Outsourcing is one of the emerging issues within the United States economy, as many people view it as a threat to the overall employment rate of the country. The problem mentioned in the part 1 of this discussion states that the Mode 1 services, which are mostly available across different sectors of various industries, can be utilized by local companies in the United States. Therefore, American companies can buy services from other Asian countries, such as India and Philippines in order to increase their profitability through more affordable labor cost. The purpose of this discussion is to present solutions to this emerging problem, which are the emerging concerns against outsourcing as a contributor to potential increase in the country’s unemployment rate. This paper argues that outsourcing provides benefits; such as economic, social, political, and environmental advantages to United States.
Solution to the Problem
One of the key concerns of outsourcing in the United States is the decrease in job opportunities for many Americans. Moreland (2014) said that outsourcing provides various problems; hence, many big companies in the country are unable to avoid the lure of reducing the jobs in the United States and outsource them in other countries. This can be part of the issue, but it could not be the major problem when it comes to employment rate in the country. One of the applicable solutions to this problem is through creation of more jobs in the country.
The United States must increase its competitiveness when it comes to global trade. Instead of focusing on the exported job opportunities to other countries, it would be more important to enhance the Foreign Direct Investment in order to create more jobs. Thus the concept of outsourcing does not always mean that it is a loss for the American workforce. In fact, Bartlett (2004) said the many countries outsource their businesses in the United States, which therefore states that as jobs are being outsourced, there are also a large number of businesses that are being insourced in the United States.
Economic Advantage
Although buying services from other countries, which is the primary concept of outsourcing, would impact the employment rate in the United States, there are better effects that such business concept provides to the country’s economy. Generally, only a small part of the total jobs in the country are being outsourced. Thus, those jobs that require little training or skill are being purchased by large American Companies (Bartlett, 2004). Thus, high-paying jobs stay in the country. As opposed to the popular belief, the American economy is benefiting from outsourcing, such as stronger job demand in the U.S., competitive advantages for small businesses, and more profitability for bigger companies.
The stronger U.S. job demand is in relation to the Information Technology globalization that will produce more job demand in the country especially for IT professionals. Furthermore, small businesses will gain from outsourcing because they have better managerial structures different from bigger companies. Therefore, these smaller businesses will be able to compete with bigger companies as they will be able to organize their businesses purely without buying services from other countries. On the other hand, bigger companies will be more profitable in terms of acquiring more affordable labor cost, to which the continuous flow of tax remittance from these companies will help the economy and the government through increased revenue.
Social Advantage
Outsourcing also provides social benefits, such as positive impacts on the country’s productivity (Amiti, 2005). Besides the benefit of lower costs in terms of the relocation of jobs to other countries, which will save the company, outsourcing will keep the prices of their products on a lower price. The reduction of overhead spending, such as labor cost and operational cost, will keep the company from increasing their product prices. Therefore, the society will primarily benefit from the concept of outsourcing, not just the companies themselves.
Stable product price from companies who utilize outsourcing, will help the individuals in terms of maintaining a higher value of their money that are normally being spent on basic services; such as mobile handsets, cable subscription, and even health care insurance. These are few of the numerous services that many companies outsource with other countries.
Moral Advantage
Other countries who sell their services provide moral advantage to United States. These countries often have citizens who normally experience the adverse effects of poverty due to economic reasons. However, a company that utilizes outsourcing will be able to contribute to the moral responsibility of the organization towards the people, even if it means to benefit other nationalities.
Outsourcing will help the citizens of countries that sell services through this business concept, in a way that business outsource employees will be able to improve the standards of their living. Therefore, the moral aspect of outsourcing will provide positive impacts to the companies that utilize this business concept.
Conclusion
Outsourcing is often viewed as a disadvantage due to its ability to decrease jobs in the United States. However, its hidden advantages are normally not recognized by many analysts. With the evidence presented, outsourcing is a two-way concept that provides a win-win situation both to the United States as well as to the countries that sell their services in terms of economic, social, and moral advantages. Moreover, solving the problem that many outsourcing critics present can be addressed by producing more jobs in the country through increased Foreign Direct Investments that will help increasing the available jobs in the country.
References
Amiti, M. (2005). Location of vertically linked industries: agglomeration versus comparative advantage. European Economic Review, 49(4), 809-832.
Bartlett, B. (2004, June 27). How Outsourcing Creates Jobs for Americans | NCPA. Retrieved from http://www.ncpa.org/pub/ba480
Moreland, J. (2004, June 10). The Outsourcing of American Jobs Hurts the Economy on Every Level. Economy in Crisis. Retrieved from http://economyincrisis.org/content/the-outsorcing-of-american-jobs-hurts-the-economy-on-every-level
