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Off-shoring / Outsourcing: Of Course, America Benefits
from: John Parker
The constant carping of policy makers and others about the
detrimental effect off-shoring / outsourcing will have on the
national economy, seems they are hell bent on misleading the
public. Little understanding about the main principles behind
off-shoring / outsourcing, they continue to harp on about the
trend that will help eradicate poverty and raise living
standards globally. While, it is true, a number of pink slips
have been handed out as low-end jobs began to be outsourced; the
trend has also helped create more new jobs and helped in lower
the prices of many services for consumers.
The efforts of various people including a couple of Californian
Senators in a bid to scupper the off-shoring / outsourcing trend
will not only discourage outsourcing, but will end up in
damaging the economy. According to the unanimous consensus of
high profile economists, and in the words of G. Mankiw, Chair
for Council of Economic Advisors, free trade, in other words
off-shoring / outsourcing is: "just a new way of doing
international trade" and "a plus for the economy in the long
run."
If you look at it, there is very little difference between
international trade of services and international trade in
manufacturing. Both countries involved in off-shoring /
outsourcing gain from the resultant free trade. Before the
advent of high tech and advanced telecommunications, it was
necessary for service jobs to remain at home in order to be
close to customers, but since, international competition has
allowed call centres and information processing firms to service
customers from across the globe due to the latest in cutting
edge information technology and telecommunications.
In the same way that the cost of transporting goods was lowered,
and a wide array of agricultural products and manufactured goods
brought to millions of consumers with the introduction of the
19th century steam engine, 20th century information technology
promises to perform the same miracle for the service industry.
Shifting manufacturing to low cost countries resulted in lower
costs for consumers, similarly off-shoring / outsourcing greatly
benefits the American consumers by providing many more and
cheaper services.
The fear that off-shoring / outsourcing is going to destroy
American jobs is conceptually wrong, for every job that is lost
a new one is created to replace it. By spending dollars on
off-shored / outsourced services, the same dollars are either
reinvested or used to purchase American goods and services. The
American public does not often see new jobs created by the same
dollars spent on off-shoring / outsourcing services, but they do
return to US export industries as service providers purchase
equipment and other goods for their business.
Off-shoring / outsourcing as a result of free trade does not
alter job numbers in a country. Rather, it changes the job mix
to reflect areas where we have a greater competitive advantage
over other countries. Off-shoring / outsourcing services in most
cases leads to job specialisation as employees having lost
low-end jobs upgrade and specialise, in turn helps raising their
living standard. Often, unemployed workers move on to work in
other industries or re-train for better paying jobs.
A positive trend, off-shoring / outsourcing, it helps in the
following ways: 1. Off-shoring / outsourcing of service jobs
creates more jobs in the US export industry when service
providers return the favour by buying American goods and
services. 2. Off-shoring / outsourcing results in cost reduction
for domestic firms. 3. Off-shoring / outsourcing means consumers
get top quality and a wider array of services at lower prices.
In the long term, off-shoring / outsourcing will benefit all
Americans, and the IT industry will be the biggest beneficiary
of all. In the best interests of American economy, US businesses
should continue to off-shore / outsource to retain a competitive
edge in consumer markets.
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