Is the outsourcing of low-paid jobs to developing countries a strictly positive development for workers in such countries? Clarify your position by reference to notable industrial relations incidents or economic developments from the last decade.
The business practices of outsourcing and offshoring have been the subject of both praise and criticism. Critics of outsourcing refer to the loss of job opportunities (locally), lower quality products, and unequal pay rates among domestic and foreign workers. Proponents point to its potential to enhance productivity, lower costs, and enhance core efficiencies for outsourcing companies. There are, however, more in outsourcing in addition to cost-effectiveness. The perceived value of outsourcing can be approached from multiple perspectives, including labor markets, operations and supply chain management, regulatory affairs, and human rights. The growing number of abuses increasingly reported in developing countries, highlighted by the 2013 collapse of a garment factory in Bangladesh, demonstrate the need for stricter regulations and enforcement of fair labor standards. This paper takes a disfavorable view toward outsourcing, due to the fact that it leads to the exploitation of workers. Until multinational companies are held to a higher standard of accountability for the working conditions of their outsourced workers, the practice of outsourcing cannot be defended.
Outsourcing is an increasingly common business practice that involves companies sending work to other agencies or contractors overseas who can do it more cheaply than the companies can. Outsourcing is a lucrative practice for businesses and is advantageous for the economies of the countries the businesses are based in, but in the countries where work is outsourced, it leads to significant harm, including large-scale human rights violations. This essay will begin by explaining what outsourcing is and how it is beneficial to companies, consumers, and shareholders. Then, it will argue that outsourcing causes harm in developing countries by contributing to corruption and exploiting workers. A counterargument showing that outsourcing benefits the economies of developing world nations is presented, followed by a rebuttal, which argues that economic gains should not be valued over human lives. Finally, the paper concludes with a suggestion as to how outsourcing can be improved to better protect the lives of foreign workers.
All companies have a strong incentive to minimize expenses and reduce costs. Increasingly, they are accomplishing this by hiring third-party contractors to perform their peripheral business activities, such as their billing, accounts receivable, and call centers. These third-party agencies and individuals, who are often located in different countries, accept the work for less pay than in-house employees. This allows companies both to save money on employee wages as well as focus more exclusively on their “core” capabilities (Gutman, 2004). With more time, money, and manpower at their disposal, outsourcing companies have more flexibility to embark on creative projects, often leading to enhancements in their production processes . This creates even more efficiencies, which lead to even more profits. For publically traded companies, the benefits of outsourcing are passed along to shareholders in the form of higher stock values. To domestic consumers, the savings due to outsourcing are passed along in the form of goods that can be bought more cheaply than if they had been produced locally. Outsourcing confers a strong competitive advantage, the positive effects of which accumulate over time and extend outward from companies to the broader communities they serve.
Unfortunately, the benefits of outsourcing are not as strongly felt for MNC’s foreign workers. Corporate attitudes toward companies’ level of responsibility to their foreign labor force spans a wide spectrum. When multinationals allow corporate profit to take priority over corporate responsibility, workers in developing countries suffer dangerous consequences.Some companies turn a blind eye to corruption and abuse, and allow their offshore operations to be run like sweatshops. Such companies have little or no regard for their employees’ dignity. The facilities they run are unsafe and unsanitary, and the wages they distribute are barely enough to for their workers to survive on. Some of them utilize child labor and engage in human trafficking. They subject workers to exploitative working conditions, sometimes forcing them to work 18 hours a day (Zwolinski, 2011).
The harsh and unacceptable conditions workers in developing countries operate in can best be highlighted by a collapse of a Bangladesh-based factory complex linked to Primark, a low-cost, international store ("Bangladesh factory disaster" BBC, 2013). At an average of £24 per month, Primark workers in Bangladesh are paid based on local labor standards in spite of doing a similar job for one employer, same customers (but for longer working hours). This incident highlights, if anything, concept of "cheap" used widely in cross-border corporate literature. The cheapness is not limited to pay but also, as is in Primark's example, to extensive working conditions including safety, labor rights and (careless) regulatory frameworks. The safety catastrophe of Primark's Bangladesh-based factory draws attention to many more concerns about labor conditions of outsourced jobs in developing countries.
One main concern is that outsourcing suffers from a lack of enforcement of fundamental rights, which makes it easy for practitioners to get away human rights abuses. Political instability in the countries where work is outsourced, furthermore, make it difficult for governments to address this issue and confront the perpetrators of abuse. Some of these countries have underdeveloped legal systems that provide little or no legal recourse for human rights abuse victims, who cannot press charges against individuals or multinationals except in rare circumstances. The power of the International Criminal Court to intervene on behalf of victims is also limited. Only perpetrators countries that consent to jurisdiction by the ICC can be brought to account for human rights violations (McKenzie, 2008). This creates conditions that are ripe for exploitation to take hold in. Outsourcing tends to attract predatory people to its managerial ranks, because it creates a safe harbor for them. It gives them access to a steady stream of vulnerable people, who are destitute, undereducated, and unprotected, to victimize. Transnational corporations that are complicit in human rights violations easily avoid liability and sanctions by operating in developing world countries that lack a strong legal structure. They commit crimes that are not considered heinous enough to be considered crimes against humanity, and thus remain beyond the authority of the ICC to adjudicate. Unsurprisingly, the countries that have the least political stability, most conflict exposure, and highest rates of poverty are the ones in which the most flagrant corporate-related human rights violations are committed (McKenzie, 2008).
