U S Government and Ethical Issues of Outsourcing Term Paper

Excerpt from Term Paper :

U.S. Government and ethical issues of outsourcing

Description of Ideas-5

Analysis of Concepts-6

Evaluation with Reasons-7

Possible Solutions-9

U.S Government and Ethical Issues of Outsourcing

USA is at present one of the fastest growing countries as a target for outsourcing. Of late outsourcing which was once the buzzword of corporate America has been looked down upon in recent years because of growing concerns of ethics involved in outsourcing the same. Majority lament the outsourcing of jobs to low-wage economies like Asia, Philippines and elsewhere. In a slowing economy with unemployment figures hovering around 10%, outsourcing jobs is viewed as extremely undesirable. However some experts are of the opinion that outsourcing per se is not bad as it helps business to lower costs to remain in business, particularly during periods of recession. When outsourcing permits a company to cut down on costs and make production at less cost, it augurs well for the company in the long run. After all it is the bedrock of comparative advantage. But the ethical concerns far outweigh the benefits that companies gain. By outsourcing, individual privacy is compromised, the cost of educating an American student is wasted when his job is outsourced to a different country thereby destabilizing the wage economics of America and in turn harming the economy in the long-term.


USA is the single largest country having the maximum requirement for outsourced services in various sectors from providers across the globe ranging primarily from IT services to legal services, medical record keeping etc. Cost advantages, speedier productivity, leveraging the benefit of time zones of outsourced geographies are cited as the major drivers of outsourcing. American companies stand to garner substantial competitive advantage from outsourcing which reinforces the U.S. industry and its constituents. Outsourcing is a strategic move by an enterprise to save valuable development time which can be otherwise devoted towards its core functions. For instance, a U.S. company outsourcing to India enjoys round the clock productivity due to the 12-hour time difference between the two nations. (Miracle Technologies, 2012)

According to a latest research study by Forrester, jobs worth 3.3 million U.S. dollars will possibly be outsourced by 2015 with IT outsourcing leading the pack wherein 4,72,632 jobs are likely to be outsourced in the next four years. The concern lies in the fact that the face of outsourcing has changed over years from low-skilled jobs to extremely professional ones. Although, outsourcing benefits both the nations, there are ethical issues which is enough to alter the practice of outsourcing into a contentious issue. Congruent with any business practice in a globalized world order, outsourcing is neither right nor wrong per se. But the manner in which outsourcing strategies are implemented and extent to which the participating nations integrate social responsibilities and ethical practices in their strategies is what matters most. (Miracle Technologies, 2012)

Description of Ideas:

The practice of outsourcing is primarily advocated due to economic reasons and some are of the opinion that additional jobs are created in USA as the outsourced nation benefiting from outsourcing stand to gain more spending power. Nevertheless the issue of job displacement coupled with social costs should be considered before the drift of outsourcing risks the long-term viability of U.S. economic and educational systems. According to a report published by the U.S. administration, 3 million jobs have been lost since the last three years, with the percentage of outsourcing component being 15% which is rising. And outsourcing by the technology sector is surging fast with an approximate 10 billion USD in net contracts that were outsourced. (Mintz, 2004)

US economists expect that in the coming decade at least 14 million service sector jobs stand at risk of being outsourced. It is crucial to perceive the long-term effects of this trend as 'responsibility' is the vital issue involved here. For instance should a college professor advise his students not to go for computer programming since these will be outsourced in any case? Taking the case of accounting and filing of tax returns, privacy is compromised when it is outsourced. This led to the introduction of a Bill SB1451 by Senate Liz Figueroa which addresses the threat of privacy when personal, medical or financial information is outsourced. (Mintz, 2004)

The Bill ensures that personal and confidential information like Social Security Number, Bank Account Numbers, and Tax Information as also Health information which enjoys legal protection through confidentiality laws will not be disclosed during outsourcing. Ethical issues involved in outsourcing surfaced when a transcriber of medical information refused to hand over the completed work unless a hike in fees is made upfront. The above is not an isolated situation altogether. According to Dobbs, U.S. software major SolidWorks Corp discovered that a worker appointed by an outsourcing concern even attempted to sell its property to a competitor. Benefiting from cost advantage at the expense of losing confidentiality of personal information is unethical. (Mintz, 2004)

Analysis of Concepts:

As a typical concept, IT outsourcing is the dominant one within the gamut of outsourcing as there are strategic advantages of IT outsourcing. The benefits cover widespread IT process formalization resulting in continuous competitive advantages which sometimes outweigh the cost savings. It is a fact that offshore IT workers earn $25 on an hourly basis compared to $70 to $90 which Americans earn. However, not all IT positions are suitable for outsourcing. It is important to note that it is usual for one U.S. IT worker to accomplish a variety of roles within a given job. For instance, an individual's work may comprise the roles of IT programmer, tester, maintenance programmer and quality assurance, technical mentor etc. Huge U.S. enterprises which are sufficiently large enough to offshore jobs due to their volume required to render it profitable as an IT delivery model, hardly ever offshore in excess of 10% of their IT organization. (Gold, 2012)

Coming to the broader analysis of the ethics of outsourcing, it is imperative to focus on the contribution of Niccolo Machiavelli which is perused more out of curiosity rather than to serve any type of ethical or moral guidance. According to Niccolo, the ends justify the means. However the U.S. culture by and large acknowledges that the ends do not justify the means. The U.S. administration has a Bill of Rights and a robust legal system designed to support that philosophy. But in corporate America and more and more in Government it is observed that cost as an 'end' is used to justify several decision and admittedly it does not justify the means and outsourcing definitely figures among them. In the outsourcing industry, in order to increase profitability by minimized costs (end), corporations are off-shoring the same. It is important to note that reducing the huge economic intricacies and rationale to a simple set or means and end is unfair. (Breslin, 1999)

Evaluation with Reasons:

The ethical problem of outsourcing is concerned with the bigger scenario of free trade. It is found that polices supporting free trade and outsourcing is one of them more often that not is engaged in conflict situation with labor and environmental activities who are perturbed that labor and environmental benchmarks are not required to be adhered to by the outsourced nation. They point out that U.S. corporations have found out a way to circumvent following these expensive union and environmental requirements. During 2005, almost all states suggested to make laws which would either ban or restrict outsourcing. But a few laws were passed and majority of these bills delineated restrictions regarding state contracts that are outsourced and take steps to restrict usage of offshore call centers. Since outsourcing is perceived as harmful to American workers, it is among the issues taken on by the AFL-CIO and others. Since 2004, as many as forty states have contemplated various anti-sourcing bills out of which majority have been bans on foreign or outside state bidders competing for state contract. (Ching, 2009)

The repercussion of outsourcing experienced in USA is extremely debatable due to our moral responsibility to conform to a system of value in society and promote human development. Promoting capitalism through cost cutting measures, and earning higher profits comes at a cost to society when values and moral benchmarks are sidelined. Although outsourcing on the face of it is not illegal or unethical, but the backlash of outsourcing experienced in USA are regarded unethical. This is because U.S. citizens having completed their education in USA to be recruited in their homeland are displaced from jobs by foreign workers. (Torrance, 2006)

Besides, in outsourcing there is an absence of regulation to safeguard personal and classified information, and the U.S. Govt is unable to provide any effective solutions to handle these repercussions through the process of re-training and re-employment of displaced persons and through offering of incentives for business that abstain them from outsourcing. When outsourcing is viewed through the eyes of capitalism, it is effortless to sideline the ethical issues associated with the activity. On the contrary, the outsourced nation benefits from sustained employment…

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