...Off-shoring and outsourcing have become especially prevalent in recent years due to the shift in foreign labour markets becoming more competitive, and even favourable in some sectors. It should be noted that domestic examples of outsourcing do not shift the labour market because within the country itself, there are no structural changes. As a result, this paper will focus on outlining the various off-shoring and outsourcing implications and effects on international labour markets. Outsourcing vs. Off-shoring Companies have been able to implement off-shoring and outsourcing because of the phenomenon of lower transportation costs and instant communication across barriers of the world. Outsourcing and off-shoring are often grouped together and defined similarly, however they can be understood and interpreted in many ways. Outsourcing is a division of labour by contracting foreign third-parties abroad. In comparison, off-shoring is a more extreme form of outsourcing. It instead relocates key production sectors abroad, but not core innovative activities. Companies will often setup their own facilities which results in a decrease in foreign unemployment. Specific examples related to off-shoring and outsourcing will be discussed throughout the paper. In a wider spectrum, firms use off-shoring and outsourcing to remain competitive with the ongoing globalization that is present. Both countries involved are able to raise their nation’s GDP by shifting labour output and wages to more...
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...Is it fair to workers of developed countries when companies shift work to lower wage countries? The main reason companies shift work to lower wage countries is to reduce operating costs. Low labour, production, and energy costs in countries such as China, Japan, India, and Mexico is causing companies to shut their factories within the United States and open new factories in those foreign countries. This leads to the loss of jobs within the United States, a lower standard of quality, and resentment by those who are living within the United seeing more and more of their jobs going overseas. In 1994, NAFTA (North American Free Trade Agreement) was passed by then President Bill Clinton. His goal was to open the trade routes to all countries. Unfortunately, it led to many plants moving across the borders to Canada and Mexico. While outsourcing had begun in the 1980s, it grew by leaps and bounds in the latter part of the 1990s. Jobs went overseas to China, Japan, and India and the economy began to falter as American's lost their jobs and suddenly faced living on minimum wage as higher paying jobs went to these other countries. By looking at the average annual salaries in these other countries, it is easy to understand why companies find it appealing to outsource their business. Especially in China where the average yearly salary is significantly lower than their American and European counterparts. • China - $1,290 • India - $14,500 • Japan - $17,000 to...
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...Marcus Gardner International Economics Group Written Assignment 1 Global Trends: Manufacturing and Outsourcing Over the past decades various businesses across the globe have made shifts in the way manufacturing is handled in their companies. Some have outsourced the full scope of their manufacturing. While others have done partial outsourcing, where partial assembly is returned to the US industry. When manufacturing is outsourced, whether for goods or services, many companies downsize their work force. This creates a loss of jobs for the American industries while increasing jobs in places such as China, India and Indonesia, just to mention a few. Outsourcing, undoubtedly has its comparative advantages as far as having lower wages but it also has risks such as rising costs and trade barriers. It is some of these challenges that is believed to have created a slow re-routing of manufacturing to return to the US Industry. The global trend in manufacturing and outsourcing is that many countries rely heavily on China and other developing nations for manufacturing. For this reason many countries outsource their manufacturing to China. In the article, “The end of cheap China,” the writer reminds us that, “China is the world’s largest manufacturing power and they account for a fifth of global manufacturing.” The primary reason for this trend is due to the cheap labor. It should be noted that global manufacturing is also advantageous to China and other developing nations...
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...No. 2005-12-A Office of Economics Working Paper U.S. International Trade Commission Growth in Services Outsourcing to India: Propellant or Drain on the U.S. Economy? William Greene* U.S. International Trade Commission January 2006 *The author is with the Office of Economics of the U.S. International Trade Commission. Office of Economics working papers are the result of the ongoing professional research of USITC staff and are solely meant to represent the opinions and professional research of individual authors. These papers are not meant to represent in any way the views of the U.S. International Trade Commission or any of its individual Commissioners. Working papers are circulated to promote the active exchange of ideas between USITC Staff and recognized experts outside the USITC, and to promote professional development of Office staff by encouraging outside professional critique of staff research. Address correspondence to: Office of Economics U.S. International Trade Commission Washington, DC 20436 USA No. 2006-01-A OFFICE OF ECONOMICS WORKING PAPER U.S. INTERNATIONAL TRADE COMMISSION Growth in Services Outsourcing to India: Propellant or Drain on the U.S. Economy? William Greene U.S. International Trade Commission January 2006 The authors is with the Office of Economics of the U.S. International Trade Commission. Office of Economics working papers are the result of the ongoing professional research of USITC Staff and are solely meant to represent...
