Understanding Outsourcing Jobs to Other Countries

Because of the proliferation of high speed communication methods such as the Internet, consumers have the ability to purchase goods from anywhere in the world, literally at the push of a button, or more precisely, the click of a computer mouse. While this is a tremendous asset to consumers, it also allows underdeveloped countries that pay low wages to their workers to offer goods at a much lower price than a country such as the United States, where fair wages and a higher standard of living increases production costs, which results in higher prices. The consumer will naturally purchase the less expensive items, to the detriment of the firms producing higher priced goods. This paper will discuss how, in an effort to remain competitive and profitable, American firms are increasingly relocating to the nations where lower costs and increased sales translate into healthy profit margins, despite viable alternatives.

Why Outsource?

The common thread that was found in virtually all of the literature reviewed, simply put, is that "the bottom line is the bottom line". What is meant by that is that all of the discussion, debate, and dissention surrounding outsourcing come down to economic impact-for better or for worse for a variety of groups and institutions. When manufacture outsourcing is discussed in the literature, the typical portrayal is that of the "American Worker" as the hardworking person who punches a time clock day after day and dedicates him or herself to producing the goods that their fellow citizens need and want on a constant basis, but becoming extinct because of a flood of less expensive goods coming to the United States marketplace from foreign countries where huge populations of underpaid workers produce the same items at a much lower price. On the other hand, some portrayals of the "American Worker" in the literature painted a picture of a complacent, spoiled worker who has developed a sense of entitlement regardless of the quality of goods produced or the demand for the same (this portrayal echoed a sort of anti-labor union sentiment). One theory suggest that the workers in the foreign countries that now enjoy inexpensive labor and huge pools of workers, such as China, will also eventually find themselves faced with complacent, demanding workers as their standard of living rises (Chappell, 2004).

Who is to Blame?

As with many socioeconomic issues, the governmental perspective of outsourcing is a key issue. Commonly tossed about much like some sort of political football, it is not difficult to see that it is used by political adversaries to blame one another for the loss of jobs to foreign competitors (Barnes, 2004). Just as often, however, are reports from governmental agencies that provide fair analysis and sensible recommendations to avoid negative impact from outsourcing. From the manufacturers' standpoint, there is also a common belief among manufacturers that much of the outsourcing problems are caused by government intervention rather than the natural forces of the marketplace (Evans, 2004). Those who are the biggest proponents of outsourcing make arguments like these in its defense:

•Exporting low paying jobs will result in higher paying jobs because workers will be compelled to upgrade their skills to obtain better employment, as that is all that is available.

•Higher wages will mean more governmental taxes paid, thereby improving the standard of living for everyone as well as improvements to roads, schools, law enforcement and other infrastructure.

•America can focus on innovation, thereby creating the ideas for products that would ultimately be produced by low paid workers in other countries, with the innovators benefiting from the creation of the original idea.

•As the U.S. develops a stronger track record of innovation, other nations will engage in business with American firms which will also generate a great deal of revenue, which again translates into a higher standard of living, more tax dollars, and do forth.

•When a nation engages in more business with foreign nations, it is feasible that the relations between these companies will improve, which may lead to less disputes between nations, which is an overall plus for every man, woman and child.

•The focus on innovation will lead to more individuals pursuing a technologically-based education, which will also pay many dividends well into the future.

The Downside of Outsourcing

Statements of defense aside, outsourcing is a damaging phenomenon in many respects. While outsourcing appears to be beneficial for stockholders of the companies that employ the practice, the damage it causes to the American economy far exceeds these benefits. The business and industry of the United States of America is literally the lifeblood of not only America, but also many other nations worldwide. The American worker not only contributes to the domestic economy and his or her own wellbeing, but also pays income taxes that are often used by the United States government to subsidize the economies of other nations in the form of financial assistance, humanitarian aid, defense against other nations, and much more. If we reduce or eliminate the ability of American business entities to generate a profit, this will ultimately impact the ability of America to literally assist the rest of the world in improving their quality of life from many standpoints. It is also not farfetched to put forth the proposition that if the United States were unable to generate sufficient tax revenue based on the income of American workers, an unfavorable domestic impact would also be felt.

Alternatives to Outsourcing

Having seen that outsourcing exists and has wide support in some circles, there is still the fact that it is damaging and demands a closer look in terms of possible alternatives. Recent economic theory, as farfetched as it may seem, suggests that there may be a "magic bullet" that would eliminate outsourcing in one broad stroke. This theory centers on the breakup of worldwide organized crime and the prevention of copyright, patent and trademark infringement. Simply stated, by reducing or eliminating counterfeit goods such as illegally sold copies of computer software, books, DVDs, music and the like, the entities that created these items originally will receive the revenues and royalties to which they are lawfully entitled. When the underground methods of selling these goods are crushed, the sales simply cannot occur. As a result, legitimate businesses with creativity and inventiveness will flourish. Because the US is a world leader in innovation, domestic business concerns will prosper to the point that outsourcing will be unnecessary or more cumbersome than the benefits of it allow. While this may seem a farfetched theory, it is gaining merit in many people's minds (Evans, 2004).

More conservative remedies for outsourcing include the improvement of dialogue with trade and labor unions to negotiate lower wages to prevent the need to export jobs, a more concerted effort to market the quality that American made goods have to offer in order to make US manufacturing more appealing to businesses, and an increase in tax incentives for companies to remain domestically located. While none of these options are easy, they are possible, and should be investigated.

Conclusion

This paper has shown that outsourcing exists, why it exists, and what it causes. However, the paper has also shown alternatives to outsourcing; some that are unusual, some more conventional, but all worth closer consideration. Nothing short of the economic future of America hangs in the balance.

References

Barnes, Tom. (2004). State Lawmakers Slam Outsourcing. Harrisburg, Pennsylvania Post-Gazette, February 25, 2004.

Chappell, Robert. (2004). Outwitting Outsourcing. Madison Magazine, November, 2004. Retrieved February 13, 2007 from the World Wide
Web: http://www.madisonmagazine.com

Evans, Donald. (2004). Free and Fair Trade: Real Results in Leveling the Playing Field. United States Department of Commerce Newsroom, October 26,2006. Retrieved February 12, 2007 from the World Wide Web:
http://www.commerce.gov/opa/press/2004_Releases/October