Abstract
In the contemporary business society, different nations try to adopt the idea of outsourcing as an instrument of improving the growth of their economy. Outsourcing is attained through different ways that a country would consider beneficial to the growth of its economy. Such ways may include importing cheaply skilled labor from foreign countries, investing some part of a company’s income to foreign countries, shipping manufactured goods to a foreign country to be sold there and many other ways which are mainly adopted to improve the country’s economic growth. Outsourcing may, however, exhibit divergent impacts to the county’s economic growth depending on how effective it has been practiced.
Several countries suffer from economic depression due to the negative impact of outsourcing. Analysis of different businesses existing in different states will reveal certain characteristics that either benefit or compromise the development of a corporation economically. A comprehensive conclusion of how beneficial or limiting factor is cannot be established unless certain aspects connected to its functional units are properly studied.
Impact of outsourcing in a nation’s economy
Outsourcing is a common phrase in the current world used to refer to an action by different companies that prefer to reduce the cost of supplying goods by simply involving the outsiders in their supply as well as in carrying out their activities. Such companies may use different companies in the domestic country to help them in the supply of their goods. Outsourcing is believed to have different impacts in the nation’s economy depending on the magnitude of its effect to such a country. When used properly, outsourcing improves a country’s economy. Outsourced goods many at times tend to be a consumer friendly as they are relatively cheap compared to domestically produced goods whose prices normally tend to be higher. Similarly, outsourcing may as well be of benefit to companies as it saves them the shipping expense as well as the costs incurred in hiring local labor. A large number of companies would prefer the outsourced goods to the goods that are produced locally.
Outsourcing has also been realized to hinder developing countries to realize their potential in developing their economy. Developing countries employ much of the borrowed funds when carrying out productions. Such funds are in turn paid back at higher interest rate. When a good number of the citizens are employed, the country experiences a noticeable economic growth. It is also a fact that outsourcing helps to acquire goods from other countries when such goods cannot be produced by the local companies (Buchholz, 2004). Additionally, it puts the nation in a position to enjoy goods that it doesn’t produce on its own. Also from outsourcing the government may be able to collect revenue as it lays taxes on the goods supplied from every foreign country. Furthermore, outsourcing may also help the developing countries to pay back their debts to the developed countries.
As much as many people would argue that outsourcing is of much more importance to the nation’s economic growth, it remains an undisputable fact that outsourcing has got several negative impacts to the growth of the nation’s economy. Outsourcing tends to generate more income to a foreign country more than it does to the country to which the goods are outsourced. Considering the employment opportunities, outsourcing affects a nation’s economy as a large group of people may be imported to offer cheaper labor and to leave the locals unemployed (Bowie, 2002). This has got a negative impact on a nation’s economy since the imported labor carries away their salary leaving the country with very little to invest on. Outsourcing may have a positive impact to an individual company when it pays less to its imported workers, though in the long run, it has got a negative impact to the economy of a country as a whole.
A nation may be operating at the risk of leaving its citizens jobless when companies decide to import its workers in order to benefit from the cheap labor from other countries; it denies employment opportunities to the locals who would remain unemployed despite the company being located in their own country. The decision has got a lot of negative impacts on the nation’s economy. Outsourcing may as well have a negative impact to the government in terms of revenue collected. The government collects fewer taxes from the citizens since there are minimal names of citizens in the nominal roll receipt.
The companies from these developed countries use the available resources in developing countries when manufacturing their products. However, these resources do not benefit such countries. This leads to significant losses by developing countries to developed countries. Citizens from the developing countries also suffer from underpayment by the foreign companies who prefer imported labor since they are paid less as compared to the local laborers who may demand more payment. To a developing country, outsourcing may be viewed as a loss since such a country has to pay its income to the imported labor. Such income could have been used to develop the economy of the country but instead it is lost to other countries.
When a citizen receives payment from the local companies, he/she uses that income to obtain other goods and services within the country. That would in turn lead to economic improvement. In this case, such a company prefers to import the labor, it losses large amount of income to a foreign country, through payment given to the imported workers. Such income lost to foreign countries could be used to improve the economy of the country. Outsourcing also has got an effect on the health plans of the country. The government may not be able to plan for its citizens’ retirement benefits, as well as the compensation benefits insurance.
Several arguments have been raised concerning the rising rate of outsourcing. Nonetheless, some people may tend to support the idea since they view it to be of much importance to the growth of the economy. Both developing and developed economies benefit greatly from the impacts of outsourcing. Even though there are several positive impacts of outsourcing, we cannot disregard its negative impacts to the economy. Outsourcing has led to the deviation of the economical for several nations both developed and the developing countries (Hira & Anil, 2008). Nations can lose a large amount of income to a foreign country due to the impact of outsourcing. When done effectively, outsourcing yields a great amount of income to the country and such incomes play a major role in the growth of the country’s economy.
In the current economy, the effect of outsourcing is felt and it contributes largely to the growth or deviation of a nation’s economy. From different people’s perspective, outsourcing cannot be avoided, and it is upon different nations to practice it effectively so as to avoid huge losses that can be experienced or impacted to other countries’ economy. Developed countries should, therefore, take an initiative when doing their investments so as to avoid exploiting developing countries and also to attain a considerable economic growth.
References
Bowie, N. (2002). The Blackwell Guide to Business. Malden: Blackwell.
Buchholz, T. (2004). Bringing the Jobs Home: How the Left Created the Outsourcing Crisis and How We Can Fix It. New York: Sentinel.
Hira, R., & Anil, H. (2008). Outsourcing America: What's behind Our National Crisis and How We Can Reclaim American Jobs? New York: AMACOM.
