This trend later shifted to China, which offered cheap prices through very low wage rates, few workers' rights laws, a fixed currency pegged to the US dollar, currently fixed to a basket of economies cheap loans, cheap land, and factories for new companies, few environmental regulations, and huge economies of scale based on cities with populations over a million workers dedicated to producing a single kind of product.
The Economy, Outsourcing Jobs and Higher Education | HuffPost
However, many companies are reluctant to move high value-added production of leading-edge products to China because of lax enforcement of intellectual property laws. Growth of offshoring of IT-enabled services, both to subsidiaries and to outside companies offshore outsourcing is linked to the availability of large amounts of reliable and affordable communication infrastructure following the telecommunication and Internet expansion of the late s.
Much of the job movement, however, was to outside companies - offshore outsourcing. John Urry distinguished professor of sociology at Lancaster University argues that the concealment of income, the avoidance of taxation and eluding legislation relating to work, finance, pleasure, waste, energy and security may be becoming a serious concern for democratic governments and ordinary citizens who may be adversely affected by unregulated, offshore activities.
Further, the rising costs of transportation could lead to production nearer the point of consumption becoming more economically viable, particularly as new technologies such as additive manufacturing mature . Reshoring also known as onshoring , inshoring and backshoring is the act of reintroducing domestic manufacturing to a country.
It is the reverse process of offshoring, where manufacturing is moved to another country where labor is cheaper. The World Bank 's World Development Report on the future of work  considers the potential for automation to drive companies to reshore production, reducing the role of labor in the proess, and offers suggestions as to how governments can respond.
For the last twenty years, American companies have been "offshoring" and outsourcing manufacturing to low cost countries such as China , Malaysia and Vietnam. This program and website helps companies connect with resources available on a Federal, State and local level. Advances in 3D printing technologies brought manufacturers closer to their customers. There have been several very successful stories of companies. In most cases hundreds if not thousands of jobs were created or reinstated. There have been some cases of reshoring that weren't successful. This is not an uncommon reshoring scenario.
Some companies pursue reshoring with their own internal staff. But reshoring projects are complicated and involve engineering, marketing, production, finance, and procurement. In addition, there are real estate concerns, government incentives and training requirements that require outreach to the community. To help with these projects, companies often turn to consultants that specialize in Reshoring.
In the United Kingdom , companies have used the reintroduction of domestic call centres as a unique selling point. Offshoring is often enabled by the transfer of valuable information to the offshore site. Such information and training enables the remote workers to produce results of comparable value previously produced by internal employees.
When such transfer includes protected materials, as confidential documents and trade secrets, protected by non-disclosure agreements , then intellectual property has been transferred or exported. The documentation and valuation of such exports is quite difficult, but should be considered since it comprises items that may be regulated or taxable.
Offshoring to foreign subsidiaries has been a controversial issue spurring heated debates among economists. Jobs go to the destination country and lower cost of goods and services to the origin country. On the other hand, job losses and wage erosion in developed countries have sparked opposition. Free trade with low-wage countries is win-lose for many employees who find their jobs offshored or with stagnating wages.
Currency manipulation by governments and their central banks cause differences in labor cost.
Some foreign companies are outsourcing jobs to America
Preeg testified before the Senate committee on Banking, Housing, and Urban Affairs that China, for instance, pegs its currency to the dollar at a sub-par value in violation of Article IV of the International Monetary Fund Articles of Agreement which state that no nation shall manipulate its currency to gain a market advantage. In , IT employment in the United States has recently reached pre levels   and has been rising since.
The number of jobs lost to offshoring is less than 1 percent of the total US labor market. The total number of jobs lost to offshoring, both manufacturing and technical represent only 4 percent of the total jobs lost in the US. Major reasons for cutting jobs are from contract completion and downsizing.
The Economist reported in January that: "High levels of unemployment in Western countries after the financial crisis have made the public in many countries so hostile towards offshoring that many companies are now reluctant to engage in it. Two estimates of the impact of offshoring on U. The increased safety net costs of the unemployed may be absorbed by the government taxpayers in the high-cost country or by the company doing the offshoring.
