This is a process of acquiring labor externally, this for organization may range from hiring members from other organizations who specialize in the required task, and for a country it may involve importing labor from other countries. The major consideration in labor outsourcing is the need to cut on production costs of the organization, redirecting or conserving labor and ensuring efficiency in the organization.
Development of out sourcing
Job outsourcing was not a major issue in the US though it can be traced back in the early 1980’s but it never coursed uproar within the American community. This however changed when steps in technology took centre stage this is because it eased communication between countries which facilitated easy and efficient way of communication between countries.
This prompted companies who found the labor cost in the US expensive move some of their operations to countries with lower labor costs initially for American countries they devolved their operations to countries like Mexico but the recent times have seen the same moved to other countries in Asia like India and Malaysia.
It should be noted at the start of this discussion that there seems to be a close tie between outsourcing and off shoring, though the two may make use of the principles they are fundamentally different as off shoring involves transfer of organizational function to another country while outsourcing involves contracting for a job. (England M C 2001)
Contentious issue on outsourcing
Outsourcing can be looked at in two aspects one from the country that the services are being contracted from and the other is the country to which the services are contracted to
The general argument by the American people is that outsourcing has led to job loss for the citizens of the country this has been echoed by various economists while others have refuted the fact there is any significant influence of the outsourcing functions.
There is thus need to examine most of these function s held b y the American people on outsourcing and determine their viability or whether they represent any significant threat to the people’s chance of getting employment within the states.
This will involve examination of the myths held by the people and considering the fact behind the myth and also provide information to support the fact.
-Myth one is that Americans are losing jobs, this myth is contradicted by the fact that the current rate of employment is at an all time high with a house hold employment survey indicating that there are 1.9 million more Americans employed since the recession in 2001.
-Myth two is that a job outsourced is a job lost this again is contradicted by the fact that outsourcing simply ensures efficiency.
Outsourcing is the a means of getting more output with lesser input cost t his leads to lower prices for all consumers who buy or us these products. Lower prices lead directly to higher living standards of living and more jobs in a growing economy.
-The third myth held b y most Americans is that outsourcing is a one way street. The fact behind it is that outsourcing works both sides/ways. (Kern T and Will cocks P 2002)
The number of jobs sourced from other countries to America is growing at a fast rate than those jobs that are lost overseas. In the last releases by the Organization for International Investment, the numbers of manufacturing jobs in sourced to America grew by a massive 82 percent, while the number outsourced overseas grew by only 23 percent. It should also be of importance to note that most of these in sourced jobs are higher paying than the outsourced jobs.
-The other is that American manufacturing jobs are moving to poor nations especially China, the truth is that nations are losing manufacturing jobs worldwide even in China.
It should be noted that America is not the only country experiencing declines in manufacturing jobs. It is of importance to note that the Americans working under the manufacturing industry who lost jobs averaged 11 percent which was the average job loss in the entire world; however China lost similar jobs at 15 percent which was a higher job loss than that of the Americans.
-The next myth is that only greedy company’s benefit from outsourcing the truth is that everyone actually benefits from the outsourcing function.
Outsourcing is mainly preferred to improve efficiency. As costs decline every consumer benefits including those who may lose jobs through outsourcing. Michael W. Klein carried out a study
which included dislocation of costs in its calculations; it simply showed the benefits of trade that outweigh its costs by 100 percent. (Klein M, 2003)
-The other myth is that the government can protect people from outsourcing the fact is that this would lead to protectionism which is actually isolationism and has a history of failure.
Proposals to punish businesses that outsource jobs, institute tariffs or change tax rules will obviously carry unintended consequences if it is enacted. Such measures will be detrimental to the firms within America who currently export goods and services and at the same time it would erode competitiveness. An example of this would be when the US government instituted tariffs on steel this led to loss of jobs in a span of industries and led to a very high price for the consumers of the steel products. (England M C 2001).
