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Outsourcing – Myths and Realities
A renowned Professor says, Believing to offshore outsourcing cause redundancy is the financial comparable of believe that the sun revolve around the earth; instinctively forceful, however evidently mistaken. This statement is enough to falsify the myths that surround offshoring or outsourcing. But it is the policy makers who wants to gather the votes of those unemployed or lost their jobs in this trend and blames offshoring and outsourcing meant for a fading inactive economy, increasing redundancy, weak work expansion etc.
It is a popular myth that American and European jobs are exported to 3rd world country. But the fact is that a great number of Americans and Europeans are involved in added lucrative employ than previous. It may be true that offshoring and outsourcing are the reason of some unemployment. But it is very few in number in comparison to American jobs. In the past three years near about 1000,000 to 170,000 jobs found themselves to be offshored or outsourced. This figure represent below 1% of the job that were lost in American market due to changes in business and economic sectors. Economic study results show that real earnings are up, unemployment numbers are down, jobless numbers are 10% below the 25-year average, and 2.2-milion more Americans are employed now than before the recession. In the history of North America it is for the first time that so many people have been employed.
Another myth is that there is one way flow of American jobs going overseas. The fact is that while some jobs are transferred, global trade has generated so many high-end jobs for Americans as off-shoring or outsourcing foreign firms work from the states. More than 6 million Americans work in offices that have been set for offshoring outsourcing purpose. It is a proven fact that US citizens employed by non-US firms increased by 4.7 million, while non-Americans working for US firms rose to 2.8 million.
Another great myth is that free trade; free labor and free capital are harming US economy. Economic freedom results in curtailments of benefits and lower wages for American workers if jobs are offshored and outsourced and they will have to compete with the low labour costs in other countries. But in reality it has proved that freedom is essential for growth of economy, for creation of new jobs and higher standards of living. More trade should be invited so that economy does not suffer from too little trade instead of protecting the market in fear of too much trade.
Statistics show that during 2000 – 2003 while manufacturing employment fell by 2.8 million in the US, manufactured goods import rose by a meager 0.6%. In the US the debate revolves around the issue of offshoring/ outsourcing white collar jobs when US has a trade surplus of $ 60 billion compared to the rest of the world. According to Morgan & Stanley, the reduced export growth is a result of a strong dollar and lack of growth/ demand in its trade partners though the blame is put on offshoring/ outsourcing. On the other hand cheap imports, computers machinery, etc. have increased the productivity of a company.
Lastly there is a myth that cost reduction is the only reason for which US firms outsource globally. But the fact is that this is not the only reason, it may be the part, of the reason.
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