Economic Impact of Outsourcing

Topics: Economics, Outsourcing, Investment Pages: 2 (685 words) Published: January 3, 2011
The concept of outsourcing has erupted in popularity in the 21st century. Many corporations and small businesses reap the advantages of outsourcing their manufacturing or production needs to maintain their competitive edge. As employment in many countries contracts, there are people who look at the benefits of outsourcing as damaging to an economy. The main argument is reducing the labor costs involved in producing goods or services. On the surface, American employees view outsourcing as a threat to their own jobs. However, this argument is easily overshadowed by the many benefits of outsourcing in today's economy. 1. Increased Manufacturing

To be competitive, many tend to utilize their workforce to the maximum levels. This stream of constant manufacturing leaves little area for expansion and injects fatigue over the workforce. In an effort to increase manufacturing, a company can outsource portions of the needed work or tasks to a smaller more focused group of individuals who can provide an accurate and easier outcome. By outsourcing, companies can achieve improved levels of efficiency. Even an extremely conservative estimate places the savings by outsourcing at a healthy 9 percent.[5] Lower production costs lead to a decreased price for the consumer in a competitive market. This frees up more of the consumer’s income to purchase other goods and services. An increase in demand, in turn spurrs the need for the delivery of goods and services, thereby stimulating the economy. 2. Continued Innovation

Many businesses focus too much on the task at hand rather than updating their information or procedures. Technology constantly expands and is perfected in other areas of the world. Companies can become more innovative and learn new techniques for improving their tasks and output from new specialists acquired by outsourcing. 7. Lower Consumer Cost

Consumers will benefit from this method of manufacturing and production. Typically, when a company can lower it's cost to...
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