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Outsourcing Essay

1687 words - 7 pages

Offshore Outsourcing

In 1973, a monumental shift was prevailing where U.S. companies were sending low skilled jobs within the manufacturing industry to offshore countries to reduce labor cost while maximizing profits. Outsourcing a variety of American jobs overseas has become common practice during the last decade or so. American wages are higher than offshore wages, and it saves American companies money. The effects of outsourcing began to be noticed in a wide area, from customer service to job loss. Outsourcing overseas may save companies money, but in the end, it places them in a negative light and indicates their lack of interest in protecting and enhancing America and the ...view middle of the document...

For example, call center employees are displaced when jobs move to India, which effect the economic position of the country. They could lose their home, their car, or go bankrupt, which has an affect on the national and local economies as well. This might not affect the economy if it only touches a few workers, but the numbers indicate that hundreds of thousands are affected, and the numbers are rising. In the future, the workforce will be severely affected and social services such as unemployment, welfare, and medical services will be affected.

Many people look at offshoring jobs as a cost saving measure; however, these views may be easily refuted. As one expert notes, "For one thing, there are governance and management issues involved in offshoring. Implementing both process and procedural controls as well as compliance controls costs money, which takes away from the savings of the cheaper labor markets seen overseas" ("Globalthink"). Set-up costs can be major in some industries such as call centers and training can be extremely costly. So can maintaining quality and security at offshore sites. For example, one company who processed credit cards in Juarez, Mexico found it had additional costs in auditing, regulation, and security in the Mexican location in order to ensure customer privacy and credit card security ("Regulators").

There is another cost to companies' offshoring, and that is the company's reputation. Offshore call centers have continuously come under fire from offshoring critics because of the level of service they sometimes provide. Consumers speak of difficulty understanding some call center employees, of not receiving high-quality service and even being disconnected if the employee cannot solve the problem. This gives companies engaging offshore call centers a bad customer service reputation, and some consumers will avoid purchasing products and services, if they know overseas workers operates the company call centers. In addition, the quality of some foreign-produced products has come under fire from consumers, leading to distrust of some brands that rely heavily on offshore production.

Offshore outsourcing is also extremely controversial because of the very reason companies choose to outsource – low wages. The Nike Corporation is just one company that has come under fire for paying oversees workers incredibly low wages that do not allow them to escape poverty or better their economic situation. Two authors write, "According to the Nike Corporation, the advantage of locating in Indonesia is that a pair of shoes selling for $80 in the United States will involve direct labor costs in Indonesia of only $2.60. Although subcontractors sell their services to companies like Nike, they are pressured to pay a minimum wage of $52.50 per month." (Cypher, and Dietz 409). This is not an isolated case; the same type of low wage work has been chronicle around the world, as U.S. companies attempt to reap...

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