in services for American prosperity and competitiveness. Many people are pessimistic about the impact of offshore outsourcing at a time when American workers are having more difficulty finding employment, since it creates personal hardships, reduces the tax base and increases demands on our safety nets. Competitors from lower-wage nations, it is feared, could put
As the problem of job outsourcing becomes more of an issue in politics, elected officials like the President and Congress will no longer be able to ignore the dilemma. The war in Iraq has been at the forefront of the presidential race but the importance of outsourcing
Not only is this outsourcing causing companies to lose their best employees, but also the consumers that buy their products. "Employees displaced by foreigners and left unemployed or in lower paid work have
“Outsourcing refers to the practice of contracting workers outside of a company or business for work duties or services previously performed by company employees or “in-house”. This practice is also often referred to as offshoring due to the increasingly prevalent use of “non-U.S.” service providers for these outsourced duties. However, strictly speaking, outsourcing can and does refer to the use of contracted labor provided by individuals outside of an organization, but still within the U.S.; whereas when these same services are provided outside the U.S., it is both outsourcing and offshoring.”
For decades, American citizens have been complaining about how outsourcing has ruined their lives and that it is only going to harm America and its economy. Unfortunately, jobs are going to be lost and the unemployment rate may rise due to globalization. However, the benefits of globalization are infinite. People in other parts of the world will achieve a greater life than they ever thought possible due to the factories built in their countries. Due to the poverty in third world countries, these factories will provide a great source of income for the citizens of third world countries. People in America will benefit from the stable economy; prices of America’s goods will stay relatively the same. Despite the misinformed Americans opinions