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...Offshoring, also known as offshore outsourcing, is the term that is used to describe the practice among companies located in the United States on contracting businesses beyond U.S borders to perform services that would otherwise have been provided by in-house employees in white-collar occupations. The term can be applied to U.S. firms that are offshoring the jobs of blue-collar workers on textile and auto assembly lines, for example, which has been taking place for decades. The extension of offshoring from U.S. manufacturers to facilitate providers has heightened public policy concerns about the extent of job loss and foregone employment opportunities among American workers. This concern was especially relevant to policymakers because of the national unemployment rate persistently exceeding 9% despite the end of the Great Recession in June 2009 . The outsourcing of service sector jobs from the United States was a response to the early 1980s recessions when employers narrowed their focus to the company’s core mission and contracted peripheral activities (e.g., janitorial duties) to other U.S. businesses. The 2001 recession caused employers to seek further efficiencies by tapping into the global supply of labor. U.S. businesses were able to outsource overseas the jobs of white-collar workers in some service providing industries as a result of widely disseminated technological advances that permit low cost, good quality, and high speed transmission of voice and data communications...
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...Central and Eastern European countries like Poland and Romania are strong spots on the global outsourcing map Globalization & Integration Group Project Table of Contents Abstract 3 Introduction 3 Poland 4 Significant savings costs 5 Ability and quality of resources 5 Low risk location 5 Culture Similarity 6 Investment Climate 6 article 7 Romania 8 Government support and business environment 9 Quality of the language and educational skills 9 Low labor costs 10 Culture 10 Intellectual property security and privacy 10 article 11 Comparison 12 Cost competiveness 12 Resources and skills 13 Economic competitiveness 13 Regulation 13 Corruption perception 14 Legal protection 14 Conclusion 14 References 14 Abstract In this paper, we discuss why are the Eastern European countries like Romania and Poland potential destination for outsourcing. Given an economic condition, Geographical advantage, business environment and quality issue explanation of each country. Both countries are economically competitive in outsourcing market in Eastern Europe, promptly emerging as a favorite destination. Introduction Outsourcing is a practice used externally...
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...Globalization and Income Inequality in U.S. Globalization is the process of international integration, which the nation-states culturally, political, and economically interact with each other, creating a global society. Developing countries are modernizing, economies are constantly shifting, and technologies are advancing; however, as fascinating as globalization can be, it has several side effects. One of the key problems that is caused by globalization is income inequality between and within nations. The rich are getting richer and the lower class people are struggling to survive in this world. One example is the United States. Since the 1970s, its income inequality has been worsening, causing several major problems. This paper looks at US income inequality demonstrating the existence of this problem, the importance of addressing it, and the connection between such disparity and globalization, particularly economic and technological globalization. According to the data retrieved from the U.S. Census Bureau (See Appendix 2), it can be proved that income inequality exists. The real family data show that before 1975, all classes shared the prosperity, growing at a similar rate. Starting from 1973, the 95th Percentile (the level separating the 5 percent of the richest from the rest) rose at the same pace and increased approximately 60 percent; however, the growth of both the median (the level separating the half of the richer families from the other half) and the 20th Percentile...
