Outsourcing is defined as “To send out (work, for example) to an outside provider or manufacturer in order to cut costs” (American Heritage Dictionary 2007, ¶1). Some companies may want to send jobs overseas to save money, but at what cost to the American spirit and position of technological leadership. However, the result is not always a savings; it can sometimes cost much more. The cost of outsourcing jobs to the US economy is greater than most people realize.
Where does the money go if it does not come back to the originating economy? Companies are sending the wages of outsourced jobs to other countries, not back into the economy that provided the income for those jobs. Let us look at an example: If XYZ Inc makes and sells widgets in Anytown, USA, the revenues from those widget sales are used to pay the wages of the workers who make more widgets, the workers buy more widgets and the cycle goes on and on. Then, management decides to save some money on production costs and moves manufacturing operations to a country that has a cheaper work force. Now then, some of the revenues from selling the widgets are sent to the foreign country to pay the lower cost workers, and the rest of the savings is given to the company shareholders as a bonus (Kilbane, 2004). With this in mind, consider who is going to buy the widgets now that XYZ Inc has closed its operations in Anytown, USA. This is just one aspect of the outsourcing equation; others are tax revenues, new college students shying away from outsourced fields, and the security of information that is being sent overseas for processing.
Some companies send the profits back to their home office, which is great for the receiving economy, but what about the source economy? Outsourcing does not have to mean sending jobs away; it could mean that money is being sent away also. Larger retailers place their daily profits into sweep accounts, which then are deposited into the bank at the home office, which is invariably out of town. With the exception of local sales taxes, the money that chain retailers make in sales receipts is swept out of the local economy, how long until it goes out of the country? When technology evolves to the point that it will be more economical to manage entirely out of another country, the “big business” will go, leaving the US with not only a larger trade deficit, but also a higher unemployment rate.
Proponents of outsourcing say that lower costs for the company to produce a service or product equals lower prices for the consumer. However, how can consumers buy the products or services offered if they lost their job to outsourcing? If a government agency can save a quarter of its budget per year by sending call centers overseas, then that would be money that could be spent in other areas of that agency. When the information that is processed overseas by that agency becomes compromised, what happens to the person whose information was compromised? Nevertheless, if the real world cost of this is the sacrifice of the end consumer’s privacy or security, then what is the point?
Outsourcing means lower buying power for the consumer due to the lack of jobs, and less motivation to make gratuitous purchases due to the poor wage quality of the jobs available. With out a stable mid- to high-end income available, people will not be making the big-ticket purchases; some will skip essential items like homes and cars. This could depress the local and regional economies to the point that it could affect the national economy. The result may not be as bad as the Great Depression of the 1920s, but it will be enough to make life financially difficult for almost every American citizen. If someone losses a good job due to a plant closing or down-sizing, they’re not going to be in the mood to go shopping at a mall for a while, especially if they aren’t going to be able to replace that job or the income. A morale drop for the general populous is not a very good thing; it has lead to civil wars, riots and general anarchy through out history. The trend that is starting to show could lead to this, maybe not now but in future generations.
What will the consumer privacy be in the future if outsourcing continues? Some companies are sending confidential information, such as financial and medical information, to workers in foreign countries, giving them access to personal information with no real safeguards against misuse. This information is available to anyone sitting at a computer in a processing center. It would be very easy for a corporate executive to decide that information in an entire customer database will be moved to a foreign country, and the consumer can do little or nothing about it. Would anyone want his or her mortgage lender to do that?
In October of 2003,
. . . a disgruntled worker in Pakistan, subcontracted to transcribe medical files from the
University of California San Francisco Medical Center, threatened to post patient files on the
Internet if she wasn’t given the back pay she was owed by her employer (Dobbs, 2004, ¶3). Lawmakers are working to try to pass laws designed to protect the consumer, but this is taking time and as the adage says, ‘time is money’. When lawmakers spend time working on this problem, they are not spending time to solve other problems, which is a waste that can be avoided by simply not sending jobs and information to other countries. Nevertheless, lawmakers in California are spending the time to try to protect consumers, (Dobbs, 2004). The cost of making laws to protect US consumers is staggering. The Senate’s pay raise in 2006 brought them up to $165,200 a year (www.senate.gov, n.d.) each, how many Senators are there? So how much is it costing the American people?
There is currently nothing in place to ensure the integrity of American information overseas, other than the word of corporate officials. If there is an information leak, and consumer fraud does occur, it would be financially draining to clear anyone’s good name. Even though the US government allowed the information to be in a situation where it could be compromised, the government would not be obligated to financially assist in any way.
The available jobs on the market will be spread out across the world, making finding a job close to home a difficult task, at least a job that pays well. There will still be jobs close to home, the burgers will still need to be flipped, the gas still needs to be pumped and the groceries still need to be bagged. Since these jobs are not high wage jobs, poverty could begin to gain ground in some communities and the crime rates may climb. Eventually the class gap will widen to intolerable dimensions, because all the “good” jobs will be gone out of most towns and cities; just leaving the landowners, and the surfs who tend to them.
America may lose its standing of technological leadership in the global economy. Because of the out-flow of skilled labor positions such as mechanical and software engineers, some very bright students might be discouraged away from the engineering fields (Kilbane, 2004). The positions are simply disappearing, since they have gone to the overseas market. When the seasoned engineers all retire, that will leave just the engineers that are here on worker Visas; the rest of the talent pool will have gone to where the work is, which eventually might just be another country, China maybe?
No one knows what will come from the outsourcing debate, at least as far as the result is concerned. Companies may benefit by outsourcing, however, the consumer may suffer irreversible damage. The cost to the moral of the American spirit and the technological leadership are far too great. Eventually, something needs to be done, “We the People . . .” (“United States Constitution”, n.d.) should not have to risk our jobs, identity or livelihood for lower prices.
Reference:
Dobbs, L. (2004). Outsourcing of jobs leads to information leaks. Caribbean Business, 32(21), 24-24. Retrieved Wednesday, December 27, 2006 from EBSCOhosthost database.Kilbane
tsourcing? Electronic Design, 52(13), 40-40. Retrieved Wednesday, December 27, 2006 from EBSCOhost database.
outsourcing. (n.d.). The AEBSCOhosteritage® Dictionary of the English Language, Fourth Edition. Retrieved January 20, 2007, from Dictionary.com website: http://dictionary.referenDictionary.comoutsourcing
United States Senate Web Site (n.d.) U.S. Senate: Art & History Home > People > Senators > Senate Salaries since 1789. Retrieved January 29, 2007, from Senate.gov website: http://www.senate.gov/artandhSenate.govtory/common/briefing/senate_salaries.htm
U.S. National Archives and Records Administration (n.d.) The National Archives Experience Retrieved February 1, 2007, from National Archives website: http://www.archives.gov/national-archives-experience/charters/constitution_transcript.html
