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Outsourcing in America

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Outsourcing

Should we as Americans be uneasy about the effects of outsourcing? As a supervisor in the manufacturing industry, I have watched a lot of jobs leave to be outsourced to foreign countries. As an American this was a concern to me as it is too many other Americans. As I began to research this essay I began to realize that this is a good thing for businesses and for America. Outsourcing jobs overseas helps the economy and businesses grow by creating jobs and cutting development and production costs.

Outsourcing is necessary because it makes the products and goods more affordable to the consumer. In countries such as India and the Philippines, where the majority of the working population speaks English fluently, companies have access to the same caliber of highly skilled, motivated and educated workers that they have in the United States, but at a fraction of the labor cost of that in the United States. Most of the jobs that are outsourced, such as computer programming, call center and data entry jobs are the ones that Americans do not want to begin with, because they consider them trivial low paying jobs. Usually these low paying jobs have a considerable turnover rate in the United States. Because of the turnover rate, companies spend more time and money to fill these positions because they constantly have to hire and train new employees. In places such as India these jobs are considered good decent paying jobs, which people want to do. In the development of products, engineers from the United States work hand and hand with their Indian counterparts, and because of the time difference between the United States and India projects can be worked on around the clock and therefore take less time to

develop. There are substantial benefits for companies that outsource because they do not have the high labor rates, health insurance costs, retirement plans, unemployment insurance and numerous other expenses that are associated with operating a business in the United States. There are also considerable tax benefits for these companies as well because they do not have the real estate needed to produce and warehouse their products. This saves money because they do not have the overhead needed to maintain these facilities or the tax burden associated with maintaining an inventory. In the long run, consumers of the products and services that these companies offer, save as these companies pass the savings on by way of reduced prices.

Outsourcing is good for the economy of the United States and other countries because it creates jobs and increases revenues for businesses and governments. It not only creates more revenue for the companies that outsource, but it also creates revenue for the company that does not. Jobs are created in the United States by what is called “Insourcing”. Insourcing is the creation of jobs by foreign business. Although the United States creates more jobs in foreign countries at this point in time, the jobs that are created here in the United States are on average higher paying than the jobs that are outsourced.

Consider what’s happened in heavy manufacturing, which includes the manufacturing of vehicles, computers, electronics and other machinery. Since the mid-1990’s, foreign companies have added 400,000 jobs in these industries in the U.S. Over the same time period, U.S. companies moved 300,000 jobs to foreign countries in the same sectors. The

insourced jobs in these industries are also high-paying, with average compensation per employee of over $65,000. (2004, February 2). The News & Observer, p. A13.

The products and goods that are produced and or manufactured in these foreign countries by

American companies are now bought and sold in the countries where they are made. Many of these countries have populations much larger than that of the United States. “The United States accounts for only about 5% of the world population” (Bush, 2006, paragraph #5). Countries such as India for example have huge populations. “India’s middle class is now estimated at 300 million people” (Bush, 2006, paragraph #6). “That’s greater than the entire population of the United States. And this middle class is buying air conditioners, kitchen appliances and washing machines _ and a lot of them from American companies” (Bush, 2006, paragraph #6). Because of the closer ties and trade agreements that we have with these countries, even the companies that do not outsource their products or services either because they choose not to, or they are in industries where it is not feasible to do so, benefit from outsourcing. These companies benefit by way of increased revenue, the increased revenue is created from the sale of their products and services to the consumers in these countries.

So, the question remains, should we as Americans be uneasy about the effects of outsourcing? In my opinion, no because the long term benefits from outsourcing

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