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...States government should not impose stiff penalties, on companies for offshoring, to protect American jobs. Pros of Outsourcing A energetic American economy can only be achieved by participating actively in the international economy. If the United States enacts protectionist laws against offshoring, other countries will pass similar laws and the American economy will suffer. Outsourcing has given American companies greater cost competitiveness. It makes financial sense to manufacture in countries where salaries for low skill workers are low. Offshoring allows businesses to focus on core skills and to expand production. Business can contract with overseas manufactures without sinking their capital into a new factory. Contracting the manufacturing process with an experienced partner can speed up the production of new items, while leaving the business with cash to invest in marketing. In addition, businesses can contract with a firm that has expertise in the manufacturing process. Also, offshoring permits individual businesses to build bridges, to make international contacts and thus to expand their markets . When businesses outsource, they can develop networks in new countries. These new networks provide the business access to new markets. Outsourcing the manufacturing process also enables businesses to take full advantage of the economies of scale. Outsourcing production to an offshore manufacturer, which can keep factories working fulltime 24 hours a day by producing...
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...to all countries involved in free trade system can be challenged with the most recent wave of globalization. In the past, outsourcing was mainly used to save money and cut costs by moving low skilled, blue-collar manufacturing jobs into poorer, low wage countries, however, currently there has been an increase of higher wage and skilled white collar professions following suit (Hill, 2012). 6a. Who benefits from the outsourcing of skilled white-collar jobs to developing nations? Who are the losers? The people who benefit from outsourcing skilled white-collar jobs to developed nation are those whole live in the poor countries as well as the consumers of goods or services being produced in the poor countries. Outsourcing benefits the poor countries by creating and supporting jobs, which results in the country being able to attain sustainable economic growth. It also benefits consumers in developed nations, who can save money when purchasing these goods, which results in them having more money to spend on other goods and services. Having more money to spend on additional goods and services is needed when improving their living standards. The people who are the losers in this process of outsourcing of skilled white-collar jobs to developing nations are the producers in more developed nations, who have lost business to enterprises that outsource (Hill, 2012). 6b. Will developing nations like the United States suffer from the loss of high-skilled and high-paying jobs? Yes...
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...the world’s two most populous countries enter the world trading system. Just the sheer size of these two countries is a challenge to other countries that are smaller. More people in China and India means more opportunities (and increased demand) to grow their economies, to increase education, to manufacture more goods, provide more services, use up more of the world’s resources, etc. These are all challenges that other countries face with India and China. India’s service sector has grown tremendously and many people have begun outsourcing service jobs such as information technology and computer jobs to India as well as other service jobs such as call-center customer service jobs. Outsourcing reduces the price of these services and allows businesses to increase profits by having lower costs. This poses as a challenge to the economies that are outsourcing jobs to lower fare countries because it reduces the number of jobs in its own country and leaves more of its own people unemployed or having to look for other type of work. China has emerged as an export platform and a high volume manufacturer of consumer goods. China has very low wages and its manufacturing wages are estimated to be about one-fourth of the amount paid in Brazil and Mexico. But apart from low wages, China has several other sources of comparative advantage which poses a challenge to emerging markets such as Mexico, Brazil and Thailand who can no longer depend on low wages as the key source of their comparative...
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...part 3.1 Outsourcing definition and types 3.2 Outsourcing and its effect on business 3.3 Outsourcing pros and cons 3. Conclusion 4. Bibliography Introduction The term outsourcing comes with many preconceived connotations, both positive and negative, thus the study of the mechanisms for effective use of outsourcing as a business development tool is also clouded with these perception issues. Much of the academic study of outsourcing revolves around trying to determine if it is a good thing or a bad thing, whether it is harmful to the local workforce or beneficial to globalization, and whether the average company has an obligation, moral or otherwise, to consumers in its home town, state or country to use labor within that region. None of those topics are pertinent to the discussion here and are therefore being immediately excluded. That is not to say that these are not pertinent and valid area of research in their own right, only that they are tangential to this discussion herein. This review will focus on outsourcing as it relates to control mechanisms within company development. Specifically, this paper will attempt to identify the link between control mechanism and outsourcing within the framework of managerial accounting. Outsourcing, literally, is the use of an external source to perform a business function instead of having an employee do it using company equipment. In its simplest form, outsourcing is paying a cleaning...
