Sample Essay On Does Offshoring Jobs Disadvantage Americans?

The terms “outsourcing” and “offshoring” have similar, but slightly different meanings. Both terms refer to the corporate practice of sending work to third-party contractors external to the company, rather than assigning it to in-house employees. However, whereas outsourcing can take place entirely within a single country, offshoring is the process of sending it off to another country’s shores. In other words, when a company sends work to a contractor within its own country, it outsources the work, but if the contractor is foreign-based, it offshores the work. The chapter on offshoring further expands the definition of offshoring to mean the movement of an entire operation, department, or factory to another country. Outsourcing, on the other hand, is limited to the movement of a specific in-house function of a company, such as its call centers, billing, or support operations, to another company or agency. So, an American company may be said to outsource its call centers and offshore its factories to another country.
America has invested heavily in other countries where it outsources work. This has created a dependence on American investment in these countries, undermining their self-sufficiency, while also allowing their underdeveloped industries to grow and flourish. Outsourcing is a favorable practice for American companies because it reduces their labor costs, sometimes by more than half. The impact of outsourcing on the United States has been to reduce employment and depress wages in its service sector. Outsourcing puts American workers in direct competition with foreign-born workers who are willing to accept lower wages, and the lowest-skilled Americans have suffered job loss and wage reduction as a result. It contributes to long-term structural unemployment. However, by creating demand for American goods and services, expanding foreign markets, increasing productivity, and saving companies money, outsourcing tends to drive up wages in the long run.
Offshoring boosts the economies of the countries to which work is offshored, and fosters competition among developing countries to offer the best incentives to offshoring countries. Between 1995 and 2002, for example, the economy of China grew by 17% each year as a result of its adapting capitalist business practices to its expanding manufacturing sector. Inspired by China’s success, other Asian countries began to engage in competitive flattening to see which country could leverage the most cost advantage to offshorers. As the rate of manufacturing productivity accelerated, however, its total employment in manufacturing shrank, and at a rate greater than the US’s. Furthermore, as jobs are sent to cheap labor countries, the products from offshored factories are bought at lower prices, saving consumers billions of dollars over the years. This in turn drives interest rates down in the offshoring countries, leading to more corporate investment and private spending. Furthermore, offshoring tends to broaden companies’ customer base to include foreign customers, an effect that increases exports for offshoring countries. Every dollar spent on offshore factories is thought to return in the form of economic output in its home country. Thus, America benefits both from the savings due to offshoring, and from its export of goods and services to the factories it offshores. As foreign demand for American customers and workers increases, so increases America’s economy due to exports. Rather than destroying American jobs and reducing American wages, offshoring creates new jobs by introducing new demand, and increases American wages by creating savings, driving down interest rates, and expanding the economy.
Though outsourcing and offshoring are controversial practices, they undeniably create advantages for both home countries and their foreign partners. Outsourcing contributes to American unemployment, but it the savings it generates contributes to long-term wage inflation. Offshoring expands the economies of both America the recipients of its offshored factories by opening up foreign markets, increasing demand for American goods and services, and driving up American exports.