Under Bill Clintons administration outsourcing exploded through out the 90's and continues today. The American manufacturing era is over. Outsourcing will continue to be the wave of the future. Is your job at risk?
Outsourcing takes jobs from our shores and sends them abroad, where wages are often lower and other conditions are favorable because they lower a company's overhead. Outsourcing typically involves the reallocation of menial/labor-oriented jobs, often production tasks, to another country, while administrative operations remain centralized in the U.S.
Countries are chosen as sites for outsourcing because they offer a number of attractive and competitive benefits. Labor laws, wage laws, and tax laws all create favorable conditions that help a company lower its overhead and increase its profit. Increased taxation contributes to outsourcing as it reduces corporate profit.
Outsourcing in the United States began in the 1980s and has become increasingly popular, particularly in industries such as manufacturing and has increased in popularity with the explosion of globalization.
As companies in the United States and other western nations began experiencing success with outsourcing in terms of the economy and their businesses, other industries and businesses began to establish operational branches abroad. The core industries that currently utilize outsourcing include phone-based customer service relations, production of material goods (such as clothing, shoes, and car parts), and accounting. Despite its popularity as a 21st century business practice, outsourcing jobs to foreign countries hurts the U.S. economy, directly and indirectly. Menial and technological jobs that are outsourced contribute to unemployment in the U.S., while foreign students who come here to study for degrees are returning to their home countries, where increasingly attractive employment packages are offered as incentives.
Companies that use outsourcing insist that there are many benefits that make outsourcing preferable to the centralization of business within the U.S. Outsourcing lowers a company's overhead because it transfers operations to countries where operational costs tend to be lower. This benefit is passed on directly to the consumer, who enjoys lower prices and thus has minimal incentive to complain about outsourcing unless it affects his or her community directly in terms of job loss. The United States national economy benefits as consumers are stimulated to participate in the economy by increasing their purchases; however, this benefit is offset by negative economic variables. Outsourcing benefits other countries' economies as well, and it is not infrequent to see proponents of outsourcing lauding the fact that this practice results in productive employment for people living in economically and professionally depressed areas. Outsourcing provides workers in other countries with a higher wage than they might receive normally, and it relieves the burden of another country's government to provide jobs for its workers.
Despite the alleged benefits of outsourcing, this practice also has negative implications, both for individuals and the U.S. economy. Outsourcing contributes to unemployment in the U.S. In one California county, the estimated costs of just 2000 jobs outsourced to Europe, Asia, and Latin America will result in the county's economic losses in excess of $949 million annually. Personal losses will be felt as well; of the $949 million, $301 million represents lost wages. When labor and manufacturing jobs are outsourced, individuals, families, and communities suffer economic losses due to limited job replacement. Most people who work in these industry sectors are not academically or professionally qualified to work in other fields, so their job choices are severely limited, especially when the trend in a community is for industry to be outsourced. When there is massive unemployment, especially within single communities that lose manufacturing jobs, the entire economy of a region can be threatened, creating other social problems that result in economic costs.
Such problems may include spiraling personal debt, the loss of one's car or home, and the inability to pay for a child's education, thus perpetuating the cycle of economic and vocational poverty. These are indirect but important economic impacts of outsourcing. Finally, another negative outcome of outsourcing is that jobs in certain sectors-especially technology-effectively lure foreign nationals educated in the U.S. back to their home countries, causing the United States to experience a phenomenon known as reverse brain-drain. After offering generous scholarships, grants, and in-kind support to foreign nationals, increasing numbers of U.S. educated foreigners are returning to their home countries to pursue lucrative job opportunities offered by United States companies. In many cases, foreign nationals may already have initiated the visa process that would allow them to remain in the United States to work, but their return to the home country aborts that process, resulting in unnecessary costs that cannot be recuperated by U.S. based employers.
Despite the clear economic disadvantages of outsourcing, it is unlikely that this practice will decrease in popularity or use anytime in the near future. U.S. companies are interested more in their own performance than the national economy, and will defend what they perceive to be the positive effects of outsourcing. As profit motivation drives the offshore outsourcing phenomenon. The increasing trend of globalization will also support the continued use of outsourcing as a business practice. As political, legal, and economic boundaries begin to be relaxed, or to dissolve completely, the processes of outsourcing are likely to be facilitated, thereby increasing the use of this practice even more. Finally, it is unlikely that outsourcing will slow down anytime soon because, quite simply, there is limited research that substantiates the exact nature of the impact of this practice on individuals, industries, and the U.S. economy at large.
The American public lacks knowledge with respect to the pros and cons of outsourcing. The economic dynamics of outsourcing must be understood and strategies introduced so that companies can outsource more intelligently. When U.S. based operations are closed and transfer operations abroad, the impact can be devastating. What the American public needs to know is just how devastating the practice of outsourcing has become.
The sad reality is we can't fix this problem. We can't turn back time and change the events of the past. We can't manufacture products like the United States did in the past and if we did we wouldn't be able to purchase them because the prices would be to high. As new technologies are developed and introduced in America the majority of the components will be manufactured in foreign nations imported to the United States, assembled and sold to the consumer foreign or domestic. The business scheme has changed and there is no correcting it, the true question is how do we move forward and create employment in America that will support our current and future work forces as the population in the United States continues to climb? Resolving this problem will determine the economic success of our country.