Outsourcing Companies First Outsourced Manufacturing Term Paper

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In addition research has found that estimate that nearly 252,000 computer programming and computer software engineering jobs could be outsourced 2015(Zarocostas). However, 1.15 million new IT jobs could be produced by 2012 (Zarocostas).

In addition to the increased number of jobs that are being outsourced. Such outsourcing impacts the economy in many ways. Although many argue that outsourcing has a positive effect in the long run, for many workers outsourcing means the end of well paying jobs that are often being replaced with lower paying jobs (Taylor). However those that are proponents of IT jobs assert that the U.S. economy has experienced growth in productivity as a result of outsourcing (Taylor). The article explains that in recent years the American economy has experienced a great deal of productivity growth (Taylor). The article asserts that when determined by output per hour in the business sector, productivity growth was 4.4% in the year 2002, 4.3% in the year2003, and 3.9% in the year 2004 this period reflected three of the best four years for productivity growth since 1971 (Taylor). The author further explains that Producing more per hour is how an economy raises the average standard of living over time. U.S. firms have generated this remarkable productivity growth in large part by taking advantage of the gains in information and communications technology -- and outsourcing is one mechanism by which this has happened. The practice of outsourcing both to domestic and foreign firms allows businesses to harness dramatic innovations in communications and information technology more effectively than they could if they just gave each of their own payroll-department employees a fancy new computer. Instead of every firm individually needing to learn how to run an expensive computerized system for collecting job applications, mailing paychecks, and offering choices of employee benefits, these services can now be provided by firms with core competencies in these areas (Taylor)."

Although there are many "rosy" expectations as it relates to outsourcing there are many that believe that outsourcing will have a negative effect on the U.S. economy (Craig). An article entitled "Outsourcing the American Economy" asserts that many economists and policy makers are in denial about the real impact that outsourcing will have on the economy in the future if certain restrictions are not placed on the practice of outsourcing (Craig). The article contends that according to calculation produced by the University of California 14 million white-collar jobs may soon be outsourced (Craig). The author further states that these jobs are not only composed of customer service, call-center operators, and back-office jobs, but also include information technology, architecture, accounting, advanced engineering design, stock analysis, and so on (Craig). The article explains that these jobs are vitally important tot the American economy because involves individuals that are upwardly mobile and who generate the majority of the tax revenues that fund American education, infrastructure, social security and health systems (Craig).

The author points out that most American corporations and policy makers are so blinded by a short-term mentality in which they are experiencing businesses associated with quarterly results-- that they have not taken into account the long-term impact of outsourcing. Such long-term impacts include alienating their best employees and consumers. The author also explains that Employees displaced by foreigners and left unemployed or in lower paid work have a reduced presence in the consumer market. They provide fewer retirement savings for new investment. Nothink economists assume that new, better jobs are on the way for displaced Americans, but no economists can identify these jobs. The authors point out that "the track record for the re-employment of displaced U.S. workers is abysmal: "The Department of Labor reports that more than one in three workers who are displaced remains unemployed, and many of those who are lucky enough to find jobs take major pay cuts. Many former manufacturing workers who were displaced a decade ago because of manufacturing that went offshore took training courses and found jobs in the information technology sector. They are now facing the unenviable situation of having their second career disappear overseas (Craig)."

The authors assert that many economists in the United States are so oblivious to the negative impact of outsourcing that they do not realize or embrace the idea that the exact same incentive that contributes to the outsourcing of one tradable good or service is also relevant for all tradable goods and services (Craig). In addition, during the 21st century the U.S. economy has only been able to create jobs in nontradable domestic services which are the same type of labor force that is prevalent in the third world (Craig).

The article further explains that before the creation of outsourcing, American employees were protected against low wage foreign labor (Craig). This protection ensured that American worker had access to more capital and better technology, and as such their higher productivity was congruent with their higher wages (Craig). However, outsourcing creates a situation in which Americans have to compete nose to nose with foreign workers (Craig). This has the effect of undermining American employees' main competitive advantage over foreign workers which is exacerbated by their physical presence in the U.S." And providing those outsourced workers with the same technologies and skills training (Craig).

In the end the author asserts that the aforementioned mentality will create a lose-lose situation for employees in the United States, American, American businesses, and our nations government (Craig). The author further explains that outsourcing is responsible for record unemployment in engineering fields and has also resulted in a significant decline in university enrollments in both technical and scientific disciplines (Craig). In addition a great deal of the jobs that are not outsourced are being filled by lower paid foreigner workers who are given H-1b and L-1 visas (Craig). In some cases American employees have to train the foreign workers that are replacing them (Craig). The author further contends that U.S. corporations justify their offshore operations as essential to gain a foothold in emerging Asian markets. The Hira brothers believe this is self-delusion. "There is no evidence that they will be able to outcompete local Chinese and Indian companies, who are very rapidly assimilating the technology and know-how from the local U.S. plants. In fact, studies show that Indian IT companies have been consistently outcompeting their U.S. counterparts, even in U.S. markets. Thus, it is time for CEOs to start thinking about whether they are fine with their own jobs being outsourced as well (Craig)."

As you can see IT outsourcing has had a serious effect upon those that have graduated with degrees in the areas of information technology and engineering. There is a great deal of evidence that suggest that in there will be even fewer students that major in information technology because there is less job security as a result of IT outsourcing ("Sharp Rise in Outsourcing Seen at 42% This Year"). Such decreases in the number of engineers and information technology professionals may have devastating effects in the future.

The possibility that laws will be passed in the near future to prevent jobs from moving outside the U.S.

One of the primary issues surrounding the outsourcing of IT Jobs is that there are only a handful of laws that prohibit or limit the amount of IT outsourcing that it allowed (Gussert). Indeed in recent years many unions and workers have called for national state and local legislation that would reduce IT job losses (Zarocostas).

For instance, one of the legislative measures being suggested would forbid governments for outsourcing high tech jobs. In addition, there are at least 100 bills pending in 38 states to ban the outsourcing to foreign contractors by state and local governments (Zarocostas). However the Organization for Economic Cooperation and Development has asserted that such a ban will not tackle the adjustment challenge created by outsourcing (Zarocostas). In addition the agency warns that a U.S. response that is trade-restrictive could fail if trading partners decide to take retaliatory actions (Zarocostas).

According to an article entitled "U.S. Senate passes law against outsourcing" in June of 2004 the United States Senate created the first federal law against outsourcing. This particular bill barred American companies from distributing sub-contracts to India and other nations to reduce costs. The article further explains that The legal measure, was part of a $328 billion spending bill. The article further explains that Under the measure, when the U.S. federal government gives contracts to an American firm, the latter cannot subsequently give sub-contracts to a source outside the United States. The measure avoids challenging the government's right to give projects to contractors. But what it does provide is that that contract cannot be sub-contracted out by the outsourcing mechanism to India or other countries like China or Russia to cut costs. The provision is the first federal law that limits companies from performing contracted work outside the U.S. ever since outsourcing became a potent political…[continue]

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