Impact that Outsourcing
China for example is said to be the best country for foreign direct investors. This is because it has better wage advantages than most countries such as the United States and even Mexico. The amount of money asked for by employees in china is much less than that asked by an employee with the same qualification and doing the same job in the United States and in Mexico. This is advantageous as it helps the company to save more on the cost of production by investing in this country (Hale, 2005,pp.
160 – 170). Also in China, the employers do not have to provide food or cheap housing to the employees as is the case with Mexico. This reduction in cost overwhelmingly increases the profits of a company the company if it has invested in several. However, Mexico has the advantage of being closer to the home of the GE, this means that the cost of transportation of the products to the United States market is cheaper than that incurred in transporting from china.
There also is no language barrier as Mexicans can speak English unlike in China where the investors have to learn the Chinese language so as to make communication
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China for example only starts to tax fully after the fifth year of operation which is not the same as other countries. Other countries have more talent that can be tapped than others. India for example is said to an educated and talented work force than its other two counterparts. This has been advantageous for GE investment in India as they are able to get quality and professional labor at a very low cost. The decision of General Electric Inc to have multiple outsourcing partnerships has enabled them to know where to invest in what investment resulting to reduced cost of production maximum profits.
Impact that Outsourcing will have on the US Economy in General. Outsourcing will have both positive and negative impacts on the economy of the United States in general. Outsourcing involves the transfer of manufacturing and services of certain products to other countries where the cost of production is lower than that it is in the United States. This results to the American citizens losing jobs as the manufacturing plants are closed down in the United States.
This consequently leads to downward pressure on effective wages as low skilled laborers after losing their jobs usually have no alternative and due to desperation bargain for jobs that pay lower salaries than the ones they occupied before. This reduces the household income of these workers. Most of the newly expanding firms do not provide adequate health and medical cover for their employees. This has resulted into large numbers of uninsured and under insured individuals which has adverse impacts on these individuals, the community as a whole and the organizations that offer medical services.
This situation of individuals not having adequate medical cover increases taxes and cost of health care premiums which is not good for the growth of an economy (Economist Intelligence Unit (Great Britain). ,1982, p. 29). Out sourcing has resulted to slowing down of improvement in the United States economy. The rate at which infrastructure is developed is not as fast as it would be if the outsourcing organizations operated from the United States. This is because for manufacturing businesses to be successful, infrastructure such as transport and communication networks have to be effective.
The transfer of industries to other countries has resulted to the negligence of some infrastructures which would not be there if the industries were operating from home. It has also resulted to marginalization of the rural areas some of which could have formed good sites for setting up of the manufacturing plants. The lagging behind of infrastructure development and opening up of the interior to development pulls down the economy of the country (Fernandez, 2000, p. 189).