Craig Final Essay

Impact of Outsourcing on America 1

Impact of Outsourcing on America Craig Lowrie COM/150 Effective Essay Writing January 14, 2012 Sheryl Brasswell

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Outsourcing is not a new process and has been used by corporations for decades. Outsourcing can be defined as ―the strategic use of outside resources to perform activities traditionally handled by internal staff and resources‖ (Hanfield, 2006). Outsourcing American jobs to other countries will not leave enough work for the millions and millions of unemployed Americans. An out of work American will not spend money on any unnecessary purchases. Therefore, businesses and people who manufacture products will not make money. While outsourcing is a cost-cutting measure for corporations, it impacts the United States economy because jobs go to other countries, affecting the American people’s lives. According to Hanfield (2006), outsourcing was not formally identified as a business strategy until 1989. Outsourcing was originally used when a corporation did not have internal capabilities to complete tasks. Then, ―in the 1990s, as organizations began to focus more on cost-saving measures, they started to outsource those functions necessary to run a company but not related specifically to the core business‖ (Hansfield, 2006). In the past, employers used outsourcing to focus on reducing costs within their organization. Outsourcing has evolved resulting in corporations shifting their focus. Today, employers use outsourcing for strategic purposes. According to Hansfield (2006), the focus today is less on ownership and more on developing strategic partnerships to bring about enhanced results. Outsourcing has many supporters who believe it benefits the American economy. For corporations, outsourcing provides many benefits to their organization. Although outsourcing is no longer solely used for cost reductions, it continues to be used as a cost savings benefits. United States corporations claim labor is a big expense. Supporters believe that outsourcing reduces operating expenses for corporations such as overhead. Once taxes, paid vacations,

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bonuses, insurance, office space, a computer, a mobile phone, and Internet access are calculated, a $50,000 per year employee can easily cost a company upwards of $100,000. In addition to cost savings, supporters claim that outsourcing doesn’t just lead to jobs lost, but jobs gained as well. Supporters do not argue that United States corporations have sent jobs to other countries such as India or China. However, outsourcing supporters will remind us that foreign companies invest in the United States as well. Michigan has experienced job losses because of outsourcing, but the state has also gained good paying jobs from direct foreign investment. Those employment gains have centered on the auto industry. In the article, Offshore Outsourcing Has Many Economic Benefits, it states that in the '80s, for example, Mazda Motor Corp. built a brand new automotive assembly plant in Flat Rock, Michigan, which still employs several hundred people in well-paid, United Auto Workers represented jobs. Nissan Motor employs an estimated 800 people in Farmington Hills, MI. Hyundai, located in Ann Arbor MI, employ approximately 100 people at its tech center. Suzuki Motor Corp. operates a development nexus in Wixom, MI. Toyota Motor Co. also decided to open a technical center in MI employing approximately 500 people. Not only are foreign automakers investing in the United States, but also foreign owned manufacturers and suppliers as well. As companies expand their business, outsourcing lets corporations focus on functions essential to focus on growth. Rapid growth can be draining on essential resources. In the article, Top 7 Outsourcing Advantages, it states that outsourcing activities will allow refocusing on those business activities that are important without sacrificing quality or service in the back-office. Additionally, outsourcing supporters proclaim that consumers also reap the benefits of moving jobs overseas. For example, companies have and continue to move outsource call centers to other countries. Supporters believe that this improves customer service for Americans

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by providing assistance to the United States consumer twenty-four hours a day seven days a week. In the same way, supporters claim that producing goods overseas results in lower priced goods for United States consumer to purchase. ―Consumer can buy a DVD player for less than $100. It is one reason why retail costs of products has halved in many sectors over the last 20 years, allowing for inflation‖ (Dixon, 2006). Outsourcing opponents argue that relocating American jobs to other countries harms our employment market and negatively impacts the American people. It is no secret that the United States job market has and continues to suffer. Manufacturing occupations were among the first jobs to be lost to outsourcing and sent overseas. Unfortunately, manufacturing is not the only industry to be affected by outsourcing. Consequently, white collar jobs have also become a casualty of this practice. ―The United States lost 2.5 million manufacturing jobs since the Bush presidency beginning in 2001, U.S. corporations now are racing to outsource white-collar jobs— including work in computer sciences, engineering, entertainment, financial and medical services—to countries where workers earn far less‖ (Birnbaum, 2005). Furthermore, Shipping Jobs Overseas: How Real is the Problem, reports that Goldman Sachs estimates 400,000– 600,000 professional services and information sector jobs moved overseas in the past few years, accounting for about half of the total net job loss in the sector over the period. Today, the United States unemployment rate is at 8.6%. Birnbaum reported in her (2005) article, American Jobs: Going, Going, by 2010, about 30 percent of working Americans weren’t making even poverty wages. Outsourcing continues to impact the American people in 2011. Americans are losing good paying jobs which are forcing them to accept lower paying jobs to support their families. ―Labor Department list of the 10 occupations likely to show the largest job growth this decade is dominated by jobs that typically pay poorly—food preparation,