For example, Unocal, a United States MNC, has been implicated in human rights abuses in Burma, a country with a notorious human rights record. Allegations of abuse by Unocal range from claims of forced labor and forced migration, to rape, torture, and summary murder. A lawsuit brought by Burmese villagers against the company resulted in the payout of an undisclosed amount of money to help “improve living conditions” in Burma (“The 14 Worst Corporate Evildoers,” 2005).
Another concern is that multinationals can become destabilizing forces themselves in vulnerable, low-developed countries. They can become tools of oppression by the state, by supporting dictatorships, suppressing speech, and sponsoring militias. Some of these MNCs use their financial leverage to lobby for economic policies that favor corporate over human welfare, and by increasing their economic power, gain even more political influence. In this way, western multinational corporations become extensions of the national governments of poor countries (United Nations Development Programme, 2000). Some corporations profiteer from war in unstable countries, and some have been alleged to provide their own troops and munition to take part in civil conflicts. This has been seen in Nigeria, where partnerships between multinational oil companies and corrupt local governments have conspired in the subjugation of ethnic minorities (“Oil Companies Complicit in Nigerian Abuses,” 1999).
These examples demonstrate the human toll of outsourcing. When companies are able to relocate their operations to developing countries, the incentive to adhere to ethical business practices diminishes. Their unchecked power gives them free reign to violate the rights and safety of workers, and in extreme cases, threatens the peaceful and democratic governance of entire countries.
Outsourcing does have some benefits in developing nations, however. Some companies, like Adept Technologies, have a positive social and economic influence. Proponents of outsourcing point to the laregely positive global impact of these companies. Outsourcing elevates the standard of living for workers in developing countries (Casey ,2015). By providing high-paying jobs in struggling, underdeveloped economies, workers in developing countries find in outsourced jobs an opportunity to improve their lives. MNCs enhance their corporate image in turn by creating jobs for the local labor force, boosting economic activity by investments and, in some cases, helping create value for local communities by sponsoring social programs. Furthermore, some MNCs pay their employees handsomely, and this has positive overall implications for the economies of countries where work is outsourced. Paying workers reasonably high, competitive wages leads to more spending, creating economic activity, and causes a “multiplier effect” (Gutman, 2004), in which the money that workers earn is spent over and over again. And while some companies pay their foreign workers close-to-average wages, some pay their workers significantly more than that. For example, Kenyan workers at the MNC Adept Technologies receive an income that is 250% of the average in Kenya (Bornstein, 2011). This is not enough to make those workers rich, but it is sufficient to provide food, housing, clothing, transportation, and education for them and their families. The economic gains due to outsourcing are seen to be direct and tangible in this case.
However, the ocassional social and economic benefits of outsourcing are not enough to outweigh the human costs. Outsourcing makes it too easy for human rights violations to be overlooked. It is a proven fact that outsourcing leads to horrific abuses carried out by corporations in foreign countries,. The economic goods of outsourcing should not be valued over the lives of workers and their families. Until all companies are legally bound to the same standard of conduct, subjected to human rights audits, and held criminally liable for violations, outsourcing will remain an unethical practice.
Companies have the right to maximize profits by whatever legal means they choose, and this includes outsourcing and offshoring. But the right of companies to be profitable should not be given priority over the human rights of workers. Whether they are located in Malaysia or Manhattan, workers are entitled to dignified treatment, fair pay, and safe and sanitary working conditions. Multinational companies that profit from outsourced labor have an ethical obligation to provide the same standards of employment for their outsourced workers as for their regular employees. Companies that fail to uphold workers’ rights and turn a blind eye to abuses should subject to corporate criminal liability. There is not a specific path companies can adopt for better work conditions in developing countries. The concept of work is, after all, a negotiable one and is subject to several variables only concerned investors are fitting to settle.
Reference list
Casey, D.M. (2015). Overseas Outsourcing. Business in United States of America. Retrieved from http://ebusinessinusa.com/2639-overseas-outsourcing.html
BBC. (2013). Bangladesh factory disaster: Primark to extend aid. Retrieved from: http://www.bbc.co.uk/news/business-24646264
Bornstein, D. (2011, November 8). Outsourcing is Not (Always) Evil. The New York Times. Retrieved May 20, 2016, from http://opinionator.blogs.nytimes.com/2011/11/08/outsourcing-is-not-always-evil/?_r=0.
McKenzie, J. (2008). Limits of Offshoring-Why the United States Should Keep Enforcement of Human Rights Standards In-House, The. Ind. LJ, 83, 1121.
Gutman, H. (2004). Outsourcing in The Developing and Developed World. Countercurrents.org. Retrieved from http://www.countercurrents.org/glo-gutman260304.htm.
Oil Companies Complicit in Nigerian Abuse. (1999, February 23). Human Rights Watch. Retrieved May 20, 2016, from https://www.hrw.org/news/1999/02/23/oil-companies-complicit-nigerian-abuses
Roberts, E. (2003). The Economics of Offshoring in the Software Industry. Retrieved May 20, 2016, from https://cs.stanford.edu/people/eroberts/cs181/projects/2003-04/offshoring/impact.html
The 14 Worst Corporate Evildoers. (2005, December 11). Retrieved May 20, 2016, from http://www.alternet.org/story/29337/the_14_worst_corporate_evildoers.
United Nations Development Programme. (2000). Human Development Report 2000: Human Rights and Human Development. UNDP.
Zwolinski, M. (2011, November 8). Sweatshops, Exploitation, and Neglect. Bleeding Heart Liberatarians. Retrieved May 20, 2016, from http://bleedingheartlibertarians.com/2011/11/sweatshops-exploitation-and-neglect/
