This report is written in efforts to evaluate ethics of outsourcing and the dilemmas involved. |
Ethics of Outsourcing Outsourcing has been the target of many positive as well as negative topics amongst many Americans. The United States economy has taken many hits and efforts to reduce costs have resulted in increased outsourcing in labor as well as service industries. The ongoing debate of whether outsourcing is unethical does not fall only in the act of outsourcing itself but also in the terms to which outsourced employees are treated. The question of whether mass layoffs are justifiable or ethical toward employees who are dedicated to corporations for so many years and whether resorting to illegal labor is ethical are also derivatives of outsourcing. We continue to ask ourselves if this form of cost reduction and its effects on the U.S. employees morally ethical? In these challenging economic times, there has been a large array of speculations towards the subject of outsourcing jobs to other offshore destinations. Outsourcing has been going on around the world for a large amount of time before now. Though it seems to be more of a negative topic of discussion during the fall of the American economy, it is important to realize the positive global impacts it has created. It is still considered a morally challenging topic, but there are both advantages and benefits that are being reaped around the world from outsourcing.
Outsourcing has been a leading marketing tool for allowing expansions of companies with their services around the world. Some benefits of outsourcing allow company growth with offshore expansion. It also allows companies to find a better way to save money while still obtaining quality workmanship. Outsourcing has been a benefit due to it allowing companies to gain business and expand its roots elsewhere. “By outsourcing to other locations, most of the big global companies are able to fulfill their business objectives (addCMSpg.1).” These new global ties developing in the service industries are expanding the global networks in a positive direction. As the market grows along with the demands for services, outsourcing these services will help fill the growing demands of society. “With so many big and small offshore companies providing a range of services, there is a great variety of services to choose from (addCMSpg.1)”. Creating this array of variety is helping these companies create better job production and results. Companies planning on outsourcing now have more options available, allowing them to select other companies that best meet their expectations and quality of work to be done. This ensures maximum resource utilization and creates better results for the task at hand.
The main advantage to outsourcing is that it helps increase globalization. The concept of globalization is “the development of an increasingly integrated global economy marked especially by free trade, free flow of capital, and the tapping of cheaper foreign labor markets (Webster, pg.1).” The advent of globalization has lead to the crumbling of many economical barriers such as trade and culture. The increase in globalization with outsourcing has been a major contributor to aiding in the development of less developed countries. Outsourcing to these deprived countries has created better paying job opportunities. Better paying jobs has helped lead to a positive cascading effect of a better standard of living in these under developed countries.
Outsourcing work to offshore helps cut costs for companies keeps prices down and most importantly aids development of less fortunate countries around the globe. “By investing in these countries, we are also helping them develop into new markets for our own business, which is good for everyone (globalchange pg.1).” There are highly skilled workers waiting for job opportunities in third world countries and outsourcing jobs to these laborers is one of the ways that can help get those countries moving their economies in the right direction. “Every job we create in these countries can create many others as new money flows into the national economy, and is spent on local goods and services ( globalchange pg.1).” These small steps taken towards helping these less fortunate countries will benefit the world as a whole while dealing with a large moral issue, the expanding distance between the rich and poor countries. Bridging this gap could help contribute to the beginning of world peace and prosperity.
Two countries that have felt the positive impacts of outsourcing jobs to their country are India and the Philippines. With a large outpour of outsourcing of IT jobs to India, the country is beginning to renew its identity from issues that once distressed the country. “With democracy, support from the government, more freedom for businesses, fewer restrictions and regulations, lesser interest rates and fewer restrictions concerning outsourcing, India has become a more ideal place for job outsourcing (outsource2india pg.1).” The Philippines have graduated a massive amount of English speaking professionals that are eager to begin work. This has allowed their country to pace themselves to eventually bypass India as the leading suppliers for international business processing (BPO). “The explosive growth of business process outsourcing (BPO) has plugged the economy of the Philippines into the global services industry, raising high new hopes about the country's economic prospects (offshoring pg.1)”. The Philippines are bouncing back from decades of a poor economy due to available cheap labor and low demand from its own country. The lead job being outsourced to the Philippines, much like India, is IT. These dynamic breakthroughs from outsourcing to their countries will put their people and their culture onto the fast of becoming first –world countries.