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customer service, office clerking, security and food service‖ (Birnbaum, 2005). Another concern for Americans is the information being sent overseas along with our jobs. As United States corporations relocated jobs overseas, our personal information is going as well. Private information, such as medical records or payroll information is potentially compromised. ―There have been instances of thefts of things like credit cards, social security numbers and patented material, and these must give a company pause‖ (http://www.wisegeek.com/what-are-someoutsourcint-risks.htm). Outsourcing is not going away. American jobs will continue to be lost to other countries. ―Today high paying jobs are being outsourced to India including doctors, mathematicians, accountants, financial analysts engineers, biologists, architects, physicists, chemists and programmers‖ (Cameron, 2010). This trend will continue. ―Forrester Research Inc. predicts U.S. employers will move 3.4 million white-collar jobs and $136 billion in wages overseas by 2015‖ (http://www.aflcio.org/issues/jobseconomy/jobs/outsourcing_problems.cfm). Our economy is consumer driven. With better paying jobs disappearing rapidly, Americans will be forced to accept lesser paying jobs. Wages lost from higher paying jobs will force families to spend less further hindering our economy’s recovery. Corporations face challenges in the future as outsourcing continues to evolve. Outsourcing has already created a labor shortage for other countries overseas. ―Some companies are now thinking of moving operations to places like Pakistan (50% lower costs and over 200,000 IT graduates looking for work), Bangladesh or Vietnam‖ (Nixon, 2010). Outsourcing jobs create a demand for higher wages in emerging countries. For example, ―China is now seeing 100%

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salary inflation at top end and India is not far behind - acute shortage of experienced business leadership labor shortage for skilled workers in emerging countries‖ (Nixon,). Outsourcing is here to stay. Outsourcing has both supporters and opponents. The outsourcing supporters believe outsourcing is a business practice American corporations will continue to use to save money by reducing overhead, improving efficiencies and focusing on core competencies. Supporters also claim that United States corporations and consumers will reap the benefits by cheaper production costs resulting in cheaper products for purchase. However, opponents argue that because corporations will not stop moving American jobs overseas to other countries, our economy and people will continue to be impacted by this practice. Manufacturing jobs were among the first jobs to be relocated, but as our economy evolves, more and more white collar jobs will be lost as well. Americans will be forced to compete for lesser paying jobs. The American Dream can no longer be defined as the family who has a house with a white picket fence and two cars in the driveway. Outsourcing has redefined America’s dream by taking jobs away and reducing the American way of life. The new American dream is no dream at all, but a nightmare we will not wake up from anytime soon.

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References

Handfield, PhD, Robert. (2006). A Brief History of Outsourcing. Retrieved November 27, 2011, from http://scm.ncsu.edu/scm-articles/article/a-brief-history-of-outsourcing Offshore Outsourcing Has Many Economic Benefits. Retrieved November 27, 2011, from http://ic.galegroup.com.ezproxy.apollolibrary.com/ic/ovic/ViewpointsDetailsPage/Viewp ointsDetailsWindow?displayGroupName=Viewpoints& disableHighlighting=true&prodId=OVIC&action=e&windowstate=normal&catId=&doc umentId=GALE%7CEJ3010653208&mode=view Bucki, James. Top 7 Outsourcing Advantages. Retrieved December 7, 2011, from http://operationstech.about.com/od/officestaffingandmanagem/a/OutSrcAdvantg.htm Shipping Jobs Overseas: How Real Is the Problem? Retrieved November 27, 2011, from http://www.aflcio.org/issues/jobseconomy/jobs/outsourcing_problems.cfm Birnbaum, Jane (2005). American Jobs: Going, Going… Retrieved December 7, 2011, from http://www.aflcio.org/aboutus/thisistheaflcio/publications/magazine/0903_amjobs.cfm

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What Are Some Outsourcing Risks. Retrieved December 9, 2011, from http://www.wisegeek.com/what-are-some-outsourcing-risks.htm Dixon, Patrick (2010). The Future of Outsourcing-Impact on Jobs. Retrieved December 7, 2011, from http://www.globalchange.com/outsourcing.htm Cameron, Alexia (April 12, 2010). Outsourcing America’s Future. Retrieved December 7, 2011, from http://economyincrisis.org/content/outsourcing-americas-future