-The last myth that is closely related to the outsourcing function is that free trade free labor and free capital harm the US economy the fact is that economic freedom is necessary for economic growth, new jobs and higher living standards.
The study by the Index Economic Freedom confirms that there is a very strong and positive relationship between economic freedoms per capita GDP. Countries that have policies that which protect jobs of a few from outsourcing tend to have very minimal growth which in turn leads to lower jobs.
It should be noted that most of these myths constitute what the citizens may perceive as the disadvantages of outsourcing, this has been the only view mostly held by the People who are bitter with the government for allowing outsourcing but then there are other great advantages that are not talked about concerning outsourcing which leads to the general believe that it is negative and countries should stop it.
Benefits of outsourcing
The other side of the coin holds the benefits of the function though the may not be clearly outlined within the text they form the bulk of the facts on these particular myths, but besides these there are others associated with outsourcing which include:-
Cost savings. The lowering of the overall cost of the service to the business, this usually involves a cut on the cost of labor which is sourced from countries which have lower labor rates than the native country of the company.
Focus on the core function of the business-Resources are only sourced for those activities that are central to the running of the business this allows the business not only to get the best but to ensure that they get the same at a reasonable rate. (Kein W, Schuh S, and Trieste R 2003).
Cost restructuring-This denotes the balance that exists between the fixed and the variable costs of the company what outsourcing does is that it provides a means of altering these costs ratio by minimizing the content of the fixed cost to the variable costs.
Improve quality-This is achieved by through contracting out service with a new service level management. (Kern T and Will cocks P 2002).
Reduce marketing time- this is the time taken to deliver a product to the market, outsourcing ensures that this is minimized through additional capability brought by the outsourced personnel.
Effects of outsourcing to the country of origin
The above discussion has entirely been based on the feelings and sentiments of the country to which the services are directed to but there exists the feelings of those who are from the country that provides the labor force. In most cases for these countries they perceive more benefits that losses among these benefits are the following.
Faster and better communication
The main boost of outsourcing has been the existence of proper communication systems and as the same improves the rate of outsourcing increases. Since communication has become so fast easy and has gotten simplified with time distance has stopped being an issue no matter the location of each.
Thus outsourcing helps develop most of these communication facilities as most organizations strive to make efficient their communication channels by use of highly advanced technologies such as video conferencing.
The advent of globalization
Globalization has brought along several factors such as lower costs of communication transportation and production,
Besides this globalization has led to collapse of numerous trade barriers that existed between most countries, besides the trade barriers globalization has led to increased cultural and language interactions which has improved the relations between countries. With the advantages that globalization has brought in job outsourcing g has also risen.
Time zone advantages
All countries within the world do not fall under the same time zones and what outsourcing enables is that these do not create a disadvantage but instead are used to create a production advantage, This is enabled by organizations ensuring that they ensure a 24 hours product ion by outsourcing from countries with a different time frame who continue with the production process even when the time frame of the native country harbors production like during the night.
Most countries before outsourcing function gained ground considered their populations a disadvantage especially for countries like India, but with the introduction of outsourcing it proved a boom for these countries as they provided labor to organizations based elsewhere in the world. This created a lifeline for the people of these countries and helped support other systems within the economy and thus in general develop their own economy. (Heyne P and Boettke P 2009)
Outsourcing has brought in efficiency in most economies though most people have chosen to look at the negative side of it but the truth remains that the world has grown, economically, culturally and socially thanks to outsourcing.
England M C (2001) .Outsourcing the American dream. Writers club Press
Heyne P and Boettke P (2009) Economic way of thinking. Prentice Hall
Kern T and Will cocks P (2002) The Relationship advantages. Oxford University Press.
Kein W, Schuh S, and Trieste R (2003), Job creation, Job Destruction and
International competition.Upjohrn Institute.
Klein M, (September 23, 2003) Wall street journal. Steeling our wealth Pg. A24
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