Although many companies have encouraged outsourcing and emphasized on building better economies for other suffering countries, there is still one question that continues to exist for many American workers. Why is it that these companies continue to preach their acts of outsourcing are in efforts to induce economic growth in other countries without regard to the effects of they have on the U.S. economy. Outsourcing does not always result in positive impacts for companies or on other countries. It leaves so many negative impacts which deals with moral issues, which may leave one to question whether outsourcing should be done or not. One of the negative impacts of outsourcing is that it increasing the rate of unemployment and becoming the big reason of huge lay-offs especially in U.S. This issue involved effect more than just saving money. They involve affecting society by discouraging future American computer technicians, engineers and even financial analysis. When companies outsource, they guaranteed many offshore workers to keep their job and increase in their wages but it affects employees in the country and they lose their jobs and forces American workers to train their replacement outside of the country. Companies create an organizational culture where corporate loyalty is rewarded with huge layoffs. This brings to think that is it really ethical? The increase in unemployment in the country and leaving people jobless after they work for us so long and made the company run smoothly. Many corporations do not think of this question as often because they are thinking about the advantage of their own personal goal and money. In such a culture, employees are compelled to look around and voluntarily seek new employment opportunities before they are involuntarily forced out of work. Worker’s morale decreases even though they may be loyal to the company itself due to the thought of being replaced with contracted offshore employees, which have little personal connection to the company. These workers mostly do not share the same point of view and drive to excel as the original employees, and the quantity of company data security and customer service usually suffer. According to the Cover, Business Week, February 3, 2003, United States economy recovered statistically from the mild recession in 2001, unemployment has risen from 4% to 6% which is a big increase and not only that but urban centers like New York City, which has a January unemployment rate of 8.06%. These statics tells us that how outsourcing is affecting people in America and it is keep growing up. Americans continue losing their jobs and the companies of America continue producing jobs offshore. This is the ethical issue because many corporations are laying people off who have dedicated some many years to the company for cheaper labor overseas. There were many changes to the American economy over the past three decades due to outsourcing. As the working place becoming more high-tech, the American worker was promised greater rewards with higher skills. Many workers put their lives accordingly and change their lifestyles by going back to school to learn new skills or for continuing education. Although it has helped many of those who have ascertained higher education, many are still in search of a job due to companies outsourcing. This has resulting in a huge increase of American workers who do not possess job security, while the layoffs continue to increase. According to New York Times, 9% of non-seasonal U.S. layoffs in the first quarter were due to outsourcing. Many believe that more jobs will create by themselves and one goes away but this has not been the case and the economy continues to plummet. Professor Daniel W. Drezner of the University of Chicago states, “ believing that offshore outsourcing causes unemployment is the economic equivalent of believing that sun revolves around the earth: intuitively compelling but clearly wrong.” There are many ways which can cause unemployment but the form of unemployment that policymaker have shown they are most concerned about involves worker who have involuntarily lost jobs without any fault of their own.
The layoffs through unemployment flow with business cycle but involuntary job loss is ever present because firms replace workers for reason other than temporarily weak demand. Many employers contracting out functions to other affiliated and nonaffiliated in the United States, to employers contracting out activities to affiliated and nonaffiliated employers located outside United States. Offshoring has driven much of the interest in job loss and economic insecurity. Most workers separated in extended mass layoffs involving domestic or offshore outsourcing have been employed by manufactures. In extended mass layoffs associated with the movement of work offshore, jobs most often are shifted to third world countries. This leaves U.S. employment rate low and the increase in unemployment does not help many young students who are graduating school, expecting to ascertain a job. Many students, who have graduated, have returned for more education due to the current job market. It seems as though it is better to stay in school then to finish and be unemployed while paying back student loans. So the question remains, “Is this ethical?”
