The Impact of Outsourcing on the U.S. Economy Essay

561 Words 3 Pages
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 …show more content…
Furthermore, the U.S. economy may also benefit if companies reinvest the extra profits gained from outsourcing for expansion in the U.S. This creates more jobs at home, but again, this is a long term effect of outsourcing and depends on how successful that business is overseas.
Exporting presents many advantages including reduced dependency on home market sales and greater control over research, design and production decisions. Conversely, many exported goods are subject to tariff or nontariff barriers and transportation costs that may substantially increase the final cost to consumers (Williams, 2009.)
Some companies stand to benefit from exporting. Large U.S. based organizations are strongly in favor of their companies’ free ability to export U.S. jobs and have no interest in taking responsibility for the consequences to their employees. Basically, this means that the CEOs, executives and shareholders support offshore outsourcing because they stand to gain from rising profits and stock prices while employees here at home are losing their jobs to free trade and offshoring. The U.S. is in a period of transition in which many companies have just discovered the benefits of outsourcing, so they are anxiously scrambling to substitute cheaper foreign labor for American labor. The direct transfer of work overseas is growing much faster than the…