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
By offshoring American jobs companies will be able to profit from those positions. In contrast, employees will be affected and probably will need to gain more training in order to find another job.
Outsourcing simply means acquiring services from an external organization instead of using internal resources (Butler, 2000). By using outsourced resources, organizations can gain a competitive advantage by utilizing contingent staff to accomplish strategic goals without incurring the fixed overhead. By focusing on the leading edge and highly specialized skill sets, outsourcing providers can often offer higher quality services, or at a lower price than the client organization. Typical reasons for outsourcing go beyond simple contingent staffing. Outsourcing providers are able to maintain economies of scale with regard to specialization (...
Recently outsourcing has been in the news, especially during political election years. It seems to be a phenomenon that is causing much concern among the population. But exactly how is outsourcing effecting both workers and businesses? And is it as big of a problem as politicians describe?
Outsourcing is a complicated and a multifaceted subject that involves a “business[’s] purchase of parts or labor from another company rather than maintaining a sufficient enough number of its own employees to do the same work in the country where the company is already based” ("Outsourcing"). The first practice of outsourcing was in medieval times when “nation-states called in soldiers-for-hire to help their own military forces during ongoing conflicts” ("Outsourcing"). Many think of outsourcing as a one way trade of production facilities moving outside of a companies locale but in actuality it is a two way trade that also involves companies from other areas moving their factories to local areas where conditions are beneficial for the specific business. Outsourcing has evolved but the main idea has remained the same. The recent increase in outsourcing “was initiated by Wall Street pressures on corporations . . . . for increased profits . . . in the production of goods and services marketed in the U.S."(Roberts).
It is difficult to determine whether offshore outsourcing has a positive or negative effect on the U.S. economy. It may actually depend on which perspective you take on it. As stated by Hira and Hira (2005), outsourcing in the services sector is a major shift in how the economy operates and will have serious impacts, both positive and negative, on the trajectory of economic growth, distribution of income and the workforce. However, there are many factors to take into account when considering globalization. Companies must familiarize themselves with the various rules and regulations of global business, tariffs, trade agreements and barriers, and decide how to go global; global consistency or local adaptation. All of these issues affect a company’s plan to move forward with offshore outsourcing.
Both sides can agree that outsourcing can be desirable for a business do to the potential profit. It allows goods to be made cheaper, management to run smoother, and money to be made faster (Salanţă 270). Both sides can also agree, however, that U.S. jobs are lost as a result of outsourcing (Ahmed 192), as well as environmental damage being cause due to corporations taking advantage of loose environmental regulations (Marquis 39). Upon digging deeper into this debate, one can find that both sides present very convincing arguments.
Since the concept of outsourcing was introduced it has been a subject of debate between politicians and citizens of the United States. Remarkably, it was the United States who supported outsourcing and now it is the United States that feels its economic progress is being threatened by outsourcing. One may argue that the financial situations that existed two decades earlier are not the same as they are today, thus the change of time, business priorities of economies have also changed.
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 American jobs seems to have been slightly overshadowed. If the issue of outsourcing is not watched carefully and a definitive plan hammered out, a trickling down of negative effects may occur within the U.S. economy. However, there is a polarized opinion on the effects of this “phenomenon”.
...ect on the college graduates and younger children of today. Outsourcing has made nothing but trouble for the United States with the passing of free trade agreements. It will cause a lack of jobs that will run the economy into the ground, and ruin the lives of the citizens of the United States. All of that so a business can use its faulty practices to make a higher profit. Outsourcing has consequences that will haunt the average American and their families for the rest of their existence on this planet.
157). In most cases, the organization will have positive consequences since they are the ones considering the outsourcing. Mintz says that benefits an organization gets from outsourcing include increased productivity and allows current management to focus on clients (2004, pg. 6-7). The current employees and families will have experience job loss. The current community will potentially lose tax income, increase unemployment, and families will leave the community. The potentially new employees and families will have new jobs that will provide wages and benefits. The new community will get increased tax revenue and population
This does not seem to be the case when so many companies actually leave their U.S. home factories and build new ones in third world countries. (The Big One. Michael Moore. 1998). Why would any company prefer to stay in America when they could ...
Outsourcing has been around for many years. In this paper, I will discuss some of the history of outsourcing, the good things about outsourcing, and the bad things about outsourcing. Outsourcing is important because many companies rely on it in order to get many different products and services to their facility on time and in good shape. Outsourcing is a huge part of the business industry today. Any business can be affected by outsourcing.
In the late 1980's the rise of India outsourcing had its start. During this phase, India provided skilled contract workers for the US. Efforts to outsource projects to India arose in the late 1990's. This was driven by a combination of rapidly changing technologies and shrinking IT budgets Little by little the small offshore development projects started to multiply. In the beginning it was trial and error because there wasn't much focus on a repeatable and process driven model. During this time offshore outsourcing led to several failures. The big outsourcing force during the late 1990's came with Y2K. Work needed to get done quick and outsourcing to Indian companies was a solution to this. Indian companies had the ability to scale rapidly.
Outsourcing is a technique for companies to reassign specific responsibilities to external entities. There are several motivations for outsourcing including organizational, improvement, cost, and revenue advantages (Ghodeswar & Vaidyanathan, 2008).
Big organizations often do this because they want to save money and produce cheaper products for the customer, so that they feel like they got an impressive deal. When Americans hear the word “offshore outsourcing”, they automatically assume that Americans are losing their jobs to foreign countries. Most of these jobs that companies outsource, such as the garment industry jobs, are offshore outsourced because they are labor intensive jobs. According to Timmerman “they do, and Nari tells me what each girl does during the process.