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The issue of outsourcing

The issue of outsourcing is a contentious one with policy makers, state leaders and business executives expressing contradicting opinions concerning its growing practice. Thanks to the development of communication technology and the proliferation of the Internet, the number of tasks which can be done offshore has expanded. While offshore outsourcing is a new concept, the idea of subcontracting work so as to cut costs is nothing new. In the 1980s, for instance, manufacturing first in the Northwest states decided to move to the South and Southwest where wage rates were so much lower (McKinsey Global Institute).

Having business processes performed offshore is just a different expression of the same idea. The key to outsourcing is the availability of highly skilled personnel whose wage expectation are so much lower than those of their counterparts in the employer’s home market (McKinsey Global Institute). With outsourcing, companies can now produce goods and services of the same quality, with substantially lower costs. This enables employers to channel excess resources as additional capital or they can use it to develop to develop their human resources or operational processes at home.

How does it affect economies? Those in the home country are affected in two ways. At the

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onset of implementation, outsourcing can lead to higher unemployment. This is actually one of the major reasons why so many people oppose outsourcing. In a 2006 report published by Fox News, President George Bush, a supporter of outsourcing, was quoted saying that this practice can hurt the US (Associated Press). The report also stated that around 27,000 employees were laid off from 2005 to 2005. And yet, at the time, Pres.

Bush did go back on his policies because he believed that outsourcing was still the solution to the country’s ails. He said “education – not trade protectionism – is the answer to deal with the increasing globalized world in which we live and work” (Associated Press). At the same time, the US Senate also decided to allow the Bush Outsourcing Plan to continue (Pegg). With more employees seeking improved education, an increase in productivity can be expected. Gone are the day when employees can go home without an output to present.

In this case, companies are benefitted – executives can now guarantee that they are getting the best effort from their employees. Again, this leads to an advantage – with more and more employees performing efficiently, companies can now readily expand their production because there is an assurance of profit. In the long run, with the establishment of more manufacturing plants (or operational branches for retailers), home countries benefit with increased employment. On the other hand, most outsourcing countries are also considered as some of the poorest in the world.

Some of these include India, where people live on less than $2 a day, and the Philippines. Countries receiving outsourced work benefit with increased opportunity to earn a living. Skilled professionals in these countries can now find work without going abroad. And since wages in these outsourcing countries are so much lower than the home country, chances are, workers in companies receiving outsourced work receive a substantial amount of income compared to workers in local companies. Works Cited Associated Press. “Bush: Outsourcing Does Hurt U. S. ” 3 March 2006. Fox News.

11 July 2010 <http://www. foxnews. com/story/0,2933,186791,00. html>. McKinsey Global Institute. “Offshoring: Understanding the Emerging Global Labor Market. ” n. d. Google Books. 11 July 2010 <http://books. google. com. ph/books? id=PZOXwtWnevsC&printsec=frontcover&dq=offshoring&source=bl&ots=PcQ6IS8EID&sig=upxicVUFph8HOFz3-owyVbkTr3c&hl=tl&ei=dSU9TJ6rHca2cdmWqKIB&sa=X&oi=book_result&ct=result&resnum=8&ved=0CE0Q6AEwBw#v=onepage&q&f=false>. Pegg, J. R. “Senate Opts Not to Block Bush Outsourcing Plan. ” 24 September 2003. Environment News Wire. 11 July 2010 <http://ens-newswire.

com/ens/sep2003/2003-09-24-10. asp>. Additional Sources: Blinder, Alan S. “Offshoring: The Next Industrial Revolution? ” March/April 2006. Foreign Affairs. 11 July 2010 <http://www. foreignaffairs. com/articles/61514/alan-s-blinder/offshoring-the-next-industrial-revolution>. Gorg, H. and Hanley, A. “Does Outsourcing Increase Profitability? .” October 2004. Social Science Research Network. 12 July 2010 <http://papers. ssrn. com/sol3/papers. cfm? abstract_id=612228>. McKinsey Global Institute. “Is Offshoring Win Win? ” August 2003. Unige. 12 July 2010 <http://hei.

unige. ch/~baldwin/ComparativeAdvantageMyths/IsOffshoringWinWin_McKinsey. pdf>. Working Party on the Information Economy. “Potential Impacts of International Sourcing on Different Occupations. ” 19 October 2006. Organisation for Economic Co-operation and Development. 12 July 2010 <http://www. oecd. org/dataoecd/3/52/37577499. pdf>. —. “The share of employment potentially affected by offshoring – an empirical investigation. ” 3 February 2006. Organisation for Economic Co-operation and Development. 12 July 2010 <http://www. oecd. org/dataoecd/37/26/36187829. pdf>.

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