We now have established that outsourcing is an option companies resort to more and more nowadays. In some markets, some say it is even necessary just to stay competitive and bring costs down rather than to continue paying American workers more for the same job. Layoffs are just one of the issues at home in America, however, while the bottom line is what most corporations look at, what most often gets over looked are the workers in the countries where the work is outsourced.
More often than not, outsourced workers in third world countries work under conditions and circumstances that would be deem dangerous or inhumane in the U.S. One example of this took place in 2003 in Uruguay, a complaint was filed by a government official when the National Customs Office carried out an inspection of a forestry company in the Department of Rivera (in the northeast of Uruguay, bordering with Brazil). The forestry company was Forestal Cono Sur S.A., who owns some 26,000 acres of pine plantations in Uruguay. However, almost 100% of its shares belong to Forestal Cholguán, which is a subsidiary company of the giant Chilean corporation, Arauco. In its home country, Arauco owns 906,033 acres of plantations, which the Mapuche people have fought for because the company has appropriated much of their territories. When the area of inspection was reached 40 mattresses were found along with fifty Brazilian undocumented laborers, living and working under inhumane conditions. The laborers had been hired by a Brazilian company, which in turn had been hired by the Chilean company to carry out plantation work. The Customs Director explained that the workers slept on the floor, ate leftovers, dressed in rags and in several cases had injuries that had not received adequate medical treatment. "They were living practically under a regime of slavery," he stated. (www.wrm.org.uy)
Change.org explains the dangers of becoming an outsourced contract worker. For starters, there is no upward mobility or permanent hiring. However, when workers sign contracts it is usually for the duration of the project or job which may last years. Here is where contracts begin to be inhumane; the worker cannot leave because they are bound by the contract they signed. The contractor may be forced to work for years, sometimes an entire career without ever seeing a single pay raise or any option to re-negotiate the contract. Also, since all workers are “contractors,” this allows corporations to avoid paying any form of benefits like vacation, sick days and medical care. Unfortunately change.org goes on to state the following, “The incidence of stress-related illness, major depression, anxiety disorders and the need for inpatient psychiatric care is at least ten times higher for contractors than it is for the general population. That is hugely significant, and clearly illustrates that contracting (especially long-term contractor positions) may be hazardous to one's health and well-being.”
According to Asianews.it suicide is a growing problem amongst Chinese workers. Stress and poor working conditions often are the driving force to take such drastic measures. Foxxconn, a Taiwanese company that is the lead supplier of Apple, Nokia, and Sony, has been in the spotlight because since 2009, they have had more than 12 employees die of unnatural causes. The problem has been so severe that company has been called “the suicide express.” Asianews.it goes on to explain that workers are often forced to live ten to a room in company dorms near the plant. In many cases workers are usually far away from their families and any kind of support. To add to their stress, violence, theft and sexual abuse is not unheard of in the dorms.
As mentioned before, the main reason for companies to outsource labor is to reduce costs and increase their profit margins. However, the way most corporations are currently treating outsourced workers is a new form of legalized slavery and is ethically wrong. Corporations should be held accountable for the treatment of these workers. Providing safe work environments, proper training and normal working hours is the very least companies could do for the amount of money that the outsourced employees make them. Unfortunately, greed is what usually drives most CEO’s of major corporations and morals and ethics are left for the way side. Although The International Labour Organization was created for this exact reason, most can agree that so far, they are losing the battle and millions of people are suffering.
