Affect Of Off Shore Outsourcing

Off-shoring is affecting the U.S. economy greatly. Off-shoring is taking away jobs from the American people causing a rise in the unemployment rates. Not only is off-shoring taking away jobs, but it is making it harder to find new jobs. It needs to be considered that jobs are not the only thing being shipped out, but Americans' personal information as well.

Off-shore outsourcing is when a company sends work overseas. One main reason is to cut costs and save a certain amount of money by paying less in wages. Off-shoring has become more common since the 1990's. What would a person do if his job was taken away and given to someone else in another country? The most common jobs that are outsourced are manufacturing jobs but many corporations are now moving white collar jobs, mostly Information Technology (IT) jobs, overseas. This is causing the value of the American IT Employee to depreciate and making it harder to compete for these jobs. Universities are starting to train around globalization to make IT students more knowledgeable on global economics. Outsourcing overseas is also causing unemployment rates to climb.

Starting late 1990's, due to Internet bandwidth becoming affordable for transmission of messages containing tables, graphs, images, audio, and video, it has increasingly become feasible to outsource IT Enabled Service to offshore countries (Ahlawat & Ahlawat 2006). Some of these jobs are high waged positions that are provided from some financial services and insurance companies. These employers found that they could cut costs by paying lower wages. The minimum wage in the U.S. is much higher than the going rate of China or India, which are the two major countries that receive off shored work from the U.S.

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Ahlawat & Ahlawat found that from 1999- 2002, the number of manufacturing plants in the U.S. had declined by 20,000 while U.S. multinationals opened 246 facilities in foreign countries. Imagine how many employees were let go due to these corporations closing up shop in the U.S. and moving to a foreign country! High tech occupations are leading in the unemployment rates. It was found that the unemployment rates for computer programmers had risen to 6.7% in 2003 from 2.5% in 2001 (Melymuka 2004). While researching it was found on a tracker provided by, techsunite.org, that 469,996 jobs have been off shored since 2000. Since 2005, 103,436 jobs have been off shored. Out of the jobs moved since 2005, 29% were lost, that is 30,000 jobs. What would these 30,000 employees do? They need money while they look for a new job so the first place they will most likely go is the unemployment line. It was stated in Outsourcing America (2005) that the Forrester Research, Inc., a consulting firm, predicted that approximately 3.4 million white collar jobs and 136 billion in wages would move overseas by 2015 (Hira 2005).

The table provided on the next page shows projected numbers of jobs that will be moved overseas. Now finding a new job in the information technology is becoming a lot harder for these people that just lost their jobs; since a lot of the companies are resorting to off shoring and paying less in wages, these new job seekers have to short-sell themselves a bit and make less money to get the job. Not only do they have to compete with lower wages but the will have to compete with the recently graduated students. New graduates becoming more knowledgeable in global economics due to universities adapting to the rapid growth of off shore outsourcing. Perry (2004) stated UNC makes sure students see first hand what global economics looks like.

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Table 1

Projected Numbers of U.S. Jobs to be Moved Offshore, by Profession.

(To Low Wage Countries Such as China, India, Russia, and the Philippines.)

Profession 2003 By 2005 By 2010 By 2015

Art, Design 2,500 8,000 15,000 30,000

Architecture 14,000 46,000 93,000 191,000

Business 30,000 91,000 176,000 356,000

Computer 102,000 181,000 322,000 542,000

Legal 6,000 20,000 39,000 79,000

Life Sciences 300 4,000 16,000 39,000

Management 3,500 34,000 106,000 259,000

Office 146,000 410,000 815,000 1,600,000

Sales 11,000 38,000 97,000 218,000

TOTAL 315,000 830,000 1,700,000 3,400,000

Note: Numbers have been rounded

Source: Near Term Growth of Offshoring Accelerating, Forrester Research, Inc., May 14, 2004.

Note: From Outsourcing America, by Ron Hira and Anil Hira, Ch. 4, Copy right 2005.

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Security is also a big concern with off shore outsourcing. It was mentioned before