Europe experienced less offshoring than the U. Research has found that offshoring has mixed effects on wages and employment,   with some studies showing insignificant effects,  some showing negative effects,   whereas other studies have found that offshoring actually increases low-skilled employment and wages in the offshoring country. The World Bank 's World Development Report on the future of work  highlights how offshoring can shape the demand for skills in receiving countries and explores how increasing automation can lead to reshoring of production in some cases.
According to classical economics , the three factors of production are land , labor , and capital. Offshoring relies heavily on the mobility of labor and capital ; land has little or no mobility potential.
In microeconomics , working capital funds the initial costs of offshoring. If the state heavily regulates how a corporation can spend its working capital, it will not be able to offshore its operations. For the same reason the macroeconomy must be free for offshoring to succeed. Computers and the Internet made work in the services industry electronically portable.
Most theories that argue offshoring eventually benefits domestic workers assume that those workers will be able to obtain new jobs, even if by accepting lower salaries or by retraining themselves in a new field. Foreign workers benefit from new jobs and higher wages when the work moves to them. Labor scholars argue that global labor arbitrage leads to unethical practices, connected to exploitation of workers, eroding work conditions and decreasing job security.
In the developed world, moving manufacturing jobs out of the country dates to at least the s  while moving knowledge service jobs offshore dates to the s  and has continued since then. It was characterized primarily by the transferring of factories from the developed to the developing world. This offshoring and closing of factories has caused a structural change in the developed world from an industrial to a post-industrial service society.
During the 20th century, the decreasing costs of transportation and communication crossed with great disparities on pay rates made increased offshoring from wealthier countries to less wealthy countries financially feasible for many companies. Further, the growth of the Internet , particularly fiber-optic intercontinental long haul capacity, and the World Wide Web reduced "transportation" costs for many kinds of information work to near zero.
Regardless of size, companies benefit from accessibility to labor resources across the world. New categories of work such as call centres, computer programming, reading medical data such as X-rays and magnetic resonance imaging , medical transcription, income tax preparation, and title searching are being offshored. Before the s, Ireland was one of the poorest countries in the EU.
Because of Ireland's relatively low corporate tax rates, US companies began offshoring of software, electronic, and pharmaceutical intellectual property to Ireland for export. This helped create a high-tech "boom" and which led to Ireland becoming one of the richest EU countries.
Outsourcing Jobs to Foreign Countries
The plan to create free trade areas such as Free Trade Area of the Americas has not yet been successful. In , offshoring of skilled work, also referred to as knowledge work, dramatically increased from the US, which fed the growing worries about threats of job loss. The opposing sides regarding offshoring, outsourcing, and offshore outsourcing are those seeking government intervention and Protectionism versus the side advocating Free Trade. Jobs formerly held by U. Some wages overseas are rising.
A study by the U. Bureau of Labor Statistics found that Chinese wages were almost tripled in the seven years following Research suggests that these wage increases could redirect some offshoring elsewhere. Increased training and education has been advocated to offset trade-related displacements, but it is no longer a comparative advantage of high-wage nations because education costs are lower in low-wage countries. From Wikipedia, the free encyclopedia.
This article is about the business process involving a single company. For offshore outsourcing, see Outsourcing. For other uses, see Offshore disambiguation. Cornell Law Review. November Academy of Management Perspectives. CIO magazine. Journal of Organizational Ethnography. European jobs are not coming back because few of them went in the first place". The Economist. January Therefore, they resort to outsourcing the work to competent companies based in the countries where the cost of labor is quite low.
Outsourcing has become a standard way of doing business in this global economy. Many people will argue that it's not fair to outsource jobs to foreign contries. These foolish people don't understand the fact that our economy is global and if a country's companies cannot compete on a global basis by employing the most economicacl resources than the jobs lost to outsourcing will eventually be lost anyway. In the second scenario, however, the entire company is lost. Most Read Articles On "Outsourcing". Top Searches on. Share this article :. Click to see more related articles.
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