Outsourcing Of Jobs

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Outsourcing of Jobs to Foreign Countries

Axia College, COM120, Effective Persuasive Writing

Professor Andrea O'Rourke

February 25, 2007

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Outsourcing of Jobs to Foreign Countries

Over the last decade or so, outsourcing of jobs to foreign countries has quickly risen as the most controversial issue here in America. Initially, manufacturing jobs were outsourced because other countries were able to manufacture goods cheaper than their domestic counterparts. Recently, companies have started outsourcing white collar jobs like computer programming, accounting and customer service to foreign countries. Foreign countries like India, China and the Philippines are able to do these jobs because they have plenty of well educated english speaking workforce, lower living standards and their laws typically are not restrictive.

Outsourcing of jobs to foreign countries is beneficial to the United States because it helps American corporations compete globally, and it improves the efficiency of the economy. How is the economy been performing? Well, with all the news about American jobs moving to other countries, the Iraq war, hurricanes Katrina and Rita, and the surge of fuel price in the last several years, the U.S. economy has been very resilient, and, in fact, is doing quite well. According to the latest data from the Federal Reserve Bank of St. Louis, the Gross Domestic Product (GDP), which is the total annual value of goods and services produced by a country, and it is a commonly used measure of the economy's performance, grew at an average of 3.2% every year since 2004 (Figure 1), while the unemployment rate dropped from a high of 5.75% in 2004 to about 4.5% in 2006 (Figure 2).

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Figure 1: GDP Annual rate for the last four years.

Note. From The Federal Reserve Bank of St. Louis' National Economic Trends Report,

2007.

Figure 2: Annual Unemployment Rate for the last three years.

Note. From The Federal Reserve Bank of St. Louis' National Economic Trends Report,

2007.

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Despite of some signs that the economy is slowing down, especially in the housing sector, the U.S. economy is currently moving along at a healthy pace. Low inflation and a strong job market have left most American households in a relatively good financial shape. As a result of low inflation, the Federal Reserve has held the interest rates steady for the last eight months. The stock market is not doing bad either. The Dow Jones Industrial Average (DJIA), the most commonly followed index of the U.S. stock market, has broken the 12,000 mark in the last two months. That is a very outstanding achievement considering it bottomed out at around 7,200 in 2002 as a direct result of the dot-com bubble burst and the September 11, 2001 tragedy.

There are winners and losers from outsourcing of jobs to foreign countries. One winner, obviously, is the people from where American jobs are being outsourced to. This helps their economy. With an improving economy, this foreign country will not need so much financial aid from the United States. The other winner is the American consumer Ð'- because goods that are being produced by other countries are cheaper than if they have been produced here. Unfortunately, not all Americans share the positive impact of our economy's growth. The manufacturing sector has been hit very hard by outsourcing. The top two American auto companies have been losing huge amount of money and have laid off thousands of workers. This also affected the companies and workers who supply the auto companies with parts. The blue collar or middle income Americans have been unable to make the transition to a different sector or to a higher paying job. The reason maybe, according to the Economic Policy Institute, is that the federal spending on training and other job programs has fallen from $63 per worker in 1986 to only $35 per worker in 2006 (Eisenbrey, 2006). As a result, the gap between middle-income and high-income workers, as far as salary is concerned, is widening.

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Now, let's discuss the benefits that outsourcing of jobs to other countries bring to the United States. A lesser known fact about outsourcing is that the American workers also directly benefit from it. Outsourcing of jobs by companies from other countries to the United States, also known as insourcing, have created many jobs. Garcia (2006) reported that "the same companies that facilitate outsourcing jobs from the U.S. have now setup shop here and are hiring. College graduates are lining up because the salary is very good and they feel that the global exposure will benefit their careers" (We're not in Palo Alto anymoreÐ'... 3). Moving of low paying jobs to the other countries will allow the United States to concentrate in higher paying job sectors. Sectors like financial services, health and education are a few examples of the higher paying sectors. As consumers, they also benefit from the low cost of goods. Computers, electronics, furnitures and textiles prices have been steady and affordable by many American households.

Using overseas workers to save money or boost production generally results in cheaper services, which leads to more competition, innovation and growth. The cheaper labor overseas