Outsourcing refers to a process through which companies assign the execution of their operations to external workers to improve the quality of their services, introduce innovation, and lower the cost of labor (Buffington, 2007, p.36). There have been heated debates regarding the effect of outsourcing on individuals, unions, and the economy of the United States.
The debates have divided people into two groups that include proponents and opponents of outsourcing. Proponents argue that outsourcing is beneficial to individuals and the economy, while opponents argue that outsourcing is harmful to individuals and the economy (Buffington, 2007, p.38). The consequences associated with outsourcing depend on the type of industry involved and a company’s reasons for outsourcing.
Proponents claim that outsourcing saves money for companies because they can acquire cheap labor. Also, they claim that it provides opportunities to individuals for high paying jobs and benefits the economy by facilitating the acquisition of cheap imports and strong exports (Buffington, 2007, p.41). Opponents claim that outsourcing reduces the number of jobs that are available to Americans, reduces the competitive advantage of the country, and affects the economy adversely (Buffington, 2007, p.42).
First, outsourcing leads to loss of jobs, especially for semi-skilled workers who have minimal qualifications (Patel 52). People with high qualifications are also affected because outsourced workers are paid less than Native American workers. On the other hand, outsourcing reduces the number of employment opportunities that are available to Americans (Patel 53). It is one of the main causes of the current unemployment crisis because workers that are outsourced from other countries take jobs that are supposed to be taken by Americans.
Outsourcing affects the economy adversely because it causes unemployment, which reduces tax revenues and the spending power of Americans (Patel 56). This has negative implications on the American economy. Outsourcing also leads to loss of revenue by local, federal, and state governments because of lesser contributions to Social Security, Medicare, and fewer tax receipts (Patel 57). The government makes payments for unemployment benefits, which affects the economy negatively.
Outsourcing hurts unions because of the deteriorating employment prospects in the American labor market. Outsourcing has resulted in increased pessimism among American workers because they perceive less demand for their skills in the future. Therefore, they fail to join unions (Patel, 61). Also, it has resulted in clashes between labor unions and employers because of their different interests in the welfare of workers.
Despite these disadvantages, outsourcing has certain benefits. First, it helps companies to cut expenses because they can easily acquire cheap labor (Buffington, 2007, p.72). This increases their revenue and contributes to their growth and the growth of the economy. Secondly, by outsourcing, the United States helps other countries to develop their economies.
This creates a market for their products and thus promotes the growth of the economy. Thirdly, outsourcing improves the competitive advantage of companies and can result in improved management and increased productivity (Buffington, 2007, p.73). All this is determined by the effectiveness of the management of the outsourcing process.
In conclusion, outsourcing has both advantages and disadvantages. Proponents argue that outsourcing is beneficial to individuals and the economy, while opponents argue that it is harmful to individuals and the economy. The consequences associated with outsourcing depend on the type of industry involved and a company’s reasons for outsourcing.
References
Buffington, J. (2007). An easy Out: Corporate America’s Addiction to Outsourcing. New York: Greenwood Publishing Group.
Patel, A. (2005). Outsourcing Success. New York: Tata McGraw-Hill Education.