Outsourcing: Why?

Outsourcing: Why it is Happening and Why it Shouldn’t be Happening.

   

Most Americans of age want to have a job, whether they currently have one or if they are looking for one.  Yet many jobs are being lost each year to companies overseas.  Outsourcing, in a general statement, is the contracting of work from one company to another, both domestic and foreign.  Offshoring is the foreign version, and the most common.  Today, more and more jobs being internationally outsourced to foreign companies.  Why do American companies send more and more jobs oversees when they are needed by domestic workers?  There are benefits from it, mainly financial, but there are also very harmful aspects to both the company itself and the American economy as a whole. In essence, offshoring has a much larger negative effect in America than positive. It can hurt the customer company, robs American workers of jobs, lowers domestic production, and ultimately damages the U.S. economy.

Some state that offshoring can “fund company expansion and lead to the creation of new, higher-paying jobs for domestic employees” (Issitt/Grant).  While this may be true, offshoring can also damage a company and not lead to many new domestic jobs.  As Jamie Aronson and Marlanda English point out, “A company that outsources any of its business functions, whether management, operational, or support-related, to an external party, loses control over those functions” (Aronson/Marlanda). Off shoring places control of that function into the hands of the other company, damaging aspects such as quality management.  The American companies “become dependent on the external parties that perform tasks for them, tasks that are integral to financial success” (Aronson/Marlanda).  Basically, the customer company depends on the success and quality of the off-shore company.  If that company fails or runs into issues, the customer company may be forced to again take over those functions and may be permanently damaged.  Plus the fact that offshoring creates time delays and language barriers.  It is much easier for a company to control a function when the work is being done in close physical proximity with domestic workers.

It is also said that offshoring offers a relief to the high cost of using domestic workers; paying a company off shore in a developing country is often cheaper.  In fact, wages in countries such as India and China are 10-20% those of similar jobs in America (Hira/Hira). Although offshoring may seem cheaper in the short term, it may not be not be in the long run.  For one, when American workers lose their jobs to overseas counterparts, they become unemployed and lose money.  This means that they may not be able to afford the products or services those companies have to offer.  

Another loss of money comes when Americans run into issues with companies that outsource, such as a drop in quality.  Mattel  For example, a consumer may have an issue with a product and need to contact customer service.  They call in only to find themselves talking to a worker in India who speaks broken English and that they can hardly understand.  This may upset those customers and the company loses their business as a result.  Why do companies something that may cause a lost of customers?

    Offshoring also creates a high level of insecurity and uncertainty among America’s workers.  Many “American professionals are at risk of losing their jobs, no matter how competent they are, how much time and money they have invested in their education, or the amount of loyalty they have shown to their company” (Aronson/Marlanda).  In fact, “experts at the University of California have estimated that... nearly one in nine of all US jobs are at risk of being outsourced” (Hira/Hira). One in nine. That’s approximately 14 million jobs.  What if this number grows?  How can any American feel confidant that their job will exist tomorrow?

Not only are more and more companies resorting to outsourcing, but the spectrum of the jobs outsourced is changing as well.  Many believe outsourcing is only involved with lower-end jobs, but more and more high tech jobs such as engineers, architects, and IT specialists are going overseas (Hira/Hira).  This means that more workers in multiple different professions are becoming vulnerable.  At the same time, workers displaced by outsourcing have trouble finding work again.  In fact, the Department of Labor states that only one in three workers will find a new job, and that often comes at a lower position than before with a lower wage (Hira/Hira).  This shows just how many people are being displaced and remaining unemployed due to offshoring.  Americans would have more access to open jobs and would have a higher level of security with a reduction of outsourcing.

    As some suggest, including John Miller, outsourcing is a new kind of free trade that benefit the global and American economies..  This is not true.  Free trade agreements are negotiated, meaning there is some bargaining involved (Hira/Hira).  The benefits are far greater for those on the receiving end of outsourcing.  They also argue that outsourcing benefits America’s economy and “by allowing companies to grow and stimulate foreign economies, the global community benefits” (Issitt/Grant). While foreign economies reap the benefits due to an increase in their job markets, America’s hardly does.  In fact, outsourcing is pretty one-sided as far as economic growth.  The US sees a drop in GDP, especially in the manufacturing sector when the other countries are doing all the production, not America. Not to mention the fact that money is leaving America in the process, not staying and being pumped into the economy.
    In addition, outsourcing is simply not favored by Americans.  Many find it unethical and would rather see domestic workers filling those positions.  In a brief survey of fifty high school students, twenty-eight said they knew what outsourcing is. Of the twenty-eight, only five said they favored outsourcing (Rosson).  Although this may be brief, it gives a basic idea of how Americans view outsourcing.  With more and more people out there losing jobs, this dissatisfaction is only increasing.  There’s a good reason that the statistics on outsourcing are fuzzy: companies don’t want to report the numbers (Hira/Hira).  They know it will cause loss of business. It would be interesting to see how things went if companies were required to disclose this information.
    These are only a portion of the facts against the practice known as offshoring, a practice that is becoming more common and more dangerous for the American worker and economy.  In this time of economic turmoil, where almost 10% of the US population is unemployed, companies are still sending more jobs overseas. In fact, reports show that a few million more jobs will be overseas by 2015 (Aronson/Marlanda).  So why is America shooting itself in the foot?

Bibliography

O'Donnell, Meredith Reed, and Ed Konczal. "Outsourcing: An Overview." Points of View:             Outsourcing (2009): 1. Points of View Reference Center. EBSCO. Web. 10 Nov. 2010.

Issitt, Micah, and Richard A. Grant. "Point: Outsourcing Benefits America and the Global             Economy." Points of View: Outsourcing (2009): 2. Points of View Reference Center.         EBSCO. Web. 3 Nov. 2010.

Aronson, Jamie, and Marlanda English. "Counterpoint: Outsourcing is a Bad Business Practice."     Points of View: Outsourcing (2009): 3. Points of View Reference Center. EBSCO. Web. 3     Nov. 2010.

Miller, John. "Outsized Offshore Outsourcing." Dollars & Sense 272 (2007): 30. Points of View         Reference Center. EBSCO. Web. 5 Nov. 2010.

Rosson, Daniel. “Outsourcing: Yes or No?” Student Survey. November 2010

Hira, Ron, and Anil Hira. Outsourcing America: What's behind Our National Crisis and How We         Can Reclaim American Jobs. New York: American Management Association, 2005.         Print.