To understand the nature of outsourcing from a non- business perspective, the practice simply means contracting out some of your functions that have been in-house to a firm outside of your business or allowing outsiders, usually small firms, to manage certain functions within your business. For instance, when a new car manufacturing company buys tyres from a supplier, rather than producing it in-house, that is outsourcing. Conventionally, such a practice is usually done among bigger companies (e.g. manufacturing companies) and smaller firms called third party logistics (e.g. UPS) within a country, but U.S companies have globalized the practice by sending some of their functions to foreign countries that has cheaper workforce.
Outsourcing overseas affects the U.S workforce. For example, jobs once held by Americans have been sent overseas by large companies in order to seek cheap labor, less environmental restrictions and lower tax rate. Manufacturing and construction companies have moved some of their functions overseas and have resulted into hundreds for their workers being layoff. For example, today about 30 percent of Intel’s microprocessors are build overseas and four of the six manufacturing facilities operated by Dell computer are outsource outside of the United States (Cook and Nyhan). Oracle, which has been handing thousands of layoff layoff notices, recently announced to move two thousand more jobs to India and China because the cost of labor in those are 20 to 50 fifty percent less than hourly wage in America for service sector jobs.
Moreover, outsourcing has lead to high increases in the unemployment rate. The Bureau of Labor Statistics in October 2008 reported that the unemployment rate rose by 0.4 percentage point to 6.5 percent and the number of unemployed persons increased by 603,000 to 10.1 million. In addition, over the past 12 months, the number of unemployed persons has increased by 2.8 million, and the unemployment rate has risen by 1.7 percentage points. In September 2008, manufacturing and construction made of 28 percent of the mass layoffs in the workforce. The report also stated that job losses continued in manufacturing, construction, and several service providing industries including health care and mining (B.L.S. 2008).
Outsourcing U.S jobs also affects individual lives, especially those who are in the technology, manufacturing and construction fields. For example, Ms. Myra Bronstein, a Mercer Island resident who worked for Watchmark- Comnitel, a U.S technology company, lost her software-testing job last year because her company shifted the work to India. Before her layoff, Ms. Bronstein was making $ 76,500 a year. Today with unemployment benefits exhausted, she has resorted to selling furniture and collectables on eBay (Cook and Nyhan).
Large companies that outsource jobs overseas also affect the economy by depriving it of revenue, which could help grow the economy. Jobs such as, call center servicing, medical transcription, tax return preparation, research and development , medical data analysis, and high level engineering, legal service, architecture and information technology that the government receives revenue from have been sent overseas by U.S companies. Some U.S economists have also estimated that more jobs will leave the United States by 2015. John C. McCarthy an analyst for market-research company, Forester Research Inc., has predicted that by 2015 U.S businesses will outsource at least 3.3 million white collars jobs to India, China, Russia, Pakistan and Vietnam (qtd.in Dunbar).
In addition, government has lost and is continuing to lose these jobs specifically in manufacturing and information technology. According to the Bureau of Labor Statistics reports from January 2001 to January 2006, the information sector of the U.S economy lost 644,400 jobs, or 17.14 of percent of its work force. Computer system design and related work lost 105,000 jobs, or 8.5 percent of its workforce. Manufacturing lost 2.9 million jobs, almost 17 percent the manufacturing workforce (BLS 2008). These statistics are enough to show that outsourcing is hurting the U.S economy and its workforce, but companies are still involved in the practice. According to Lou Dobbs, the editor of CNN program, Lou Dobbs Tonight, Dell, Intel, Apple, American Express, Bank of America, Best Buy, Comcast, Ansell Health Care, Briggs Industries, General Motor, Direct T.V and AT &T are some of the big companies that are currently involved in the practice of outsourcing jobs outside of the United States.
Moreover, with the increase in the mass layoffs and the unemployment rates, outsourcing will lead to high government spending on welfare, which could probably affect the economy. For example, more people whose jobs have been and are on the way overseas will depend on the government for support after unemployment benefits have been exhausted. The U.S government will spend more money on a single individual and a household family because these displaced employees may never be able to find the same quality jobs that are lost to outsourcing overseas (Dobbs).
