Offshore outsourcing is increasingly becoming a common practice in the global economy. By definition offshore outsourcing can be defined as the act of contracting an organization from another country to perform business functions for the organization (Chakraborty). According to proponents of offshore outsourcing, it gives businesses a competitive advantage in the marketplace. Just to be appreciated is the fact that different countries have different wage scales. This makes offshore outsourcing a common prevalence by firms in developed countries as it significantly reduces its employment costs (Linder 12).
Offshore outsourcing is also attributed to increased flow of innovative ideas as well as technology across nations, a factor that positively impacts on the effectiveness and reliability of outsourcing organizations (Rittenberg, Moore, and Covaleski). However, offshore outsourcing has been identified as a major threat to the long term sustainable development of the US economy (Chakraborty). This is first because; offshore outsourcing is compromising the employment market for the American citizens.
Given the highly living standards and thus highly wage rates in the American nation, most local firms or engaging other countries for provision of cheap business functions.
This means has and will continue limiting the availability of jobs for the citizens, a factor, which negates their ability to realizing sustainable social and economic independence. This paper is a discussion on the impact of offshore outsourcing on the American economy and its workers. The author will give an argument on why the practice should be stopped. Effects of offshore outsourcing to the US economy and its US workers
The sustainable social and economic development is greatly dependent on the economic independence of its citizens.
Offshore outsourcing has been evidently established to be a major threat to this crucial economic factor in the American society. According to available statistical evidence of offshore outsourcing practices in America, the rate of the practice is growing at an estimated 20 percent annually (Chakraborty). Another thing to acknowledge here is the fact that such statistics indicate that piece of work costing $100 in the US can be outsourced for $20 in other countries (Rittenberg, Moore, and Covaleski).
Based on these reasons, American firms prefer to hire individuals or organization from other nations to executing such business practices. This has the implication of reducing its employee, a factor that increases the level of unemployment and thus economic dependent among the citizens of America. Still on employment, it has been evidently established that offshore outsourcing is compromising the wage rates for American citizens (Chakraborty). Employment practices, though governed by federal laws are mostly at the hands of the organizations. This means that companies pay the big role of dictated the level of pay to provide to employees.
According to a recent report finding, the level of remunerations for most American employees has been greatly negated due to offshore outsourcing practices (Rittenberg, Moore, and Covaleski). Professional job seekers have limited choices for dictating employment terms and condition as they are pressured by economic survival demands. This means that, with increasing offshore outsourcing by American firms, the level of wages is bound to continue decreasing. Therefore, the practice of outsourcing is threatening the future sustainable social and economic prosperity of the American citizens.
Offshore outsourcing has negative implications on the general economic growth of the United States of America (Rittenberg, Moore, and Covaleski). The purpose of any government is to ensure sustainable social and economic development of the community. The American nation was badly hit by the economic recession during the twenty first century. This has been closely attributed to among other reasons to the problem of outsourcing. Indeed, this practice is the reason behind the high levels of unemployment in the nation.
With this as a problem, the government is forced to invest most of its resources in sustaining its currently huge dependent populations. Just to be appreciated here is the fact that such have the negative implication of compromising the execution of other community development projects by the government. Another economic effect of offshore outsourcing to the United States is the risk of system security and intellectual property rights infringement (Serapio 12). Intellectual property rights are a crucial resource for the present and sustainable future economy.
Despite this, the American nation is at the risk of compromising its intellectual property wealth due to outsourcing. According to reliable research findings, most nations hosting offshore outsourcing companies are significantly gaining technological development from the underlying secrets they acquire from the source companies (Chakraborty). This has the implication that the future of American business secrets is sufficiently threatened by offshore outsourcing, a factor that has negative effects of the economic development of our nation. Still, offshore outsourcing is leading to loss of business knowledge by American citizens.
Offshore outsourcing is by definition the process of contracting services from an external organization outside the nation (Organization for Economic Co-operation and Development 115). It has been established that offshore outsourcing are dominating most of the operations of an organization from IT, to customer services, to accounting, and to even pay role processing and data entry. This means that the future of the American people is dependent on outsiders for almost all business services. Just to be appreciated is the fact that the future of any economy in the effectiveness and long term reliability of its human resources.
