Introduction
Outsourcing is not a new concept to anyone or any country across the globe. However, in the United States, this concept was first introduced in the mid 20th century and used as a competitive strategy in the international market (Carbaugh 2-4). Information technology, in the 1990s, was among the most outsourced services. The main reason for outsourcing IT services was that there were few IT specialists in the country, yet there was a need for the development of a faster as well as a more reliable communication network at lower costs. In addition, outsourcing grew because there were many graduates from developing countries who could be contracted at much lower salaries and wages (Carbaugh 58-59).
Generally, the excess of well-trained employees was the perfect chance for outsourcing in the USA. Despite the benefits, this practice seems to have its side effects. Some quarters argue that outsourcing of jobs in the US has cost the country’s economy more than what terrorism has done. Other scholars argue that if not treated well, outsourcing of jobs overseas will undermine the development agenda of the United States. This paper supports the argument that outsourcing of US jobs overseas has cost or has had a toll on the country’s economy.
Supporters of Outsourcing
Those who support outsourcing argue that outsourcing helps in lowering prices of commodities, increases demand locally manufactured goods from other countries, and creates competition and growth of the economy (Schmidt, Shelley and Bardes 620-622). They further argue that outsourcing significantly lowers the cost of production and eventually results in a reduction in the price of goods. However, from the statistical analysis below, it will be seen that outsourcing does not support any of these assertions, and if it does, then it is at a certain cost.
Statistical analysis
Outsourcing mostly hurts average Americans as most of the outsourced persons usually take jobs in the informal sectors, which have previously been dominated by the middle class or average Americans. Experts at the University of California estimated that fourteen million are likely to be outsourced in the coming years (Schmidt, Shelley and Bardes 621-624). From a clearer perspective, what these statistics mean is that one of nine US jobs will be lost for US citizens.
This may include both blue and white-collar jobs. Another report released last year shows that by 2015, up to four million jobs would move overseas, and revenues of about $151 billion would be exported overseas in the process. The areas that are the most affected by this untimely outsourcing include the banking and security sectors, which, according to some reports, will lose approximately three million jobs by the end of 2014. Apart from the banking and security sector, the corporate and back-office had lost approximately 700,000 jobs by 2008 (Schmidt, Shelley, and Bardes 623-627).
In 2011, two million US jobs were lost as a result of outsourcing. The manufacturing industry was on the top of the list at about fifty percent, Research and Development companies had about forty percent, and IT services was at about forty-five. In general, with more than half of the United States manufacturing being outsourced, the country produces fewer products as it had in the past, compelling Americans to purchase imported products. Due to outsourcing, about forty percent of R&Ds are not innovating, endangering the competitiveness of the US against the other countries that have been investing heavily in R&D. Therefore, even if the price of goods lowers, it is at a huge cost to the local economy as the country is forced to rely on other countries to survive.
Effects of outsourcing
The employment industry and creative innovations are American ideas that are on the verge of disappearance. When compared with India and China in terms of the employment capacity, the American employment capacity, and job security trail the two states by about twenty percent (Carbaugh 58). In the 2003-2004 academic year, for instance, only twenty percent of Americans enrolled at higher institutions or were willing to pursue science and technology-related courses. China, for instance, is the second producer of scientific research papers in the world. Already, this is a threat to the US. In terms of innovation, nowadays, it is something new coming out of the United States, meaning that outsourcing will have to continue if America still wants to remain competitive.
A number of people continue to share the view that the US job market has been negatively affected through outsourcing (Hira and Hira 2-6). One of the most affected areas is the information and technology industry. In fact, this trend has left the stakeholders in the IT industry wondering which jobs are not headed for offshore markets. In fact, it argued that outsourcing has partly contributed to a nine percent unemployment rate.
Impact of Outsourcing to the unskilled labor market
With the import of skilled labor in the United States, unskilled labor will continue decimating with time. It is estimated that up to sixty percent of most American companies use unskilled labor, which is outsourced (Hira and Hira 2-5). Thus, unless something is done to remedy the situation, the unemployment gap will continue increasing and maybe reach a critical point in the near future. Therefore, it goes without saying that outsourcing is having a toll on the American economy.
Conclusion
As has been established, outsourcing hurts the economy of the United States. It is responsible for the transfer of responsibilities, decisions, and rights to some other people in other places. The export, as well as the import of jobs, has created a vacuum in the US job industry. The negative impacts of outsourcing also comprise losing trained personnel or skill level, undermining innovation, and increases over-reliance on other nations. In addition, as the United States sources out jobs at lower wage levels, the country loses its competitiveness.
As the United States heavily invests in the education sector, the level of entry of its people in the job market is being curtailed by outsourcing. Therefore, a lack of education or graduates and outsourcing of R&D lead to increased reliance on other countries, which is an aspect that harms the economy of the United States. As it has been established, outsourcing compromises the economy of the United States as it is the transfer of responsibilities, decisions, and rights to some other people in other places.
The export and import of jobs have created a vacuum in the American job industry. United States magazines and economic development have predicted a bleak future for the USA unless something is done to stop it. Some of the jobs that have been outsourced include chip design, engineering, basic research even finance related jobs. With Americans expressing mixed feelings on the subject, some of the business leaders in the United States have defended this idea.
Works Cited
Carbaugh, Robert. International Economics. Mason, OH: South-Western CENGAGE Learning, 2013. Print.
Hira, Ron and Anil Hira. Outsourcing America: The True Cost of Shipping Jobs Overseas and What Can Be Done About It. New York, NY: AMACOM, 2008. Print.
Schmidt, Steffen, Mack Shelley and Barbara Bardes. American Government and Politics Today 2009-2010 Edition. New York, NY: Cengage Learning, 2008. Print.