American Outsourcing advantage and disadvantage

[sdmsanjose]

American Outsourcing advantage and disadvantage

Economic Advantage of Outsourcing
Social Responsibility:- It is true that off shoring of processes result in growth of unemployment in the country from where the processes are being outsourced. However, that's only one part of the story! Outsourcing results in a higher profitability for the businesses which are then ploughed back into the economy. This definitely has far better impact than the negative impact of growth in unemployment. In fact the negative aspect is broadly nullified by the positive impact of profit getting ploughed inside the economy.


Economic Disadvantages of Outsourcing
Offshore and overseas outsourcing is suitable for only a particular economic situation. Outsourcing should be taken up by an economy that has a rather less population, but a very good currency exchange rate. The economic growth of the economy must be excellent, and the GDP and national income must be sufficient to pay off the outsourcing, without affecting the rate of employment. However, in nations such as United States, outsourcing affected the rate of employment, as it was left unchecked. Initially, unskilled labor in under developed proved to be good host to outsourcing, but when the cheaper outsourcing of IT jobs and financial jobs, started gaining momentum, it was tagged as export of jobs. According to reliable outsourcing statistics, as of 2006, $1.2 trillion worth of jobs were outsourced. There are two negative effects of this phenomenon, namely, there is job reduction in the exporters nation job cuts and secondly the exporter looses foreign exchange.

What are the reasons that would convince Americans that the American corporations will take the outsourcing profits and plough them back into American’s economy?

 

[MorkandMindy]

The outsourcing profits have two parts - money saved by consumers when buying cheaper goods, and the other part is profit made by the retailer / wholesaler / importer through paying less for the manufactured item.

The partition between those two parts varies, but the two added together make the difference between buying domestically produced and buying foreign made.


The seller's profit came from an American consumer, the consumer's saving is also on US expenditure; both come from inside the country and (hopefully) stay inside the country. In no way do they come from India China Germany or where ever the producer is.

Money keeps flowing from the US to the producer, so outsourcing does not in itself help the trade deficit at all.

Take an example - suppose I bought a TV:

In the domestically produced situation the American producer gets 1 job from me and 1000 dollars from me.

In the foreign made situation I spend only750 dollars, the American importer/retailer get 500 dollars, effectively half a job, and China gets 250 dollars. I've saved enough to buy a little portable for next to the microwave, so my 1,000 ends up as 667 dollars for the importer/retailer, and 333 dollars for the Chinese.

That is worse for the US than all the money staying in the US.

I would argue the consumer hasn't benefited much by having a lot more junk in his house.

 

[MorkandMindy]

The only way to benefit from imports is when there is mutual trade. Perhaps the Chinese like doing repetitive jobs and mass produce things that can be best made by humans rather than robots, and suppose we prefer to build some high tech non repetitive work based product like an MRI body scanner system.


The reason that scenario isn't working is because the Germans and Japanese are making the high-tech products the Chinese can buy, the US is making high-tech guided missile frigates and other weapons we aren't so keen to sell to the Chinese and so a lot of it we give to Israel.

The longer we fail to sell to China the further we get from being able to do it.

 

[MorkandMindy]

Economic Advantage of Outsourcing

Social Responsibility:- It is true that off shoring of processes result in growth of unemployment in the country from where the processes are being outsourced. However, that's only one part of the story! Outsourcing results in a higher profitability for the businesses which are then ploughed back into the economy. This definitely has far better impact than the negative impact of growth in unemployment. In fact the negative aspect is broadly nullified by the positive impact of profit getting ploughed inside the economy.

I don't see the positive side at all. The profit is a proportion of US money kept in the US. Whether it remains with the customer or with the importer/retailer is irrelevant as regards balance of trade. US jobs are lost and the money for the product goes instead to another country.

Where's the advantage in that?

 

[sdmsanjose]

In fact the negative aspect is broadly nullified by the positive impact of profit getting ploughed inside the economy

What are the reasons that would convince Americans that the American corporations will take the outsourcing profits and plough them back into American’s economy?

Most American corporations put profits above all else, profit is their god. That is understandable as corporations and business exist to make money. American corporations are needed and can boost the economy considerably. However, as an American, I want regulations put on the American Corporations that would force them to be a little more patriotic. Sometimes when you love money so much, you will slip into the selfish greed mode.

