Business

The impacts of outsourcing

I’m sure many people have heard of the term “outsourcing” and know it very well, as more and more light is shed on this topic. Also, I’m sure most of you know that it has an effect on America’s rising unemployment rate. However, what most people don’t know is how much this issue contributes to America’s battle to get its citizens back to work.

Outsourcing is one of the key factors in America’s current struggles with unemployment. Outsourcing is when a company assigns a process abroad to another company so that it can take advantage of the benefits of cheap labor and maximize its profits. Today, America’s unemployment rate is 5.5%, which has declined since the Great Recession, but it will not stay that way if companies continue to outsource.

Hundreds of successful companies across the country use outsourcing to cut costs and, more importantly, increase their profits. However, there is a lot of confusion around the term “outsourcing”. Simply put, outsourcing occurs when a company hires another company abroad to provide some type of product or service. For example, a company may outsource its IT department to reduce its labor costs. However, when a company builds a factory or store in another country and hires employees in that country, it is not necessarily considered an outsourcing. In this circumstance, the company may be trying to expand its market to increase its profits. The problem occurs when companies only look at the positive effects of outsourcing and do not consider the negative impact it can have.

Of all the countries in the world, the United States has the largest number of companies that outsource to foreign countries. As technology advances, transporting products to external sources has become a much simpler and more affordable process. Outsourcing began as a harmless act of sending work abroad to exclusive companies. However, outsourcing has become one of the leading causes of unemployment among Americans. Outsourcing not only affects unemployed citizens of the United States, but it also affects American consumers. With companies making their products with lower quality materials abroad, consumers know that they are paying for a lower quality product. This results in a decrease in customer satisfaction. Even though companies may be making big profits on these low-quality products, the decline in customer satisfaction will eventually catch up with them. Today, consumers would rather pay for something that they know is of high quality. However, with most American companies outsourcing, consumers expect a lower quality product.

Companies that are based abroad tend to lose customer loyalty because consumers prefer to buy from a domestic supplier. Outsourcing affects a company’s reputation in other ways as well. For example, some companies choose to outsource production to countries where there are less stringent child labor laws. Child labor activists have targeted companies, such as Nike, that are known to use child labor in foreign countries to make their products. Although Nike has generated substantial profits over the years using this strategy, they are now beginning to face the repercussions of that decision.

As outsourcing is becoming increasingly prominent, it comes at a significant cost to America’s workforce. Because outsourcing is no big secret, American workers know they are competing with the foreign workforce on a daily basis. Fearing a possible layoff can have a negative impact on a worker’s morale. Not having job security is very demoralizing and can often affect an employee’s work ethic. For these employees, being loyal to a company is not that important.

Outsourcing not only affects today’s workers, it also affects future employees. Studies have shown that outsourcing has caused a significant drop in college graduates due to a decline in employment rates in certain fields. This causes a big problem for companies looking to hire American college graduates. Outsourcing companies also run into the problem of breaking the law. Some countries that companies outsource have different confidentiality laws than the United States. If a company is caught violating these laws, it can face serious consequences.

It is very clear that outsourcing has very few positive attributes. In the short term, it benefits companies by reducing their costs and generating more income. However, what these companies are not seeing is the adverse effects that outsourcing has in the United States in the long term. Unfortunately, it may be too late for some of these companies to fix this outsourcing problem. Eventually they will become completely dependent on foreign countries. For this problem to be resolved, it will take a joint effort by our government and the companies they outsource to begin reversing these decisions and reverting to a dominant American workforce.

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