U.S. Government and the Ethical Issues of Outsourcing

Introduction

The United States is presently one of the fastest-growing targets for outsourcing. Once the buzzword of corporate America, outsourcing has been viewed with increasing skepticism in recent years due to growing ethical concerns. The majority of critics lament the outsourcing of jobs to low-wage economies in Asia, the Philippines, and elsewhere. In a slowing economy with unemployment hovering around 10%, outsourcing jobs is widely regarded as extremely undesirable. Some experts, however, contend that outsourcing is not inherently bad, as it helps businesses lower costs and remain viable—particularly during recessions. When outsourcing permits a company to reduce costs and increase production efficiency, it benefits the company's long-term competitiveness and reflects the bedrock principle of comparative advantage. Yet the ethical concerns far outweigh the benefits companies gain. By outsourcing, individual privacy is compromised, the cost of educating American students is effectively wasted when their jobs are sent abroad, and the wage economics of America are destabilized, ultimately harming the long-term economy.

The United States is the single largest consumer of outsourced services across a wide range of sectors—from IT services to legal services and medical record keeping—sourced from providers across the globe. Cost advantages, faster productivity, and the ability to leverage favorable time zones in outsourced geographies are cited as the major drivers of this practice. American companies stand to gain substantial competitive advantages from outsourcing, which in turn reinforces U.S. industry and its stakeholders. Outsourcing is a strategic move that allows an enterprise to save valuable development time, which can then be devoted to core functions. For instance, a U.S. company outsourcing to India enjoys around-the-clock productivity owing to the approximately 12-hour time difference between the two nations (Miracle Technologies, 2012).

According to a research study by Forrester, jobs worth $3.3 million will potentially be outsourced by 2015, with IT outsourcing leading the way—approximately 472,632 IT jobs were projected to be outsourced within four years. The concern lies in the fact that the nature of outsourcing has changed over the years, shifting from low-skilled jobs to highly professional ones. Although outsourcing can benefit both nations, the ethical issues it generates are sufficient to make it a deeply contentious practice. As with any business activity in a globalized world, outsourcing is neither inherently right nor wrong. What matters most is the manner in which outsourcing strategies are implemented and the extent to which participating nations integrate social responsibility and ethical practices into those strategies (Miracle Technologies, 2012).

Description of Ideas

The practice of outsourcing is primarily advocated on economic grounds, and some argue that additional jobs are ultimately created in the United States as outsourced nations gain greater spending power. Nevertheless, the issue of job displacement, coupled with its social costs, must be carefully considered before the trend of outsourcing jeopardizes the long-term viability of the U.S. economic and educational systems. According to a report published by the U.S. administration, 3 million jobs had been lost over the preceding three years, with outsourcing accounting for approximately 15% of those losses—a figure that continues to rise. Technology sector outsourcing has surged particularly fast, with approximately $10 billion in net contracts outsourced (Mintz, 2004).

U.S. economists expect that at least 14 million service-sector jobs are at risk of being outsourced over the coming decade. It is crucial to understand the long-term effects of this trend, as responsibility is the central ethical issue at stake. For example, should a college professor advise students not to pursue computer programming, given that these jobs may simply be outsourced? In the case of accounting and the filing of tax returns, privacy is directly compromised when such work is outsourced. This concern led to the introduction of Bill SB1451 in the Senate, which specifically addresses the threat to privacy when personal, medical, or financial information is processed abroad (Mintz, 2004).

The bill ensures that personal and confidential information—including Social Security numbers, bank account numbers, tax information, and health records protected by confidentiality laws—will not be disclosed during outsourcing. Ethical concerns surrounding outsourcing came to public attention when a transcriber of medical records refused to hand over completed work unless an upfront fee increase was granted. This is not an isolated incident. According to Dobbs, the U.S. software company SolidWorks Corp discovered that a worker hired by an outsourcing firm even attempted to sell its proprietary information to a competitor. Benefiting from cost advantages at the expense of the confidentiality of personal information is fundamentally unethical (Mintz, 2004).

Analysis of Concepts

Within the broader landscape of outsourcing, IT outsourcing is the most dominant form. Its strategic advantages include widespread IT process formalization, which yields continuous competitive gains that can sometimes outweigh the cost savings alone. Offshore IT workers earn approximately $25 per hour compared to the $70 to $90 that American counterparts earn. However, not all IT positions are suitable for outsourcing. It is typical for a single U.S. IT worker to perform a variety of roles within one position—such as programmer, tester, maintenance programmer, quality assurance specialist, and technical mentor. Even large U.S. enterprises with sufficient volume to make offshoring a viable IT delivery model rarely offshore more than 10% of their IT organization (Gold, 2012).

Turning to the broader ethical analysis of outsourcing, it is useful to consider the contribution of Niccolò Machiavelli, whose work is more often read out of intellectual curiosity than as a guide to ethical conduct. According to Machiavelli, the ends justify the means. U.S. culture, however, broadly rejects this premise. The U.S. has a Bill of Rights and a robust legal system designed to uphold the opposing philosophy. Yet in corporate America—and increasingly in government—cost is treated as an "end" used to justify a range of decisions, and it demonstrably does not justify the means; outsourcing figures prominently among these cases. In the outsourcing industry, corporations offshore work to increase profitability by minimizing costs, using the end to justify the means. It is important to note that reducing complex economic rationales to a simple means-and-end framework is an oversimplification, but the ethical tension it reveals is real (Breslin, 1999).

Conclusion

Considered from an ethical standpoint, outsourcing is seen to be causing more harm than good, even if the immediate impact is not always large enough to attract widespread notice. The long-term effects are clearly detrimental to the U.S. economy, as they contribute to mounting unemployment in an economy that is already under strain. Although outsourcing cannot be brought to an abrupt halt, addressing its ethical dimensions will prove beneficial in the long run. Evolving toward a model in which only a limited fraction of total jobs are outsourced will also help keep meaningful employment opportunities within America.

References

Breslin, David A. (1999). On the ethics of outsourcing. Program Manager, 28(6), 24–26.

Ching, Jacqueline. (2009). Outsourcing U.S. jobs. The Rosen Publishing Group.

Converse, R., Denenberger, R., Holt, J., Murphy, N., & Winemiller, A. (2010). Outsourcing: Unemployment in America. Retrieved July 25, 2012, from

Gold, Tandy. (2012). Ethics in IT outsourcing. CRC Press.

Mintz, Steven M. (2004). The ethical problems of outsourcing. Retrieved July 25, 2012, from http://www.utsandiego.com/uniontrib/20040806/news_lz1e6mintz.html

Miracle Technologies. (2012). United States outsourcing controversy: Capitalism vs. ethics. Retrieved July 25, 2012, from http://www.miraclegroup.com/article/the-united-states-outsourcing-controversy-capitalism-vs.-ethics.html

Torrance, Fiona. (2006). The ethics of in-house vs. outsourcing. Insight Business. Retrieved July 25, 2012, from