Offshore Outsourcing
Outline
Should the USA as a country seek for offshore outsourcing? The question can be answered in two different perspectives. To answer the above question, this essay will have an argumentative assertion about offshore outsourcing in U.S. It will discuss in detail the arguments for and against outsourcing. The essay contemplates whether it is appropriate for the U.S. companies to outsource. With this aim in mind, this essay is structured in four sections. The first section is a brief explanation of outsourcing. The second section discusses arguments against outsourcing. The third section discusses arguments for outsourcing. Lastly, the fourth section concludes the essay.
Introduction
Outsourcing refers to contracting a third party organization out of an internal firm or organization. Also, it may refer to the transfer of assets and employees from one firm to another. Offshore outsourcing is common in USA since the 21st century, and it is adversely affecting the U.S. economy. Furthermore, it increases unemployment within the U.S. economy, especially for its own citizens. The American people lose their jobs when companies opt to employ foreigners. Therefore, the U.S. government developed some policies to cut the rate of unemployment in the country conveyed by outsourcing. Alternatively, it is beneficial to companies since the wages paid to outsourced workers are less than for the USA citizens.
Offshore outsourcing increases the level of unemployment in the United States. According to Harrop, it is the mandate of workers to look out for their interest. In her essay, she talks of loss of employment opportunities for the American people to the foreigners. It is due to offshore outsourcing that the country has unemployment issues. She quotes Princeton, an economist who predicts that some jobs will be lost in a mere decade. Harrop is against offshore outsourcing which does not benefit U.S. citizens. It is the task of U.S. workers to reinforce the reduction of outsourcing by some firms in the country. Harrop does no clearly state the ways of curbing outsourcing but emphasizes that the U.S. government should solve the issue in a slow process. The H-1b program allowed educated foreigners to work in the U.S. for three years. Most of the companies take this program as a tool to transfer American jobs to other countries. This program creates unemployment in the country since employment opportunities are transferred to other countries.
Offshore outsourcing increases global competition; therefore, it makes it difficult for the USA to contend with other countries. Also, in some cases H1-B workers are trained to replace employees in some jobs. This is known as knowledge transfer. The main reason for doing this is to reduce wage expenses, but in the long run it becomes a disadvantage to the companies. In three years, the H1-B visas expire and companies are forced to train other H1-B workers. Training workers becomes an added expense and also the workers go home with knowledge on how to interact with American customers. Therefore, the companies end up facing competition threats from these workers. This increases global competition from foreign countries and affects the economic performance of the country.
Another issue is the reduction of domestic minimum wages as a result of outsourcing. Outsourcing reduces the domestic minimum wage of the USA because outsourced workers are willing to work with a wage rate less than the domestic minimum wage. Additionally, Harrop states that the program decreases the wage of American workers. H1-B workers are always willing to work for wages below the minimum wage. It is due to this reason that companies opt to hire more foreigners than native citizens. According to the law of demand and supply, when the prices of labor reduce, the supply of labor reduces accordingly. In most cases, the minimum wage in the USA is an advantage to foreigners since it is more than the minimum wage in their countries. Therefore, they opt to work with wage rates less than the prevailing wage rates. This, in turn, affects the domestic minimum wage. The companies become reluctant in increasing their wages to the prevailing domestic wages because of outsourcing. The main reason is because a low cost is incurred when companies outsource labor from other countries.
On the other and, offshore outsourcing is beneficial to the U.S. government. According to Thomas Friedman, offshore outsourcing enhances international relations of the USA with other countries. The USA has been suffering from terrorism attacks from Middle East countries and through outsourcing the US government combats terrorism. In Friedman’s article entitled 30 Little Turtles, he talks of interviewing three young Palestinian men who were suicide boomers. The three men were jobless and had no hope for their future, but after they got employment opportunities through outsourcing, they shunned from terrorism activities. Friedman concluded that outsourcing makes the world prosperous and a safer place to live.
Outsourcing is beneficial to the USA because mother companies can operate for twenty-four hours. Therefore, the companies use time so as to maximize their profits. When American companies outsource in India, they make use of the time zone difference so as to continue with their operations.
Also, in his article Friedman explains that outsourcing improved the standards of living in developing countries. Through outsourcing, employment opportunities are created for those people who lacked jobs. He explains it by saying that outsourcing reduced poverty levels in countries such as India and Pakistan. He links the issue of poverty in Pakistan to terrorism. It is true to say that poverty may lead someone to do regrettable things. Thus, Friedman interviewed a man who opted to commit a crime just to earn a few dollars because he was poor.
It would be significant to conclude that offshore outsourcing is both beneficial and disadvantageous to the United States. The main problem of outsourcing is that it affects the United States economy in different ways. On the one hand, through outsourcing, the U.S. government strengthens international relations with other countries. On the other hand, the country’s minimum wage is affected when there are no restrictions in offshore outsourcing. The issue of outsourcing should be deeply analyzed by the government so as to come up with concrete data about it. Therefore, it would be significant for the U.S. government to develop policies regarding outsourcing in a detailed manner. The Government should not be biased when developing these policies because it should be beneficial to both its citizens and foreigners. The problem should be thoroughly researched because existing researches on this issue lack sufficient data.
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