Benefits of Outsourcing to a Foreign Country

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Outsourcing to a Foreign Country

            With the economy in a current down turn we as American citizens are faced with a serious recession.  In this recession that America is presently facing businesses are trying to cut as much cost as possible, and for a lot of corporations that means outsourcing jobs to other countries.  Outsourcing job to other countries is becoming more and more popular in American business for many different reasons.  Outsourcing job generally refers to the practice of sending out jobs from their home base to other countries, largely in an effort to cut costs in making their product (DiCarlo).  The topic of outsourcing is a very controversial issue in a time like this because it is taking jobs away from Americans who could have had them.  The majority of the jobs today that are being outsourced are technology development, customer service, financial, and administrative jobs.  Even though it seems like Americans are losing all these jobs there are also a lot of benefits that come out of outsourcing jobs.  Outsourcing does not only benefit the developed nations, but it also facilitates the developing nation.

            Outsourcing jobs benefits a lot of people, and even though it seems like it is making our economy worse by losing jobs outsourcing is actually helping the economy significantly.  The idea of outsourcing is not a new proposal the United States has been outsourcing jobs since the early 1960's.  It is only starting to be noticed now because of the workers in industrialized nations are being displaced in large numbers, and comparably well-paying jobs are not being created fast enough to make up for the positions headed offshore (Barrera).  By outsourcing to developing nations it is helping our businesses run more cost and time efficient.  Since businesses are saving money they have more money to put back into their company, so they can produce more of their goods and services to sell.  If the United States was to make a product domestically the cost would be more to make the product here, and since the cost is more the selling price will be more expensive for the buyers.  So, it is a win- win situation for everyone by outsourcing because it provides gains in consumption (having more people buy a cheaper product), production (the businesses can buy more materials to make their product to sell because they have more money), and exchange (more people will be able to buy the product because it is cheaper).  It makes sense for the United States to manufacture airplanes, high-end computer chips, and advanced software, however, products that command better prices and are less complex things like shoes or textiles people are left asking the questions: Why use our resources to manufacture something of lesser value when we could use them to make something of greater value?  And why produce something ourselves when we can get it cheaper elsewhere (Barrera)?  The world reaps enormous benefits from letting countries specialize in what they do best and most cheaply (Barrera).  Not only does this system increase efficiency and achieve economies of scale (both of which lead to a drop in costs), but it lays the groundwork for even more path breaking technological changes in processes and products (Barrera).

            Outsourcing jobs does not only help the rich businesses make more money by finding cheaper labor, but also helps in the growth and advancements of developing countries.  The major countries that the United States is outsourcing jobs to are India, Philippines, Russia, China, Mexico, Ireland, South Korea, and Japan.  The majority of these countries are still considered developing countries, and have a much higher poverty rate than there is in the United States.  India is the leading recipient of the outsourcing of information technology functions like software development and maintenance, and also business process outsourcing (DiCarlo). This includes jobs such as back-office functions like accounting, human resources, call centers, and data analysis.  With the stimulation of outsourcing job to countries like India it has helps many impoverished people climb the ranks and get into the middle class.  It is like a new beginning for these people in developing nations, and it is also a new beginning for the business that was outsourced over there too.  Benefits that companies get by outsourcing to countries like China, India, Japan, and South Korea are that all these countries are roughly 12 hours ahead of the United States.  This helps the efficiency of businesses because new data can be processes and ready to be analyzed at the start of each day.  It also provides a 24 hour customer service for all these businesses because when these countries are getting ready to work the United States is winding down from its work day.

            When people hear the word "outsource" immediately they think of losing jobs that Americans could have had to foreign countries.  However, with the companies working at a more efficient rate this is creating jobs for others to have.  Outsourcing not only would not induce a fall in aggregate employment, but also has the potential to make firms sufficiently more efficient, leading to enough job creation in the same broadly defined sectors to offset the lost jobs due to outsourcing (Amiti).   Although service outsourcing is growing rapidly, it still remains a small fraction of industrial countries' GDP.  And it is not dominated by lopsided, one-way outsourcing from developed to developing countries (Amiti).  As bad as outsourcing jobs to other counties sounds in a time where everyone is looking for jobs; it is for the greater good and well help more people out in the long run. 

 

 

Works Cited

Amiti, Mary, and Shang-Jin Wei. Demystifying Outsourcing The numbers do not support the hype over job losses . Washington: InternationaMonetary Fundl, 2004. Web.

Barrera, Albino. "Who Benefits from Outsourcing?." (2004): n. page. Web. 14 Nov. 2011..

. Dicarlo , Lisa. "Best Countries For Outsourcing ." Forbes. 27 8 2003: n. page. Web. 14 Nov. 2011..

 
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