The Effects of Offshore Outsourcing

The audience of this essay includes individuals who are uneducated but interested about how companies function in the United States. More specifically, this essay will reach out to those who are curious about the strategies of how companies are profitable in the United States economy. This essay discusses the topic of offshore outsourcing which affects companies and the United States economy. Offshore outsourcing can also affect people trying to find employment in a variety of job sectors, so it is beneficial to those interested in entering the workforce to read this essay.

Label “Made in China.”

Most of us have seen products with the label “Made in China.” In the last twenty years, products ranging from kids toys to car tires have been outsourced (“preface”). More specifically offshore outsourced, meaning US companies hire people from other countries to make their product. The manufacturing of products is just one of the many examples of jobs that are outsourced; others include higher skilled positions, for example business functions such as accounting, finance, customer service and information technology (“preface”).

The outsourcing of American jobs, specifically offshore outsourcing, has been an extensively debated topic in the last twenty years. There are several disadvantages to offshore outsourcing that aren’t commonly discussed, and although outsourcing isn’t detrimental to the United States economy, overall outsourcing does have negative impacts on the economy and the people of the United States. When it comes to a business model, it makes sense that companies outsource to other countries.

When a company outsources its jobs, that company can pay employees of foreign countries a fraction of the price of what they would have pay American workers.

Get quality help now

Prof. Finch

Verified

Proficient in: Outsourcing

4.7 (346)

“ This writer never make an mistake for me always deliver long before due date. Am telling you man this writer is absolutely the best. ”

+84 relevant experts are online

Hire writer

In fact, “in one day an American worker will earn what a Bangladeshi worker earns in two months, or an Indian worker earns in roughly one month” (Hertzman). This results in companies maximizing their profits due to less production cost. Although the benefits seem clear, there are reasons why companies choose not to outsource. One reason is that the company loses control over a lot of its business. In terms of the production of goods, often times the process is not very clear-cut. Production can be difficult and run into many problems, especially at the beginning stages, so it makes sense for a company to be close to production sites to quickly troubleshoot these problems (Shih).

Issues with outsoutrcing

As for jobs in the communications and service sector, having people from across the world do these jobs can lead to difficulty in management and employment. Also, jobs in information technology that are outsourced sometimes have issues with the turnaround times (Chris). In all of these sectors, the quality of products and services are often compromised, and it is hard to asses and fix these issues when the employees are not in the same office, let alone on the other side of the world. Another issue to take into consideration when discussing offshore outsourcing is the United States unemployment rate. According to the Bureau of Labor Statistics, unemployment rates in the United States have hovered around five to six percent in the last decade, and more recently around four percent. Although this isn’t terrible, there are still an estimated fourteen million Americans looking for a full-time job. What’s worrisome is the amount of highly skilled jobs that have a good chance of being offshored in the near future. These jobs include computer programmers, actuaries and computer scientists (Baldwin).

For example, over three million jobs in business, office and computers have been outsourced in the last decade (“Number”). These are the types of jobs that people want right out of college after earning a specialized degree, and they definitely don’t want to compete with less qualified individuals from foreign countries. When important jobs are outsourced, the quality of products and services tends to drop. “Companies that outsource to foreign countries tend to hire less skilled workers” (Correnti). An example of this is in customer service. When an employee from a foreign country is communicating over the phone, there is often a language barrier and it is very difficult to understand English when the speaker has a heavy accent. This makes the company seem incompetent. Overall if these specialized jobs were not offshored as much, quality would increase and companies would look much more professional. When it comes to production jobs, offshore outsourcing is not needed for companies to be successful.

Tesla case 

An example of this is an American car company called Tesla. This car company makes fully electric cars from large lithium-ion batteries. To make these battery packs, some in favor of outsourcing might recommend offshoring production of the batteries, but Tesla decided to create a massive Gigafactory on the United States soil to mass produce large lithium-ion batteries. And to many people’s surprise, Tesla has been extremely successful. “Tesla claims that its power-packs cost half what big car makers pay their suppliers for custom-designed large-format batteries, and that its Gigafactory, a huge battery plant close to completion in the Nevada desert, will cut costs by another 30%” (Handfield). Tesla is a good example of insourcing production that benefits the company in many ways: they have easy access to the factory so they can diagnose problems faster, and overall there are less logistical issues for Tesla since they are so close to their production source. On top of this, Tesla is employing American workers, therefore reducing the unemployment rate. It is a win win situation for the economy and the company.

Admittedly, Tesla is a rare example and it would be unreasonable to say that offshoring of production should be stopped for every company. There are clear practical benefits and many companies make more profits through outsourcing their production jobs. However despite this, less production outsourcing could lead to an increase in American jobs, which would help in reducing the unemployment rate. It is also important to look at how offshoring affects those who are working in foreign countries. When United States companies go offshore, there is much less pressure to perform safety and regulation checks (Hertzman). This has caused extremely dangerous and unhealthy work conditions. One example of this is when an eight story factory building collapsed in Bangladesh in 2013. This factory building was being used by United States companies for clothing and textile production. The details involving this tragedy are horrific, with more than three hundred and eighty people being killed by the collapse itself, and another six hundred slowly died from being trapped under the rubble. Days after the tragedy, reporters said that “voices of survivors have now faded from the twisted wreck” (Cooper).

Target and Kmart case

Companies that were involved in the outsourcing include Target and Kmart. When asked about how they go about safety, “no company [could] explain in detail just how they ensure safe working conditions are met” (Cooper). It makes sense that thllis tragedy took place: the companies were being careless and irresponsible because they were not being forced to ensure safety of their employees. Admittedly, when companies offshore jobs, they do pay the workers some money, but these workers are still living in poverty and dangerous work conditions. A solution to this is to have the jobs come back to the United States.

There are better working conditions in the United States and Americans who are hungry for employment. Simply put, offshore outsourcing doesn’t need to be completely stopped, however there are serious implications and negative effects of offshoring that people and companies need to keep in mind. If more companies would consider the benefits of insourcing, it is possible that there would be lot more companies like Tesla who reap the benefits for their company while simultaneously improving the United States economy.