Outsourcing: Can It Do More Harm Than Good?

One of the biggest challenges in our economy today is outsourcing. Outsourcing is an institution’s decision to contract with an external organization to provide a traditional function or service. Outsourcing to foreign countries can either benefit or majorly hurt our country and its economy. It is also a challenge for the business world. Outsourcing dramatically helps reduce costs and raise sales, but it also poses problems for the distribution and manufacturing process of a company. Outsourcing can be anything from a call center in India to a Nike plant in China.

Outsourcing has many benefits. It allows consumers to buy goods and services at lower prices than in their own economy. Outsourcing also allows a consumer to buy a higher quality good at the same price. “While accurate numbers are hard to come by, most economists estimate that about 100,000 white-collar jobs have gone overseas in each of the past three years, for a total of about 300,000 jobs so far. Given the 138 million-plus Americans with jobs today, that is not an alarming number” (Industry Week). The textile industry is an example of one of the positive areas of outsourcing. The price of textiles and apparel has dropped by nearly 20% over the past decade because of foreign trade. The electronics manufacturing industry has globally made $360 billion in revenues in 2011 alone. The outsourcing of electronics manufacturing in China is what gives the United States all of their iPhones. Other countries are able to mass produce items and ask for lower labor wages. More capable and a less costly production process leads to more affordable products and services. This in turn allows companies in higher-labor-cost economies like the USA to stay competitive and preserve their remaining jobs.

Outsourcing has negative aspects as well. Outsourcing often eliminates direct communication between a company and its clients, which can cause a company to lose business due to dissatisfaction. Companies become hard to control because of the location in foreign countries. It also causes people, which are well qualified, to lose their jobs. Usually the person will have to find a new job a less pay because their field of work can easily be outsourced. US workers constantly have to stay ahead with training to keep their job. Technology outsourcing is the fastest growing industry. The call centers in India are one of the negative areas of outsourcing. It is almost impossible to achieve any help over the phone from someone in another country. Cultural and language barriers will always be challenges for companies who outsource. It makes it difficult to transfer knowledge to others.

Whether a company decides to outsource or not is a huge decision to make. “Outsourcing helps the economy if the savings to consumers substantially exceeds the lost wages. If the reverse is true–if prices hardly drop, if service deteriorates, and the loss in wages is substantial–the economy is worse off” (Evans). Without outsourcing where would all our clothes come from? With out outsourcing where would all our cars come from? Without outsourcing we wouldn’t have to talk over the phone about fixing a computer to someone in India. There are just as many positive aspects of outsourcing as there are negative aspects. In the long run our economy needs outsourcing. It provides us with valuable services and goods, and also helps out our industries.