Speaking of being patriotic, have you ever called for tech support from HP, Dell, Kodak, AOL, or a whole bunch of other technology corporations from America? I have and they are all outsourced. Americans are the leaders in technology and those are jobs that Americans should be doing. I have heard that the American corporations have been making record profits for the last several quarters yet the American work force still has over 9% unemployment. Are American Corporations putting profits over Americans?

The tech support workers for Gateway Computers are all 100% Americans and are based in New York state. My last purchase for a computer was a Gateway. Maybe Dell could beat their price by a few dollars but I think it is time we Americans quit making price dictate every purchase. IMO


How many of you out there want your job to be bidded on by a worker from Mexico or India?

 

[acropolis]

Outsourcing defeats of the benefit of comparative advantage. It is beneficial only for those who own the companies. Since they reinvest the profits back into other overseas nations there is very little domestic benefit. It doesn't matter if a toaster is now 20% cheaper if you don't have a job.

 

[Anovah]

To me outsourcing makes more money for a ceo as opposed to more money for 100's of workers. You are basically saying that ceo will be a better investment in the economy than those 100's of workers who buy, shop, and pay their bills locally. Not buying it.

If you can't afford to pay your workers a living wage then you have no business doing business in America.

 

[grasping the after wind]

You can allow outsourcing and keep some jobs or you can outlaw outsourcing and loose all the jobs as the corporations move out of the country or go bankrupt.

 

[kermit]

You can allow outsourcing and keep some jobs or you can outlaw outsourcing and loose all the jobs as the corporations move out of the country or go bankrupt.

That is a false dicotomy.

Also, no one is talking about outlawing outsourcing. All that opponent of outsourcing want is to end the government incentives to outsource.

 

[jgarden]

NAFTA has made us partners with the countries of the world with whom we do business. It has made us culpable to the abuses and horrifying conditions workers of the world work under. And we know it. Our legislators know it. Our Corporate America knows it—and yet, we allow it to continue.

..... The World Trade Organization (WTO) protects corporations but abashedly, blatantly ignores the torturous existence of laborers. Burma , ruled by a military dictatorship since 1962 is a very poor, yet resource rich country. It is also a haven for sweatshops and many American corporations. Until 2000 and adverse publicity, Anheuser-Busch, Apple, Estee Lauder, Hewlett-Packard, Macy’s, Ralph Lauren, Oshkosh B’Gosh, Levi-Strauss, Liz Claiborne, and many more did business with Burma. Colgate, General Electric, Ford, Halliburton, Gillette, Jordache, Lockheed, Nautica, Adidas, Chase Manhattan Corp, Proctor and Gamble, and Perry Ellis are among the businesses that continued to do business with Burma after 2000.

In Burma , Unocal was named in a human rights lawsuit in the course of building its pipeline. The suit charged Unocal knowingly used forced labor. Hundreds of eyewitnesses testified that the government’s military provided Unocal with unpaid labor by forcing thousands of villagers to work at gunpoint. Reportedly, women who refused to work were raped or murdered.

http://www.opednews.com/sherry1103_outsourcing2.htm

In 2003, the Nush Administration filed a brief on behalf of Unocal stating that continued legal action against the company would not only have a negative impact on US foreign policy, but "disrupt" its war on terroriism.

Not only does "outsourcing" have a negative impact on American workers, it makes US corporations and the government directly and indirectly "culpable" for the working conditions and practices that maximize profits and pay executive bonuses - but would also be considered a violation of human rights in the US.

 

[kermit]

The Bush Asministration

The argument behind outsourcing and free-trade, and I used to drink this Kool-aid so I know, is that it will elevate developing nations. The reality that is that is has elevated a selected group in out country and in developing nations while the living standards for both laborers in our nation and in developing nations has dropped.

 

[jgarden]

The Heritage Foundation predicted that free trade would, “over a fifteen-year time span, create the world's largest market: some 360 million people, with an economic output of more than $6 trillion a year.” Moreover, they asserted that NAFTA would guarantee that American workers would remain the most competitive in the world. That American consumers would continue to have access to the world's finest goods and services.

