Outsourcing: A Boon or Bane?

Topics: Outsourcing, United States, Employment Pages: 12 (4279 words) Published: November 13, 2011
The increasing trend of outsourcing jobs from United States in recent years has created alarming unrest among American people. Politicians also believe that outsourcing has a negative impact on jobs, should this be allowed to continue, a prosperous future of all Americans is dim. These policy makers are exploiting this issue by introducing new protectionist policies. On the contrary, some economists have shrugged of the phenomenon as part of economic growth, as outsourcing benefitted U.S. economy by creating new jobs. In the article, the writer highlights the positive effects of outsourcing on the U.S. economy, as well as politicians’ ignorance on the long run benefits from it. Outsourcing is to move jobs that are currently being performed by people of country to another country with cheaper labor costs. There is no denying to fact some jobs are lost overseas when companies choose to outsource. It seems cruel that some people who are working in factories or in highly skilled Information Technology positions will be out of job. The fact is the outsourcing save number of state side jobs. Moving some of this labor overseas could mean the difference between company staying in business or going out of business. The option to lose some jobs lost in short run is better than losing all jobs due to company closure. Companies often take savings gained from outsourcing and reinvest these savings in order to expand and create better jobs in United States. Recent history

Consider total employment spanning 1988 through 2007 (the most recent year of data available from the U.S. Bureau of Economic Analysis). Over that time, employment in affiliates rose by 5.3 million—to 11.7 million from 6.4 million. Over that same period, employment in U.S. parent companies increased by nearly as much—4.3 million—to 22 million from 17.7 million. Indeed, research repeatedly shows that foreign-affiliate expansion tends to expand U.S. parent activity. For many global firms there is no inherent substitutability between foreign and U.S. operations. Rather, there is an inherent complementarity. For example, even as IBM has been expanding abroad, last year it announced the location of a new service-delivery center in Dubuque, Iowa, where the company expects to create 1,300 new jobs and invest more than $800 million over the next 10 years. This is true in manufacturing, too. Procter & Gamble calculates that one in five of its U.S. jobs—and two in five in Ohio—depend directly on its global business. Compared to the rest of the world, U.S. corporate tax rates are sky-high and our system of corporate taxation is highly complex. The current U.S. federal statutory corporate tax rate of 35% is the highest among all 30 Organization for Economic Cooperation and Development countries, far above the OECD average of about 23%. Raise the international tax burden on U.S. multinationals by limiting foreign-tax credits, for example, and you will further reduce their ability to compete abroad. This, in turn, will reduce employment and investment in U.S parent companies. Making it harder for U.S. multinationals to create U.S. jobs would be bad policy at any time. But it would be especially detrimental now because of how dramatically the private sector of the U.S. economy has contracted in the face of this recession. Since the slowdown began in December 2007, private-sector payrolls have fallen precipitously. Today there are 2.4 million fewer private-sector jobs than 10 years ago. Moreover, in all four quarters of 2009, gross private-sector investment fell so low that it did not even cover depreciation. For the first time since at least 1947, the U.S. private capital stock shrank throughout an entire year. The major policy challenge facing the U.S. today is not just to create jobs, but to create high-paying private-sector jobs linked to investment and trade. Which firms can create these jobs? U.S.-based multinationals. They—along with similarly performing U.S....
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