Outsourcing is known to be an ethical business practice. How can outsourcing be an ethical business practice when it affects the American workers? In the early 1990s, when the U. S. economy was facing recession, outsourcing was originated (Corbett, 2004). Outsourcing is known to build successful businesses, generate jobs and helps with the economic growth. In today’s business world, outsourcing can be portrayed as an unethical business practice by the American workers; who have been impacted by a cut in employee benefits, unemployment, and dropped out of the workforce altogether due to outsourcing.
While outsourcing is helping with the economic growth in the U. S., American workers thought it to be the result in loss of employment opportunities.
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The American workers believe global outsourcing has altered the nature of work. Jobs became more temporary and forced the American workers to adapt to the changes. Cost control is one of the considerations by firms that global outsourcing is the desire to reduce operating costs (Corbett, 2004). Research shows global outsourcing reduced administrative expenses, lowered wage rates by using offshore workers, eliminated payment for the nonproductive time from workers, and eliminated the workers’ benefits. Research also suggested global outsourcing depresses wage rates, reduced job stability and resulted in a loss of benefits for American workers (Ansberry, 2003b, and 2003c: Harrison 1994). The evidence proves proof outsourcing can be portrayed as an unethical business practice. The revolution of outsourcing is how we try to make sense of it and how to do it properly the right way. Outsourcing does have some challenges, in that there are risks. Not all organizations execute well and not all providers deliver well to their customers (Corbett, 2004). The hierarchy of benefits that outsourcing delivers is 3% innovation, 3% conserve capital, 3% improved quality, 4% growth revenue, 9% access to skills, 12% variable cost structures, 17% improved focus, and 49% reduced costs (Corbett, 2004). On an executives’ standpoint, 50% believe reducing costs is the main reason for outsourcing. When cost savings are only at a 10% to 20% range, but depending on the gap between companies’ costs and money being paid out cost savings could be much higher (Corbett, 2004). If outsourcing were such an ethical business practice, the percentages should be much greater. Therefore, more proof that outsourcing is not an ethical business practice. There are many barriers to organizations that will need to be brought down if outsourcing is going to work well. Many managers fear a loss of control, losing flexibility, concerned about customers’ reactions, concerned for employees, and concerned about community and political backlash over lost jobs. (Corbett, 2004). If there are so many barriers that need to be brought down, then why outsource? Outsourcing, in this case, does not sound like a well thought out plan for the economic growth. The main focus of outsourcing jobs has been to help with the economic growth, but companies do not realize the impact outsourcing has on the American workers. These impacts can be both positive and negative, which are not evenly distributed. Several economists regrettably agree there are two effects caused by moving jobs overseas. The first effect being the displacement of American workers and the second being a change in the U. S. workforce. The displacement of American workers is a negative effect caused by moving jobs overseas. Recent years have shown the U. S. economy has disposed of more jobs than creating jobs (Hira, 2008). Claims have been made that displaced American workers have been “freed” from their imperfect jobs and move into interesting “project management” to stay onshore. This way of thinking portrays to colleges that they should focus on that training. This kind of is flawed for two particular reasons. The first reason being the assumptions that project management will remain onshore when there are also needs to locate the activities offshore. The second reason being graduates will not be able to leap right into project management without having the experience (Hira, 2008). Once again, this is more proof that outsourcing is an unethical business practice. Outsourcing has caused downward wage pressure on the American workers.