They also emphasized that NAFTA would assure Americans cheaper goods while increasing U.S. exports to the rest of the world. Moreover, the American workforce was told NAFTA would stimulate and create an estimated 200,000 jobs annually. Later, The Heritage Foundation wrote, “Economists are virtually unanimous in their conclusion that the NAFTA will have a strongly positive impact on job growth throughout the US , with most estimates in the hundreds of thousands.” That NAFTA would effectively reduce illegal immigration from Mexico , would be instrumental in tackling drug trafficking, would strengthen Mexican democracy and human rights, and above all else, would serve as a model for the rest of the world.

- NAFTA would guarantee that American workers would remain the most competitive in the world

- NAFTA would assure Americans cheaper goods while increasing U.S. exports to the rest of the world

- NAFTA would stimulate and create an estimated 200,000 jobs annually

- NAFTA would effectively reduce illegal immigration from Mexico

- NAFTA ..... would be instrumental in tackling drug trafficking,

- NAFTA ..... would strengthen Mexican democracy and human rights,

- and above all else, (Mexico) would serve as a model for the rest of the world

It should also be noted that The Heritage Foundation was also one of the driving forces behind the GOP's "Contract with America" which served as the catalyst for their successful 1994 Congressional election campaign. It was written by Larry Hunter, with the assistance of Newt Gingrich, Robert Walker, Richard Armey, Bill Paxon, Tom DeLay, Jim Nussle and John Boehner.

That was the same "John Boehner" who is currently Majority Leader of the House and would have the country believe that he and his party have the ideas to restore American prosperity - with leaders like this the US does need enemies!

http://en.wikipedia.org/wiki/Contract_with_America

 

[acropolis]

You can allow outsourcing and keep some jobs or you can outlaw outsourcing and loose all the jobs as the corporations move out of the country or go bankrupt.

An effective way to protect domestic jobs is through tariffs.

 

[brindisi]

An effective way to protect domestic jobs is through tariffs.

Yeh,...bring back the Smoot-Hawley Tariff act. That'll show em we mean business!

 

[brindisi]

The argument behind outsourcing and free-trade, and I used to drink this Kool-aid so I know, is that it will elevate developing nations. The reality that is that is has elevated a selected group in out country and in developing nations while the living standards for both laborers in our nation and in developing nations has dropped.

It may come as a surprise to workers in China and India that they have a lower standard of living now.

I know, I know,... liberals liked it better when those countries were filled with beggars. Yet another victim group for liberals to tut-tut about.

 

[acropolis]

Yeh,...bring back the Smoot-Hawley Tariff act. That'll show em we mean business!

It's either that or subsidies. Would you rather pay more taxes, or impact some other nation's exports? The third option is to do nothing, which risks losing entire industries. Though the reality is probably that tariffs simply aren't politically an option, since China would be most displeased if their products were no longer competitive in US markets.

 

[brindisi]

It's either that or subsidies. Would you rather pay more taxes, or impact some other nation's exports? The third option is to do nothing, which risks losing entire industries. Though the reality is probably that tariffs simply aren't politically an option, since China would be most displeased if their products were no longer competitive in US markets.

Let our industries be competitive again. Reduce regulations and taxes. Stop driving business away.

One of the very first things we should do is reduce capital gains taxes for short term gains, and eliminate taxes altogether on long term capital gains.

 

[acropolis]

Let our industries be competitive again. Reduce regulations and taxes. Stop driving business away.

That would require a massive reduction in US standard of living to actually happen. Hourly wages in, for example, southern China are about 0.75$/hr. It would be impossible for an American to survive on wages like that.

 

[brindisi]

That would require a massive reduction in US standard of living to actually happen. Hourly wages in, for example, southern China are about 0.75$/hr. It would be impossible for an American to survive on wages like that.

There is much more to competiveness than labor costs. We will never be a low labor cost producer, but we can be innovators in new technologies if we don't punish risk and success.

We need the next generation of Wright brothers, and Henry Ford, and Thomas Edison, and Bill Gates, and Steve Jobs.

 

[acropolis]

There is much more to competiveness than labor costs. We will never be a low labor cost producer, but we can be innovators in new technologies if we don't punish risk and success.

We need the next generation of Wright brothers, and Henry Ford, and Thomas Edison, and Bill Gates, and Steve Jobs.

This doesn't address the problem of depressed wages and unemployment resulting from manufacturing leaving the US.