However, the CEOs and some economists have bitterly argued from a business perspective that outsourcing American jobs to foreign countries will help grow the economy, thus prohibiting the practice will keep the country from being globalized (Dunbar). A proponent of outsourcing, Gregory Mankiw, who is a member of the President’s Council of Economic Advisers, said last year on a CNN business television program, Lou Dobbs Tonight that “Outsourcing is just a new way of doing international trade. [He continues]…I think outsourcing is a growing phenomenon, but it’s something that we should realize is probably a plus for the economy in the long run.” The only thing that is probable is that, the unemployment rate will continue to increase and more people will depend on the government for support if they do not find the same quality of jobs that would help support their families.
The most possible solution to the problem is for the government and the public to intervene for companies to bring back these jobs from overseas, which will help to decrease the current unemployment rate, create job opportunities and help to grow the economy. The government should intervene by restricting companies from sending jobs overseas, especially high paying jobs, because without good, high paying jobs there are no tax revenues to fund the education, health, infrastructure, and social security system. Once these restrictions are set, the government should grant incentive tax breaks to companies in order to encourage those companies that are already outsourcing functions overseas and companies that are trying to do the same to reverse their decisions. For example, the U.S Congress should pass 10% tax cut legislation for manufacturing, construction, service industries and other companies. This will help to convince companies that have moved jobs overseas due to high tax rate to rethink their decisions and bring back most of their functions, which would provide and keep good paying jobs in America. The U.S Congress and economic experts should also make the effort to document and study outsourcing from a business and non- business perspective. Both parties should acknowledge that outsourcing U.S jobs to foreign countries has caused problems and it has lessened the morale of U.S workers.
Furthermore, there must be a full disclosure. The government should require companies to make consumers aware of where products are made and when those products are the result of jobs lost due to outsourcing. State governments should pass legislation to eradicate unionization by employees. Companies sometime relocate their operations overseas when employees allow union organization/labor group to oversee their interest by advocating for increases in salary and more benefits.
The public should also intervene through immediate campaigning to emphasize the importance of economic patriotism. They should stress the need for the federal government and companies to prohibit the practice of outsourcing because it has caused thousands of people to become unemployed. The public should also caution its state governments that would promote outsourcing jobs to foreign countries, by writing to their governors and congressional representatives to prohibit companies within the states from sending jobs overseas. Furthermore, they should reject products that are produce overseas by these companies through effective campaigning by sending warning letters to companies involved and educating the public through the media about the negative impacts outsourcing has caused to the U.S workforce, individual lives and the economy. Ron Hira, an expert on outsourcing, and Anil Hira, a specialist in international economics, suggest that “Americans need to recognize that it priorities of national competitiveness and security include maintaining a technological edge and encourage the engineers, scientists and programmers to keep the United States a step ahead of its potential enemies”(Hira and Hira 11) . One way to maintain these priorities and encourage scientists, and engineers is for both the government and the public to join hands to severely minimize the practice of outsourcing job overseas and to sponsor the development of community colleges within various states and to reduce college tuition fees and text books costs.
These interventions from the government and the public will help to severely minimize outsourcing and force companies to reverse their enormous export of jobs to foreign countries, which will help to restore jobs back to the American people. The return of these jobs will limit government spending on welfare because these companies will employ old and new workers in the workforce. Companies will create new job opportunities for high school students, undergraduates, and graduate students, which will help improve the standard of living and encourage more students to learn without fear of having their jobs outsourced to foreign countries.
Furthermore, bringing back these jobs to the United States will allow companies to provide job training and advanced education scholarships for employees and make companies focus more on research and development, which will also help grow the economy. For example, people will buy new homes, new cars, pay government taxes on time, and buy other necessities. In addition, it will help to decrease the unemployment rate and minimize the current mass layoffs in the manufacturing, construction and service industries. Finally, restoring these jobs for the American people will restore pride to the workforce, encourage growth in the economy and make the workforce more productive and efficient.
Work Cited
Bureau of Labor Statistics.
Cook, John and Nyhan, Paul. “Outsourcing’s long-term effects on the U.S jobs at issue.” Seattle Post Intelligencer 10 March 2004. 11 Nov 2008
Dobbs, Lou. “Exporting America.”CNN program. 10 Nov.2008
Dobbs, Lou. “Outsourcing Harms America.” Does Outsourcing Harm America?
Ed. Katherine Read Dunbar. Detroit: Thomson Gale, 2006. 11-23.
Hira, Ron and Anil Hira. Outsourcing America. New York. Amacon Books, 2005
Robert, Paul Craig. “As Jobs Leave America’s Shores.” 30 Sept 2006. Nov 11 2008
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