For example, when a company is growing, American workers may be repositioned within the same company to take on new tasks, but if the company is not growing those workers will most likely be laid off. The president of the Information Technology Association of America, Harris Miller quoted “Americans must face the ‘hard truth’ that offshore companies not only offer information technology services for a fraction of the cost, [but they can] compete for increasingly more sophisticated and complex IT work…. The silver lining of this wage pressure is that a more competitive payroll picture may undercut [U. S. employer] need to move jobs offshore.” While no one knows the long-term effects will be for downward wage pressure, we know the overall deterioration of wages are real and can be very substantial for the American workers (Hira, 2008). These companies continue to cut the benefits of the American workers, in which they are driven by global competition. Fewer new companies are willing to pay pensions while older companies are have been threatening to stop paying pension plans. Therefore, the pension systems are on the verge of bankruptcy. If the economy is so efficient, then why are American workers paranoid about what the future holds (Hira, …show more content…
2008)? While outsourcing has been the focus of economic growth since the early 1990s, most companies do not realize the impact outsourcing has had on the American workers. In 2001 to 2003, 5.3 million workers that have held their jobs for three or more years were displaced. In 2004, 65% had to find full or part-time work, 20% were unemployed, and 15% completely dropped out of the workforce altogether (Hira, 2008). The American workers that found full-time employment, 57% earned less than their prior job, and a third of those workers said their pay was cut by 20%. Your high-level white-collar workers such as management and professional only 67% fared better being re-employed; while lower-level white-collar workers such as office and administrative occupations 60% fared worse being re-employed (Hira, 2008). From the period of 1979 to 1999, approximately 65% of manufacturing workers were re-employed, 60% experienced salary drops of 15% or more, 35% were not re-employed,and 40% earned lower salaries according to the Bureau of Labor Statistics (BLS). These American workers would probably agree that outsourcing is not an ethical business practice. How does outsourcing affect other organizations? For example, healthcare organizations have possibilities and pitfalls when it comes to outsourcing. Benefits of outsourcing in healthcare organizations are providing enough staff to operate the facility and stabilize the workload for in-house physicians. The pitfalls of outsourcing in healthcare organizations are hospitals being stripped of tax-exempt status due to excessive outsourcing, declining morale of employees, and the loss of the community support due to layoffs of employees (Hazelwood, 2005). Global outsourcing is the reason for the loss of U.
S. jobs. The economist Robert Schiller quoted “Even the so-called recession or ‘business-cycle data’ are influenced by globalization and the new technology that fosters it.” Schiller also noted, job loss recovery, if there is in-fact any recovery, is due to globalization and new technologies. Due to this globalization and new technologies, American workers have been laid off, to cut costs and two million U. S. jobs have been eliminated since 2000 (Heffes, Sep2003, Vol. 19 Issue 6). The concerns American people express and the havoc being stirred up is legitimately in our country. These American people would see outsourcing as an unethical business
practice. American companies keep increasing outsourcing and offshoring jobs. By increasing their outsourcing, they are cutting employee benefits, contract workers for regular employees, eliminate career paths and reduce expenditure for training (Cappelli, 2008; O’Toole and Lawler, 2006). Corporate executives believe to boost the productivity is to cut wages and operate by command. These executives always answer a contradiction with “we have no choice”. The fallacy of “no choice” is that companies rest heavily on the efforts, initiative, and commitment to motivate their people, who are their most important asset to the company (Lawler, 2008). Another fallacy is major employers say they want to treat “their people” right. These types of companies are clearly looking out for themselves and not their employees. That makes outsourcing an unethical business practice. Outsourcing has some good points and bad points. Maybe it is true that outsourcing has helped with the economic growth and has made companies a successful business by cutting costs, generated new jobs; which would make outsourcing an ethical business practice. Outsourcing has had an impact on the American workers, by cutting employees’ benefits, employees being laid off, working with a salary reduction, and dropping out of the workforce altogether due to outsourcing. In today’s business world, outsourcing can be seen as an ethical business practice, in that there were successful businesses built, but to the American workers who were affected by the outcome of outsourcing would see it as an unethical business practice. Outsourcing has been proven to be both ethical and an unethical business practice.
...hored, individuals, families, and communities suffer the negative economic consequences due to limited job availability. Most people who work in these industry sectors are blue collars, who are not professional or academically qualified to work in other fields, as a result their job choices are limited, especially when the main industry in that community is to work in the stage of manufacturing. When there is massive unemployment within a single community the loss of manufacturing jobs can threaten consumers, creating other problems in the society that result in economic costs. Such problems may spiral into the loss of one's car or home, personal debt, and the lack of economical means to afford a child's education, thus continuing the cycle of economic poverty. These aforementioned consequences are indirect and important economic effects of offshoring American jobs.
