Outsourcing

Only available on StudyMode
  • Download(s) : 148
  • Published : April 28, 2013
Open Document
Text Preview
Outsourcing
Former U.S. Presidential candidate Ross Perot once warned of the U.S. entry into the North American Free Trade Agreement as "a great sucking sound" as U.S. jobs "run" to Mexico. Many Americans feared that cheap labor in Mexico would cause many Americans to lose their jobs as U.S. companies could find cheaper labor south of the border. In the ten years since the beginning of NAFTA, the U.S. job market has remained strong. The types of jobs may have changed to a certain degree, but the number of jobs has only increased despite the fears of many. Today, many people are worried about the effects of the outsourcing of software upon U.S. jobs. Many people fear the "great sucking sound" as software jobs are outsourced to cheaper labor in foreign countries, such as India. U.S. legislators have faced the issue and are trying to reduce the incentives of companies to hire workers abroad. There are many fears and uncertainties about globalization and the new global economy as many people fear change and competition from cheaper foreign labor. Are these fears justified? Is the American job market going to collapse? In the words of Ed Yourdon, has the "decline and fall of the American programmer? 4 Also, is it ethical to outsource software for cheaper labor? 

In recent years, especially with the rise of the World Wide Web, there has been a steady increase in a more global economy. New technology has made the world more connected. It is much easier and less costly to communicate and interact with people around the world. Telecommunications makes it more possible to work from a remote location rather than working in a specific building. Cellular phones, laptops, and wireless internet make it much more possible to work from just about anywhere. 

The rise of the global economy has also led to the rise of employment outsourcing. Labor is being treated much like goods. Employers are seeking to lower costs and increase profits. As with the practice of buying cheap materials in foreign markets, companies are increasingly trying to buy cheap labor in foreign markets. From the standpoint of modern economics, this is just supply and demand. Therefore, does this mean that much of the labor in the U.S. will be imported from other countries? Probably not. However, as competition increases for jobs, companies will become more efficient and the price of labor for companies is likely to drop. Companies will be more likely to only pay as much as is necessary for the productivity that they are receiving. If Americans are more productive than foreign workers, then they are likely to be paid more. However, if foreign workers are as productive or more productive than American workers, then there is no reason that American workers should be paid drastically more. According to Larry Ellison, founder and CEO of Oracle, "A lot of people focus on India for lower costs. What is remarkable in India is the caliber of the computer engineers. The cost savings were an additional benefit on top of that…"  

By being able to pay less for specialized labor, many U.S. companies will be able to produce goods at a lower cost and thus increase profits. This, in turn, leads to added value to consumers. Adam Smith was one of the founders of our modern economy. His belief in focusing on the consumer rather than the producer shows up in the case of outsourcing labor. Smith believed that whatever led to benefit of the consumer was the most important thing. 6 Therefore, since outsourcing labor means lower costs (assuming that quality remains the same), the consumer is likely going to benefit from lower prices. Also, the greater efficiency and greater competition is likely to also increase productivity and quality. Thus, it is more likely that products will not only cost less, but they will also be of higher quality and add more utility to the consumer. Therefore, even though the producers and workers might appear to be hurt by lower cost...
tracking img