Pros And Cons Of Outsourcing

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Outsourcing is the transfer of a business activity or function to an external supplier, which takes main responsibility to accomplish the work. Recently, because of globalization, outsourcing becomes much more widespread than before. Some developed countries such as the United States often have outsourced jobs for developing countries like India and China. Outsourcing has two sides, like everything. People hold different viewpoints about it; some are optimistic about the future of outsourcing while others are not. There are pros and cons; and it has certain influence on employment and wages in both domestic and foreign markets. In this essay, all of the aspects that have been mentioned above will be discussed.
Outsourcing entails an arrangement
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The incentive for most U.S companies to outsource is mainly because of the high tax rates and high opportunity costs. By contrast, those third-world countries such as India do not have to confront with those problems. They have relatively lower labor costs and less government regulation. For example, Microsoft is one of those U.S companies that have meaningful engineering and IT offshoring operations in China. The jobs that Microsoft offers in China are software engineers and programmers. As Fenske states in his article, Microsoft continues to employ thousands of new employees per year in Redmond, the pace of hiring has decreased. Meanwhile, it has increased working opportunities in China, India and other technology hubs (Fenske,…show more content…
The positive aspects of outsourcing are quite obvious. First, most companies use outsourcing as one of their business strategies in order to avoid paying certain costs. According to a research conducted by Brown, 26 of the largest U.S corporations paid more to CEO’S than they paid in federal taxes in 2011(2013). This numbers implies that developing countries like U.S need to pay more costs besides tax fee. However outsourcing can eliminate those cost. In addition, sometimes home-countries do not have enough resources for companies to utilize. Still use Microsoft as an example; U.S does not have enough domestic experts to meet the increasing demand of its IT industry. Also, as Brown states in his article, U.S does not enough workers to assemble IT products such iPod or Android tablets either. However, those developing countries have available resources for U.S companies to utilize. In this way, those business ventures can focus on their advantages and maximize the profit of the whole economy.
There are some implications of outsourcing for employment and wages in the labor markets. When it comes to the foreign labor market, it can lead to lower wages and unemployment for certain jobs. Correspondingly, there will be a growing number of people are who are underemployed in those foreign labor markets. In terms of the local labor market, it will result to higher unemployment rate as foreign workers take some jobs
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