However, in the case of the American nation, we are hiring resources from outside while failure to give our graduating professionals the opportunity to enhance their business skills for the future good of the economy. Offshore outsourcing can be a source of compromised quality or failed service provision to an organization (Hira, and Hira 21). There have been many incidences of poor quality service provisions by outsourced companies. This has been closely attributed to the fact that such companies are currently enjoying huge from various companies.
Another problem with offshore outsourcing to the American economy is crucial loss in the event of service failure. Therefore, the American nation is at the ultimate risk of crashing its superpower economic stand in the world due to this emerging trend of offshore outsourcing. The American nation is marked with reduced innovative and research oriented problem solving ability due to offshore outsourcing (Gainey, Clendon, and Klaas 23). Necessity is the mother of invention. The far we are in economic and technological development is to be founded in the efforts of our ancestors.
This culture of innovation is however being taken by other nations, a factor that has been seen by many as a threat to the sustainable future economic prosperity of the nation. Therefore, offshore outsourcing is a real threat to the realization of the innovation policies treasured by the American government. Offshore outsourcing has been claimed by many investors as a potential practice for realizing sustainable economic development in organizations. This is true to the word. However, organizations are private entities, which practice profitable investments for their own economic gains.
Just to be appreciated is the fact that though firms are increasing their profit margins through offshore outsourcing and increasing their revenue remittances to the government, the economic independence of the American people is still at risk. This simply means that investment should be tailored at promoting local community not just by community projects but more by providing employment to the people. This factor of economic development is negated by offshore outsourcing practices. Recommendations and conclusion It is clearly evidently that offshore outsourcing is threatening the economy of the US and it working class citizens.
To mitigate this problem of economic loss through unemployment, offshore outsourcing should be stopped. Although organizations claim of the advantages they gain from outsourcing practices, the future social and economic prosperity of the nation will less be based on their current practices. This is because; such companies are compromising the ability of the young generation to enhance their talent, skills and qualification in providing a reliable direct for the future of this nation. In my opinion, the best alternative is for the government is to engage in reducing the operational cost of firms in the American country.
This could encourage American corporations to employ the locals while still maintaining their projected profits. Just to be appreciated is the fact that companies have a social responsibility policy. Such should not be used as a tool for maximizing profits through offshore outsourcing then claiming to help the unemployment poor members of the community. Corporations should strive to provide members with sustainable social-economic assistance by providing them with employment for ensuring economic independence. Works cited Chakraborty, Kalyan.
Offshore Outsourcing of IT-Enabled Services and the U. S. Economy: Evidences from Secondary Data. Offshore Outsourcing of IT-Enabled Services and the U. S. Economy: Evidences from Secondary Data Jun. 2002. 17 May. 2010. <http://findarticles. com/p/articles/mi_m1TSD/is_1_7/ai_n28026375/ > Gainey, Thomas, Clendon, John, and Klaas, Brian. HR Outsourcing and Its Impact: The Role of Transaction Costa. ” Personnel Psychology, 52 (1999): 23-31. Hira, Anil, and Hira Ron. Outsoucng America: What’s Behind Our National Crisis and How We Can Reclaim American Jobs. New York: AMACOM, 2005. Linder, Jane.
Outsourcing for Radical Change: A Bold Approach to Enterprise Transformation. New York: AMACOM, 2004. Organization for Economic Co-operation and Development. OECD Economic Surveys: United Sates 2005, Volumes 2005-2022. New York: OECD Publishing, 2005. Rittenberg, Larry, Moore, Wayne, and Covaleski, Mark “The Outsourcing Phenomenon. ” The Outsourcing Phenomenon. Apr. 1999. 22 Feb. 2010. <http://findarticles. com/p/articles/mi_m4153/is_2_56/ai_54455268/pg_6/? tag=content;col1> Serapio, Manuel. “International Outsourcing in Information Technology. ” Research Technology Management, 48 (2004): 12-31.
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