Outsourcing: Good Or Bad?

Submitted By Adam-Soliman
Words: 945
Pages: 4

Outsourcing - Good or Bad? Outsourcing has become a largely debated view in today’s ever-developing economy. Many associate the word with negative views and the loss of jobs in the U.S., while a number claim that it benefits everyone. Although some view it as unethical, it seems outsourcing is beneficial to all parties involved: the foreign nation that gains jobs, the American companies who hire those workers, and the U.S. economy. Outsourcing helps companies stay competitive in today’s free market system. By outsourcing, companies can reduce the cost of their labor force. A study conducted by the University of California, a world renowned college, shows that by hiring a telephone operator in India, the company based in the U.S. only has to pay them under $1 an hour where as in the U.S., the average wage is over $12.50 an hour (qtd. in Cooper 3). This reduces the company’s labor cost by 92% which leads to the company being able to lower their prices and increase profits for shareholders while maintaining competitiveness in today’s free market system. Outsourcing also allows for less risk in the company. Due to outsourcing to developing countries, companies manage to reduce risk to themselves from those whom acquire jobs from them. Developing countries normally have more lenient laws, and this results in lower fines and less lawsuits directed at companies from their workers. Also in these developing countries, benefits to workers are not often put into place reducing payments (“Outsourcing” 2). These all reduce risks to the company, therefore the company manages to stay in business and remain competitive. However it is also argued that outsourcing results in detrimental effects to the U.S. economy. There is a loss of jobs and a loss of quality in products or services that are provided by companies. MGI’s (McKinsey Global Institute) numbers go to show that there are downsides to U.S. employed workers. MGI shows that there is $1.14 cents that go toward the company as a whole for every dollar that is put into outsourcing (Bivens). Although these figures look like they benefit the company as a whole, they actually do not. Of that “67 cents are in benefits” and “47 cents for each dollar” into the U.S. workforce again (Bivens). This means that although $1.14 is beneficial to the economy as a whole, the workforce does not see an increase but rather a loss in jobs from $1 to $0.47 for workers in the U.S. These numbers only go to show that shareholders in the company benefit rather than the workforce of America. Outsourcing manufacturing often means a reduction in quality of products. Reductions in quality of the products may taint the company’s reputation which results in less demand for products. This then may lead to the consequence of a company going bankrupt; the company would have to lay off all their workers resulting in damage to the U.S. economy. Both of these, the loss of jobs and bankrupting a company, result in detrimental effects for the economy. On the other hand outsourcing is also beneficial to the U.S. economy and foreign economies in how it strengthens diplomatics and interdependence between countries and creates jobs at home and overseas. John McCain, in his campaign for the President of the U.S., “argued that outsourcing is beneficial to America’s diplomatic and foreign-policy efforts because it creates a relationship of interdependence” (“Outsourcing” 2). Because foreign countries receive jobs from other countries this results in them depending on each other for jobs in developing nations and cheaper wages in developed nations such as the U.S. This results in more trade between the new nations because outsourcing is