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Negative Effect of Outsourcing

By maphuong Nov 30, 2008 454 Words
Negative Effect of Outsourcing

The outsourcing trend has become a concerning, and debated topic in American politics and economics. The main outsourcing purpose is cutting production cost by transferring U.S jobs to lower paid foreign workers. Some views outsourcing as the way company‘s completeness, others see this as negative effect due to losing jobs. As a student of College Management who major in Business and also minor in Economic, I strongly believe that outsourcing is damaging America‘s economy.

Unemployment issue
The US’s growing unemployment rate is related to this outsourcing trend. One figure from Forrester’s Research shows that at least 40% of Fortune 1,000 companies are sending US jobs overseas. The proponents of outsourcing argue that the outsourced workers will be able to find job replacements through retraining. However, according to a report by the McKinsey Global Institute, 31% of workers who lost their jobs never found employment, (Reingold). In addition, The negative effects of outsourcing are obvious. As Americans lose their jobs to cheaper overseas labor, their spending must reduce to minimum level of surviving. This, in turn, will reduce sales and services in domestic national, thereby affect other people incomes. By outsourcing, companies are able to reduce cost of products, but who could afford to buy them?

Rising Government Spending
When many people losing their jobs as a result of outsourcing, there are fewer payroll tax receipts and fewer contributions to Social Security and Medicare. Government revenues mainly depend on income and sale tax. Reduction in this payments, add to outgoing payments for unemployment benefits will result in increasing government spending. If those moneys were using for educational, healthcare or other funding, it would have been better for America’s economy.

Disrupting the Education System
Besides effect of rising government spending, outsourcing also is threatening education system. The fear of outsourcing is striking students who are fascinated by science and engineering. Recently, the education system has seen shifts in college enrollment, as college students have begun to avoid high-tech fields like computer science. Enrollment in undergraduate computer science courses dropped 19%, and the number of newly declared majors has dropped 23% since last year, according to the Computing Research Association (Schoenberger). To potential students, the promising future is not brilliant for information technology majors when American employers are so reluctant to create jobs in these fields and so eager to outsource them

In Summary
In conclusion, negative effect of outsourcing is obvious. While outsourcing may reduce costs for businesses, it has additional consequences beyond affecting the livelihoods of jobless employees. It is including disrupting education, depriving the government of needed money. Government should have regulations, bans or tax to discourage business from outsourcing jobs.

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