Mankiw and Swagel (2006) argue outsourcing is not as large a phenomenon as the media describes. Their research indicates outsourcing accounts for very little of job loss in the United States, nor has it made a distinct contribution to the slow rebound of the labor market. They go on to propose that increased overseas employment has actually contributed to higher employment in parent United States companies. They reported that while 30,000 jobs were lost per month in 2004, two million job changes per month were happening as well. They reference the Bureau of Labor Statistics when they report that in 2015 there are expected to be 3.4 million jobs outsourced, but 160 million jobs gained here in the United States. They also claim that there is a rise in net US income by 12-14 cents per dollar of outso...
Outsourcing is a complicated and a multifaceted subject that involves a “business[’s] purchase of parts or labor from another company rather than maintaining a sufficient enough number of its own employees to do the same work in the country where the company is already based” ("Outsourcing"). The first practice of outsourcing was in medieval times when “nation-states called in soldiers-for-hire to help their own military forces during ongoing conflicts” ("Outsourcing"). Many think of outsourcing as a one way trade of production facilities moving outside of a companies locale but in actuality it is a two way trade that also involves companies from other areas moving their factories to local areas where conditions are beneficial for the specific business. Outsourcing has evolved but the main idea has remained the same. The recent increase in outsourcing “was initiated by Wall Street pressures on corporations . . . . for increased profits . . . in the production of goods and services marketed in the U.S."(Roberts).
In recessions of the past the American worker was laid off with the impression they would be rehired as soon as demand for goods and services were presented again. Now people in jobs from computer programmers to telephone operators are losing their jobs and never returning to the same field again. The big issue here is that if we continue outsourcing specific jobs overseas we could erase a whole industry of job opportunity from the American people. Economists say the framework of the U.S. labor force has been changed due to past outsourcing of jobs by this country. The more outsourcing that continues the more our job force’s structure will change. As a result, the American worker can no longer wait to be rehired into the same job or profession. Using their time while unemployed, Americans are retraining themselves and attempt to step into an entirely different career.
Outsourcing emerged on the financial arena during the 1980s and has since then been spreading. Outsourcing production was furthered with the process of globalization which provided a new component leading to the strengthening of resources, skill and labor specializations across the world. The process of outsourcing is using the skill and abilities of a third-party to accommodate society on the foundation of labor. As stated earlier, it was during the 1980s that the process kicked off mainly due to the efforts of corporations when they began to hire labor forces across the world. Even though outsourcing has come out from its developing stages, there are still following effects on the US economy.
Both sides can agree that outsourcing can be desirable for a business do to the potential profit. It allows goods to be made cheaper, management to run smoother, and money to be made faster (Salanţă 270). Both sides can also agree, however, that U.S. jobs are lost as a result of outsourcing (Ahmed 192), as well as environmental damage being cause due to corporations taking advantage of loose environmental regulations (Marquis 39). Upon digging deeper into this debate, one can find that both sides present very convincing arguments.
Political scientists Jacob S. Hacker and Paul Pierson are mentioned in Boom, Bust & Exodus, with a quote saying, “There is more inequality among workers with the same level of skills (measured by age, education and literacy) in the United States than there is among all workers in some of the more equal rich nations.” This is because the elite of the United States have come to value their own businesses for their own financial gain by outsourcing workers in other countries, which then hurts blue collar workers within the U.S. and mistreats as well as underpays the outsourced workers. This is exactly what happens in Boom, Bust & Exodus, where workers of the Maytag appliance plant go out of work because of the company’s decision to move to Mexico for cheaper labour. The workers in Illinois were making approximately $15 an hour, but once the company moved to Mexico, their wages were set to $1.10 an hour. Globalization has deeply affected those in the lower-class, who may be considered as less educated or unskilled to low skilled workers. In the text of Boom, Bust & Exodus, Broughton states, “Rising inequality is less about education gaps than it is about those at the very top of the income distribution pulling away.” The income rates of those who are rich have exponentially increased over the last few decades, while the poor have only become poorer. According to our notes,
The U.S. industries have been outsourcing manufacturing for several decades now. U.S. companies thought they were reducing costs by outsourcing development, manufacturing, and process-engineering abilities. Consequently, U.S. corporations’ knowledge, skilled workers, and supply chain, which are the necessities to producing advanced products, have vanished. For example, almost all notebook computers, cell phones, and handheld devices, which were once created in the U.S., are now designed in Asia. When a major U.S. company outsource, it pressures their rivals to do the same thing. They also lose the expertise of process engineering, which would interact with manufacturing on a daily basis. Minor companies and skilled workers go to where the jobs and knowledge networks are no matter where they are geographically in the world. This decline of trade in the U.S. has caused a negative chain reaction to their suppliers of sophisticated materials, tools, production equipment, and components. U.S. industries do not have a way of coming up with new ideas for the next generation of high-tech products...
