The Effects of Outsourcing in America

analytical Essay
1298 words
1298 words

“It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy” (Taylor). This quote by Adam Smith, cited by Timothy Taylor, defines outsourcing as a task that can be done within a group, but is instead done by a third-party group for less money. While outsourcing service benefits American firms, studies show it takes jobs from middle-class Americans and adversely affects the American economy; however, other research proposes that outsourcing might actually benefit the American economy. One effect of outsourcing is that it economically benefits American firms both domestically and abroad, and these benefits are the reason outsourcing is so prevalent in today’s world. In one research, it was found that, “Ten percent growth in American firms’ foreign investment is associated with 3% in their domestic investment” (Desai). In essence, this conclusion shows that when an American firm grows abroad, they also grow locally which benefits the firm everywhere. One study in 2004 from the McKinsey Global Institute demonstrated, “What happens when an American firm moves work that cost one dollar to India. Out of that dollar, India’s economy garners 33 cents in wages paid in India and profits earned by Indian firms. But 67 cents accrues back to American firms...” (Taylor). This research reveals that outsourcing benefits the American firms by reducing the wages they have to pay the workers and thus increases their profit margin. According to another article, “[Due to outsourcing,] return on sales was 5% and is now 6%--a net 20% change. Return on assets moves from 10% to 13.2%--an impressive 32% increase. And return on equity increases to 30%” (Lomas). This article excerpt ... ... middle of paper ... ...i, Mihir. "The Mistaken Attack on Outsourcing." Wall Street Journal 29 Dec. 2010: A.11. SIRS Issues Researcher. Web. 30 Nov. 2011. Lamphier, Gary. "Exporting Jobs a Dumb Way to Pursue a Knowledge Economy." Edmonton Journal (Alberta, Canada) 17 Jul. 2010: G.1. SIRS Issues Researcher. Web. 30 Nov. 2011. Levy, Philip, and Scott Paul. "Is Outsourcing Good for the U.S. Economy?." New York Times Upfront 14 Mar. 2011: 22. SIRS Issues Researcher. Web. 30 Nov. 2011. Lomas, Paul M. "The Implications Of Outsourcing." Frozen Food Age 46.5 (1997): 33. Advanced Placement Source. Web. 30 Nov. 2011. Taylor, Timothy. "In Defense of Outsourcing." Cato Journal Vol. 25, No. 2 Spring/Summer 2005: 367-377. SIRS Issues Researcher. Web. 30 Nov. 2011. Trumka, Richard. "Where Have All the Jobs Gone?." St. Louis Post-Dispatch 17 Nov. 2010: A.15. SIRS Issues Researcher. Web. 30 Nov. 2011.

In this essay, the author

  • Explains adam smith's definition of outsourcing as a task that can be done within groups, but is instead done by third parties for less money. while outsourcing service benefits american firms, it takes jobs from middle-class americans and adversely affects the american economy.
  • Explains that outsourcing benefits american firms domestically and abroad, which is why outsourcing is so prevalent in today's world.
  • Analyzes how outsourcing affects u.s. unemployment and the middle-class lifestyle because it takes service-producing jobs from americans.
  • Argues that outsourcing negatively affects the u.s. economy and these negative effects are only increasing as time passes.
  • Concludes that outsourcing benefits the u.s. economy by reducing wages and eliminating benefits that businesses usually have to provide to their american workers while still producing the same product.
  • Opines that outsourcing benefits american firms, but shuns loyal workers for profit, while researchers argue whether it will sustain the u.s. economy.
  • Analyzes how desai, mihir, and lamphier, gary, argue that outsourcing is bad for the u.s. economy.
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