The Impact of Offshoring on the U.S. Economy

With the current state of the economy, many companies are making the rash decisions of transferring their jobs

Specifically, companies are transferring these services overseas as in the case of call and help center services or companies are ordering manufacturing supplies from overseas at a much cheaper price than they could obtain them inside the U.S. Outsourcing is a term that is often used interchangeably with off shoring (Bhagwati, Panagariya, & Srinivasan, 2004).

What are the true reasons that companies are doing business around the world and outsourcing American jobs to other countries? Mainly, American jobs such as Accountants, Technicians and Programmers are losing their Jobs because of globalization. Most of American jobs are outsource to countries such as China or India, therefore, before this taken place Americans had more of a better stable career path or even more jobs to choose from eventually, times have changes very rapidly due to companies moving American jobs overseas. As stated by many politicans, executives, prominent corporate executives and academics “have argued that we have no choice, that with globalization it’s critical to tap the lower costs and unique skills of labor abroad to

Outsourcing does not typically expand in the United States; this is because of high wages and the struggle of keeping a job. Therefor, when a company outsources it hands over jobs in foreign countries. The United States career opportunities were diminished by 2.9 million while the jobs boosted by 2.4 million overseas. With those numbers, that means big name companies are only hiring 20 percent of Americans. (americanprogress.org). If all jobs are being shipped away, what is left here? This only enables other countries room for improvement.

The offshore activities bring consequences in the capital markets. From offshoring benefits: reducing costs and improving productivity, the organization could

Business development happens on the grounds that assets are arranged for to be utilized to enhance the organization's items or administrations. John Miller composes that the only difference between American workers and offshore workers is that the offshore workers get paid less (Miller). In the event that a business can spare cash by utilizing seaward outsourcing then it is gainful to do as such on the grounds that it prompts to business development. Like Miller, others may state that all organizations pick up from seaward outsourcing are work reserve funds. Notwithstanding, work investment funds is a long way from the main way that organizations advantage from seaward outsourcing. Pete Engardio, Michael Arndt, and Dean Foust assert that by utilizing seaward outsourcing organizations are expanding in regions of value, profitability, effectiveness, and benefit (Arndt, Engardio, Foust). This is imperative since it urges the shopper to continue purchasing those organizations items or administrations. Business development is an imperative impact of seaward outsourcing, in light of the fact that it realizes change in business work and gives less expensive and better items or administrations to the

It is difficult to determine whether offshore outsourcing has a positive or negative effect on the U.S. economy. It may actually depend on which perspective you take on it. As stated by Hira and Hira (2005), outsourcing in the services sector is a major shift in how the economy operates and will have serious impacts, both positive and negative, on the trajectory of economic growth, distribution of income and the workforce. However, there are many factors to take into account when considering globalization. Companies must familiarize themselves with the various rules and regulations of global business, tariffs, trade agreements and barriers, and decide how to go global; global consistency or local adaptation. All of these issues affect

I agree with you. Governor Kernan made the right decision for the citizens of his state. Cheaper is not always the best way to go. Outsourcing has created savings for companies but the opposite side of that is loss of jobs here in the U.S. This affects the economy here greatly. I also feel that the level of quality has been compromised due to outsourcing. Several times I have received poor customer service when checking on my credit card or receiving technical assistance for my mobile phone.

In an article for the Washington Post, Steven Pearlstein (2012) explains how outsourcing and offshoring has been a part of American History since the late 1800s. Today, well known organizations like Nike, Apple and UPS are known for being a major part of the outsourcing trend. Pearlstein (2012) suggests that the catalyst for offshoring began in the in the late 1970s as the U.S. firms were forced to find cheaper, yet efficient ways to conduct business as foreign competitors had an immediate advantage. Since the wave of outsourcing and offshoring, it appears that while big businesses have been able to cut costs and increase profits and revenues, the United States economy has suffered as jobs are taken away from citizens. Katherine Peralta (2014)

Several industries in America have moved low-skill, low-wage jobs overseas. Often, the motivation behind the relocation of these jobs is corporate financial gain. Companies can decrease production costs by utilizing low-cost labor in foreign countries. Manufacturing is one industry that has moved low-skill, low-wage jobs overseas. In 1980, the United States manufacturing employment was 21.3 million. Yet, in 2010, the United States manufacturing employment shrunk to 14.1 million (Douglas, 2017).

The process of globalization has numerous significant effects on countries, organizations, and individuals. These effects can be observed in the quality of products, in their prices, but also in their availability. Because of globalization, numerous companies prefer to expand their business on international level. Some of them outsource some of their processes and activities to cheaper destinations that allow them to reduce their investments.

Private businesses operate to earn profits and the theoretical basis on which their economic activity rests in the maximization of profit. In the pursuit maximization of profits, multinational corporations (MNCs) often expand their businesses to countries having lower labor cost, comparatively decreased cost of doing

A final reason for the company to offshore part of their operations is access new markets. Since the company is not restricted to just the domestic market, offshoring gives the company global presence and the ability to access developing markets in Third World countries. By streamlining the company’s production processes and supply chains globally, companies can lower their prices increase demand for their products, thereby attracting new customers and entering new markets.

Here researchers examined the selected countries like India, china, Brazil and Russia. He mainly found that there is continuous rise in outsourcing revenue for global sourcing, and he found that the BPO will overtake ITO within five years. The latest trend is multi-sourcing. They also found that India is still holding the clear lead as the preferred destination for outsourced services both BPO and IPO. The dollar value of the Chinese industry itself is twice that of India’s (Carmel et al, 2008). The captive centers are wholly owned by subsidiaries located in offshore location that that perform work for parent companies. The captive center use the strategies to change the way of offshore assets are utilized. One of the strategy used by captive center is pursuing a hybrid strategy here the captive outsource units of work to a local service provider. These captive centers still work for the parent companies but they outsource their work or insource the work. By doing these the captive centers can focus on the value adding services and their core services by doing these reduction in the cost can be done. There is also risk associated with these type strategy like non completion of contract, reduction in quality of service or goods

Nevertheless, the growth of multinational corporations has raised a number of concerns. An enormous amount of production power is concentrated in the hands of a few controllers, which means that the countries involved become directly susceptible to economic changes in other parts of the world. The transfer of assets from one country to another may be difficult for governments to manage or prevent, and there are likely to be disparities in the treatment of different countries.