Outsourcing: Cost-Benefit Analysis (CBA) Essay example

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Outsourcing: Cost-Benefit Analysis (CBA)

Outsourcing has become a very controversial topic, particularly around the time of presidential elections. The working public has a very different view of outsourcing than the business owners, partly due to information asymmetry. In other words, the working public does not typically have all of the information regarding the impacts of outsourcing available to them as business owners do. Reversely, business owners are not able to see the impacts of outsourcing on the working public and therefore, do not consider those impacts when restructuring their companies. The interpretations of these impacts, however, determine whether they are costs or benefits to the person interpreting them.
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This new phenomenon has sparked interest from not only consumers, who feel they receive the short end of the stick, but business executives and most economists as well, who see the other side of the spectrum.

In addition to Information Technology, The Outsourcing Institute lists several other sectors that are outsourcing: Operations, such as consulting, training, records management, printing, and telephone customer support; Finance, including payroll processing, purchasing, transaction processing, and accounting; Human Resources, mainly workers’ compensation; and Sales and Marketing, in the way of direct mailings, advertising, and telephone sales.

Opponents of outsourcing do not take this information with a grain of salt. They see outsourcing as a significant problem contributing to job loss, increasing wage gaps, and negative impacts on low-skill workers. As outsourcing is essentially free trade, some opponents blame job loss on the North American Free Trade Agreement (NAFTA) in which Mexico, Canada, and the Caribbean Basin do not pay tariffs on exports to the United States. By not imposing tariffs on exports, opponents of NAFTA claim companies will jump at the opportunity to cut costs by manufacturing products in a lower wage-paying country and exporting them to the U.S.,
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