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...Discuss the pros and cons of outsourcing. Should nations pursue the cheapest labor it can find or should nations be required to hire domestic labor to promote the domestic economy? In my opinion, companies need to look at its public relations side here and in the countries they wish to do business outside the United States. Companies needs to look at the culture, language barriers, and especially the customer service issues that U.S citizens face when they call customer service in another country for example India we would be challenged by the language barriers, and especially the customer service issues. Outsourcing is done by many companies like insurance companies, IT jobs, and customer service. Outsourcing is very popular in our country and internationally. The advantages of outsourcing can help businesses focus on their priorities or their main functions instead of secondary tasks. For example, if a company was good in control of their finances, it would be hired to handle only the finances. Outsourcing also reduces expenses by finding certain industries purposes in areas where important costs are cheaper and taxes are much lower. Most of our clothes, toys and shoes are made in China. Outsourcing can help reduce cost because the company doesn’t have to increase their payroll because they can spend less by outsourcing certain contracts. It increases competition in our global economy, outsourcing help companies by giving them a chance to focus on other driving factors...
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...There is no denying that outsourcing is a major phenomenon on a massive global scale. The Information Technology field is a major contributor to global outsourcing. Outsourcing is currently a major social and political issue in the United States. At stake are thousands of jobs ranging from help desk operators to software programmers. The financial impact outsourcing has on the global economy is also a key factor. As time passed, companies recognized the need to cut operating costs, reduce personnel and save their resources. Hence, outsourcing came to the forefront as a way to stay competitive. Developing nations like India and China have come to light in recent years as they have a wealth of computer engineers and programmers who will work for low wages. Outsourcing has become such a common practice that it is now considered a benefit to the world economy, and knowing that outsourcing is a $400 billion a year industry and IT outsourcing is a vital part of the industry. A slump in IT outsourcing would mean a loss for the global economy andThe world must accept that outsourcing is a major staple to the world economy. However, with every step forward, come two steps back. Companies continue to outsource jobs overseas, leaving thousands jobless in the United States. Companies have emphasized costs cutting and profits rather than focus on the social change outsourcing has done to American Society and the economy. The era of technological outsourcing has essentially lowered the...
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...Labor organizations or unions are formed by employees who want better wages, benefits, and healthy working conditions. Over the years, participation in unions has declined regardless of the benefits it offers. There are less strikes and better wages in the United States which in turn does not warrant the high need for these types of organizations in the work place. Labor unions today compared to in the past have fewer members and are more populated by political parties and public sector employees. During the implementation of unions, the labor force consisted heavily of automobile and steel plant workers. This has decreased due to outsourcing these jobs to foreign countries (AFL-CIO, 2004). Americans have also seen a decrease in highly-skilled jobs due to outsourcing. The United States Government current push on company’s to send these skilled jobs offshore, in return for a tax break, is hurting the economy and trade deficit. While jobs are increasing in foreign countries workers rights are not. Wages are low and employees do not have the respect and healthy work conditions as most American unions. According to a petition filed with the U.S. Trade Representative by the AFL-CIO and Industrial Union Council, the United States has lost more than 1 million jobs because of constant violations of workers rights in China (AFL-CIO, 2006). Countries with low wages or no minimum wages have the ability to offer low cost product because the labor rates put into producing these items are...
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...“Outsourcing-Offshore” Outsourcing is said to have emerged a few thousand years ago with the production and sales of food, tools, and other household appliances. As soon as small communities and societies began to form, people with specialized professions began to trade with each other for goods and services. It can be said that each worker was outsourcing some activities to others. Research shows that even in the industrial age, a few thousand years later, very few companies outsourced any of their operations. Companies in the 1800s and 1900s were vertically integrated organizations, taking care of their own production, mining, and manufacturing from raw materials to finished goods as well as then shipping the goods to company owned retail outlets. These companies often handled their own taxes, employed their own lawyers, as well as designed and built their own buildings without outside assistance. This model does not apply to all companies during that time period, but it gives a general idea of the time. The history of outsourcing portrays that as onshore outsourcing continued manufacturing outsourcing of low-tech items such as toys, shoes and apparel goods began to take place. After this manufacturing higher value items like high-tech components and consumer electronics began to appear. In fact outsourcing history demonstrates that manufacturing was the first activity that began to move to offshore destinations in a quest for lower costs. Globalization began during...
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