Another issue that has spawned as a different form of outsourcing is the hiring of illegal immigrants. This issue may relate in a smaller scale where smaller companies hire immigrants to decrease costs knowing that they will accept lower pay due to insufficient documentation to support valid work status in America. Ultimately, the government’s initiative is to create stricter policies in regards to illegal immigrants so that we can save more jobs for American citizens. Companies that continue to entertain or subject their company to such illegal behavior is only adding to the unethical aspect of how their company is ran. Stephen Steinlight stated, "A 1997 study by the American Academy of Sciences found that the cheap labor of illegal immigrants and poor immigrants caused a 44% decrease in wages among the poorest Americans from 1980 to 1994." Due to the dynamic flow of illegal immigrants breaching our economy, they have filled many of the lower paying jobs in American. Due to this factor, the saturation of cheaper labor has caused wages to decrease almost 50%. This flow has caused many disruptions in our lower working class Americans as well as a decrease in their morale when job searching. By contributing to such employment practices, not only is the illegal part a huge factor but denying legal citizens is also unethical.
In addition to the dropping of wages, "Tax payments in illegal households are only 28% of other households primarily due to much lower levels in education, which subsequently results in low incomes and even lower tax payments." Because of the abundance of illegal immigrants in America and the lack of education they possess, places them mainly in the lower paid jobs. In addition, the taxes one pay corresponds to the income one make and therefore lower income equals lower taxes.
"Amnesty for illegal immigrants will cause costs to increase significantly from $10.4 billion a year to $28.8 billion. This is because an amnesty program would transform an illegal immigrant to an "unskilled immigrant with legal status" who could access various government programs. However, due to low income, these "unskilled immigrants with legal status" would likely make very modest tax payments" (Camarota). Due to lack of education and skills illegal immigrants have lower income which qualifies them for government aid programs easier than loser paid citizens. Some of the government aid programs they are eligible for are Medicaid, food stamps, financial and welfare.
"In 2007, E-Verify, a system to determine legal employment eligibility, received about 3 million queries, of which 157,000 were found to be unauthorized to work despite having previously evaded the paper version of the I-9 process, thus stopping their illegal employment" (cis.org). Unauthorized work has been a big issue in our economy, stopping this is our number one priority. Citizens of the United States are given a right to work and feed their families with legal employment. In 2007, the government created a system called E-Verify which established a process to determine eligibly for all workers whom are either legal or illegal. After running 3 million queries, 5% has been found to be unauthorized. In addition the paper version of a system, I-9 process was also stopped due to its inconsistency. Hopefully the new system can help prevent future illegal employment.
Illegal immigration has been part of the United States since the birth of this country. Many believe that illegal immigrants have impacted our economy in a positive way with additional tax revenue. Although this may be true, it would be more beneficial to the United States economy to tax citizens rather than immigrants because citizens have higher incomes in comparison, it is only fair that all are taxed. In addition, migration of people from different parts of the world consists of skills that have expanded our low cost labor structure. These immigrants, despite creating an overflow of population and consuming our jobs, have also brought good morals and developed their own American dream. These immigrants do not mind doing jobs that many other Americans are not willing to do. Despite many negative views on immigration, is the positive integration of immigrant culture in American society justifiable reason to hire illegal immigrants? We believe it is not ethical because it continues to be illegal in America. Many of our families have migrated to American and obtained legal status the right way, which allowed them to work legally. It is just a known factor in every code of ethics to avoid doing anything illegal.
One may consider the effect of outsourcing on our employees at home in America before considering that option all together. Is it ethical to layoff so many employees in exchange for bad customer service and cheaper labor? Furthermore, is unethical behavior avoided by outsourcing due to different restrictions overseas? We believe that after thorough research of this topic, outsourcing is unethical to the extent that company decision makers have exchanged so many dedicated employees for those overseas through layoffs. We also believe that a strict code of ethics should be enforced overseas when outsourcing. Just because they are operating under different restrictions does not mean they have the right to mistreat employees. We also do not think that the current state of the economy is an excuse to utilize illegal labor. It is evident that anything illegal is not ethical by any means. Ultimately, our decision would be based on the disadvantages of outsourcing and all the unethical effects that it has on our American employees. As students who are near graduation, we believe in fueling the American economy and keeping jobs opportunities at home.