Outsourcing and Globalization
Outsourcing and Globalization
Outsourcing and GlobalizationIn today's economy the unemployment rate is at a staggering 9%. Many Americans are discovering that it is not only hard to find a job but just as equally hard to keep one. With labor in the U.S. becoming more expensive companies have turned to drastic means to maximize their profits. Many companies are having massive layoffs and moving there production overseas, where labor is exponentially less expensive. This is called outsourcing; it has affected almost all industries and has had seemingly negative effects on U.S. economy. But for business outsourcing is the best way to improve the profit margin. So in this article we will look into the positives of outsourcing in a business sense, the negative outcomes in society, and the overall effect it has in the long run.
The United States has a minimum wage of $7.25 an hour. This is what makes companies think about taking their businesses overseas. The cost of minimum wage in countries like Indonesia, China, Cambodia, and other less developed countries is well below 7.25 per month. In fact the Minimum wage in Indonesia is $1,027 per year. This lets companies move overseas and produce a larger profit margin by reducing their salaries payable accounts. In the short term businesses see large growth; not just in revenue but also capacity. The standard workweek in America is five days of work for forty hours a week. In foreign countries like the Philippines and Indonesia do not have any established workweek or hours. There is no overtime pay and the workers do not take vacations. This is because labor standards in the foreign countries are not as strict as in America, so businesses can work there employees longer, produce more, and still pay less. Companies also see a higher return on assets. So in a business sense outsourcing gives companies a large potential to grow and earn more money. The problems that come from outsourcing are when society is involved.
As previously stated the unemployment rate is high so to consistently take more and more jobs away from the United States and outsource them to foreign countries effects the economy negatively. The company before moving the production to foreign soil needs to take many factors into account. One obviously is that they will be putting many people out of jobs, which in turn will make them look socially irresponsible and could effect there company image in the long run. If an American company outsources its business yet still sells in the U.S. less people will be willing to purchase their product. Outsourcing has also hurt the American economy because it has reduced the exports from America because not as many products are being made in America any more. And because these products are being produced in countries where safety and security laws are not as rigid then the products are not being made with as much quality. In the children's toy industry there has been a lot of controversy about this in the past ten years. A Chinese company manufactured children's toys that were coated in paint that contained the date rape drug in it. Kids were getting their toys, putting them in their mouths, and then getting violently ill just because companies were trying to save money by taking it to a country that has fewer restrictions. The positives for society and the citizens of America are few. One would be that because the companies are reducing their salaries payable accounts the prices of the product are reduced, so the customers are saving money.
In past years, when George W. Bush was president the governments role was pro business, since 2008, Obama's election into office, the government seems to be taking a different path; a path to favor society's interests. If the United States government stays on the pro society mind set then in the near future it seems likely that some set of regulations or laws will be put on outsourcing. The subject of outsourcing seems to be a very controversial subject and many politicians are choosing sides and creating their platforms around it. This leads me to believe that in the very near future something will be done to help Americans keep their jobs and let the United States ascend out of this recession and back to an economic power of the past.
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