The common citizen is also poised to gain. As shown above, services and goods become cheaper and more accessible. This allows the average citizen greater access to more affordable and better quality services. The citizens also profit from the stock market. Since the multinationals are listed on American stock exchanges, their performances are reflected in the same. The Americans hold majority of the shares in the stock market and therefore will benefit from the improved revenue from cost savings. Since many of the outsourcing companies have operations abroad, they have the capacity to earn more and thus repatriate more profits back home.
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...n: justify">Besides, the head quarters of these companies are kept in the US (King, 2008). The job loss, according to some quarters, is a necessary adjustment process that should not affect the long-term economic health of the nation. With the examples of the industrial revolution where the economy adjusted by killing off farming jobs while creating factory jobs is an example of the same (Baily & Farell, 2004). The argument is that with the inevitable structural change, jobs will be lost; others will increase while at the same time new jobs will be created.
In fact, for every dollar spent on outsourcing, 72 cents of it had been previously spent in the economy. This plus the high rate of redeployment experienced in the economy means that the economy actually gains up to 45 cents from redeployment. The trick is to enable redundant workers to take up the new employment. The only way to do this is by improving their education so as to take up new jobs in higher education brackets as the competition will require. A useful strategy would be to insure the workers against job loss with the savings brought about by outsourcing (Mann, 2008). With these reassuring sentiments and an advantage of between $1.
12 and $1. 14 for every dollar spent abroad, why is there so much noise about this business strategy? The main problem today is the financial crisis. In order to cart the system out of it, there needs to be increased spending and more investment in the local economy. Outsourcing helps none of these, at least to the extent of being able to become an economic savior in this time. First, there is job loss at home, with foreign workers being preferred due to their cost benefit. Right now, the economy needs spenders not misers to stimulate it. In the event of job cuts, people will become wary of spending due to uncertainty. This is not healthy.
Statistics for 1979-1999 showed that 69% of people who ended up loosing jobs to the outsourcing phenomenon regained employment. With the job loss, even with a decent rate of redeployment, the statistics give us that those who find employment elsewhere are paid less than their previous jobs. This still does not help spending as the new income level is lower than before. Re-deployment is only available to those who are willing to improve their education levels. This affects the older workers in the job sectors affected since they are less willing to engage in education, preferring to look for employment at the same level for lower pay.
This is not good for the general economy. So with a job loss in the local economy, there is reduced demand in the economy. This is, without question, a strain on the welfare system tying up funds that would have been used elsewhere more productively by the government. This only leaves us with the option of increasing export demand so as to counter the reduced local demand (Mandel, 2008: King, 2008). So we have established that there will be reduced demand from the consumers due to outsourcing. There is also the problem of decreased investment within the country. This is what the country needs during this time so as to revive the economy.
Outsourcing means that the company either invests its resources outside to support its outsourcing activities or is supporting other companies to do the same. With increased spending outside rather than inside the country the result is that much needed investment is not taken home. The labor market at this time is becoming more affordable, with outsourcing destinations such as china and India becoming more unaffordable due to a weakening dollar. Apart from depreciation of the dollar, some destinations, India in particular are looking, unstable in terms of the tax future.
Costs of production have gone up due to tax increase causing there to be a lower savings experienced in outsourcing. This should be an incentive for companies to in source as opposed to outsource, and invest in a long-term schedule for the US (Mandel, 2008). My opinion on the matter is that we need to balance rather than approach the whole subject from the extremes. As Mann states, policies to be put in place must embrace the change in trade and to avoid getting a raw deal from free trade practices. This can be achieved through ensuring that investment remains heavy in the US so as to boost the output and employment levels.
Now, more than ever, do we need to practice conservative protectionism? This should be a temporary measure so as to ensure that the economy does not slip further than it already has. One of the policies that could be implemented is that any company that receives federal help in the form of bailouts must invest and use labor entirely in the US with the money received. Also, we have seen that education affects the redeployment rate. We must move to make our human resource market more efficient and educated such that they are above outsourcing levels. With white collar jobs on the line, it seems that this level is pretty high though.
However, smart education moves like encouraging outsource proof career paths like networking engineers who need to be on-sight will enable there to be less jobs on the wrong side of the job cut axe. With retraining now being a real option, there needs to be policies that encourage employers to engage their employees in it (King, 2008). Tax cuts and subsidies for such programs would be a welcome idea. With the job loss happening, innovation must come into play so as to create new employment channels that will allow employment figures to look hopeful again.
Innovation must be encouraged from the government quarters so that they can thrive finally as powerful economic forces. This can be achieved through encouraging research and funding innovative and creative ideas (Baily & Farell, 2004). We cannot fight the effects of globalization, for it is akin to fighting change. We can, however, find ways of using it to our advantage, allowing us to profit from it. References Baily Martin & Farell Dianal. Fourth Quarter 2004. Is your job headed for Bangalore? The Myths and Realities of Outsourcing. Sourced on 17 April 2009 www. milkeninstitute. org/publications/review/2004_
King Rachael, The New Economics of Outsourcing. Business Weeks 7th April, 2008. Sourced on 17 April 2009 http://www. businessweek. com/magazine/content/08_10/b4074041212646. htm Mandel Michael, Multinationals: Are they good for America. Business Week 28th February, 2008. Sourced on 17 April 2009 http://www. businessweek. com/magazine/content/08_10/b4074041212646. htm Mann Catherine, This Is Bangalore Calling: Hang Up or Speed Dial? What Technology-Enabled International Trade in Services Means for the. U. S. Economy and Workforce. Sourced on 17 April 2009 www. iie. com/publications/papers/mann0105. pdf