The lack of knowledge Americans have on the subject of consumers affecting outsourcing is leading our country to economic stress but if we begin to recognize the issue, the jobs we could potentially save may be our own. We have examined how consumers unintentionally assist the growth of outsourcing and the different ways we as individuals can attribute to a solutions. Also we have explored an attempt the government has taken and how people are trying to further this attempt and gain further understanding so we can work towards a successful solution. Hopefully we can further inform American consumers of this issue and help them to understand how much control they have over outsourcing.
Slaughter said it’s a common perception that hiring overseas means fewer jobs in the United States. Not so, he said. While job losses are certainly true for some companies, statistics have shown that, generally, increased hires abroad also have complementary increases here.” (Kibbe, 2004)
Outsourcing has been around for many years. In this paper I will discuss some of the history of outsourcing, the goods things about outsourcing, and the bad things about outsourcing.
Large corporations seeking the extra dollar to pocket are willing to spend whatever it takes to reduce the cost of production and increase profit margins. Doing whatever it takes in some instances can help men moving operations overseas to developing countries who are glad to be working. These developing countries unemployment rates are extremely high, so any job that pays is great to have. Americans lose jobs to foreign workers because the American economy is one of the largest in the world and its citizens enjoy great standards of living, when juxtaposed with a city of the same size in Taiwan. Labor costs play a huge and crucial role in corporations, which in turn pay the profits to the corporate giants who run, manage, and own the businesses.
We say that we are heading toward a more global economy because of the fact that competition in today’s markets is global. This means that corporations in the United States can compete in foreign markets and vice versa, therefore U.S. corporations and foreign corporations become interdependent and thrive off each other. This can have a good impact on the United States because it allows U.S. corporations to seek materials and labor outside of the U.S. in countries such as China, India, and Mexico, where workers are paid a lot less money than U.S. workers, thus allowing them to sell their products for significantly cheaper than if they were produced in the U.S.; however, the tradeoff is that many American workers in the industrial sector lose jobs due to this shift of labor to overseas. In the long run this will be beneficial for the U.S. and although some percentage of workers are losing work, new jobs in the services sector, in fields such as computer technology, telecommunications, and language skills are opening up and experiencing growth because of this change.
Labor laws, wage disparities, intense competition and fluctuating currency values are the challenges that are making organizations worldwide to compete in marketplace with products requiring a great deal of labor, and it is now getting harder for some of these organizations to maintain employees abroad. As Mello (p. 610) mentioned that a greater percentage of United States workforces are moving their operations abroad to developing nations like China and leaving an increasing number of United States domestic workers without employment. The foreign markets for the products and services are not the only things enticing these organizations to enter these global marketplaces. There are other reasons these companies are joining the global market arenas. For example, the foreign labor markets, this has attracted interest in many organizations to expand globally (Gersten, 1991). The labor force growth rates in developing nations alone will continue expanding by approximately 700 million people by the year 2010, while the United States labor force will continue to grow by only 25 million. This shows that United States’ growth rate will drop and the opportunities for productivity growth rate will increase in developing countries.
When Americans hear the word “offshore outsourcing”, they automatically assume that Americans are losing their jobs to foreign countries. Most of these jobs that companies outsource such as the garment industry jobs are offshore outsourced because they are labor intensive jobs. According to Timmerman