Globalization: Outsourcing and Offshoring Software Creation Essay

Good Essays

In recent years off shoring of high paying service jobs to counties such as India have received a lot of media attention. What are the long and short-term effects of these changes in terms of employment, income distribution and economic growth? Is the outsourcing of services a different phenomenon than simply importing steel?

Economic theory and past history point to the fact the trade provides net economic gains but if it also redistributes wealth, affects worker employment the short run and wages in the long run. It is easy to find literature that tells of the growth of the American economy with the increased use of outsourcing. It is however a different story when one asks the question who is reaping the benefit of the new lower …show more content…

In the past three years it is estimated that off shoring accounted about .5 million people laid off by Goldman Sachs. Forrester projects that the number of outsourced jobs will grow to from about 400,000 to 3.3 million by 2015. That averages 250,000 layoffs per year or less than two percent other approximately 15 million Americans who involuntarily lose their each year. Up to 14 million Americans work in occupations susiptable to off shoring. Occupations such as financial analysts, medical technicians, paralegals and computer and math professionals according to a recent study at UC Berkeley by Ashok Bardhan and Cynthia Kroll.

Gathering information about the extent of outsourcing is extremely difficult. The Department of Labor relies on employers to voluntarily report in surveys whether they have had any layoffs due to off shoring. Employers are understandably reluctant to be forthcoming with such information. The Brookings Institute held a Data Workshop to discuss problems gathering data on this topic. With the current surveying methods the potential magnitude in underestimating the import levels and overseas job displacement is significant was one conclusion of the workshop.

Off shoring should result in net gains for the US. A study by the McKinsey consulting firm estimated the net savings of moving some jobs off shore is about 50 percent. The wage differential between US and foreign

Get Access