¶ … Outsourcing" on the U.S. Economy
The increasing trend of outsourcing of jobs from the United States in recent years has assumed alarming proportions. Most projections indicate that the present trend is going to accelerate in future. The issue has invited greater attention recently as more and more categories of white collar jobs are now being outsourced by the U.S. companies while in the past only lower paid industrial jobs were affected. Some economists including officials of the present U.S. administration have shrugged off the phenomenon as part of economic globalization and believe that it would prove beneficial for the U.S. economy in the long-term. Others are of the view that the negative impact of outsourcing far outweighs its positive effect. In this essay, I shall highlight the negative effects of outsourcing on the U.S. economy, besides outlining the current and future trends in out-sourcing.
The trend of relocating jobs to other countries is not a new development in the United States as manufacturing jobs have declined ever since American companies started to establish factories abroad to take advantage of lower cost structures and wages. The decline in manufacturing jobs, however, was compensated for by greater job opportunities in the service sector. Since most jobs in the service sector were higher paid 'white-collar' jobs, losing the relatively low-paid manufacturing jobs to overseas competitors was considered a bearable set back. Moreover, the rate of jobs lost due to outsourcing in the manufacturing sector was relatively gradual and the U.S. economy had time to make the necessary adjustments. Also, according to the long-accepted theory of comparative advantage, everyone gains as...
The Americans, it seemed for a while, were the best in more skilled jobs. With rapid advances in information and communication technology and the availability of highly skilled and motivated workforce in far-flung countries such as India, who were prepared to work at a fraction of the salaries in the U.S., things started to change.
The reason why more and more American companies are opting to outsource an increasing number of jobs overseas is the cost saving it offers. The savings due to "off-shoring" in certain service sectors such as call centers are particularly significant. A management consultancy firm, McKinsey and Co., has estimated in a recent study that a typical customer services call center company initially saves up to 55% by off-shoring and could save up to 70% by re-organizing and standardizing tasks. (Stokes 38) Other sectors in which out-sourcing is an attractive cost-saving option include software programming, medical diagnosis, and research and analytical activities.
The savings made by the American companies through outsourcing as well as the availability of cheaper goods and services for the consumers may seem apparently beneficial for the U.S. economy. However, in times of sluggish job creation -- as at present, loss of white-collar jobs is a major concern. Although no official data about the exact number of U.S. jobs lost to outsourcing exists but a recent estimate by Goldman Sachs indicates that off-shoring has resulted in about half a million layoffs in the past three years. Projections by Forrester
indicate that the number of U.S. jobs outsourced would grow to 3.3 million by 2015. (Brainard and Litan 1) This…
