Wednesday, September 07, 2005

Offshore Outsourcing Benefits to US Economy

Ultimately Offshore Outsourcing of service work will generate jobs in America’s export business, lower domestic firms’ expenses, and raise the worth and number of services for consumers at lesser prices. If government hinders with the ability of U.S. businesses to outsource, Americans will all lose. Instead of altering the figure of jobs, free trade changes the mix of jobs in the country to mirror those areas in which we have the utmost competitive edge. Worldwide trade in services expands the progression of job specialization and enhances living standards. If outsourcing continues to be subdued in the U.S., American firms will need to rely on a well paid staff even for low-profile jobs, hence creating dearer U.S. commodities which would not be as competitive in the globe market. Outlawing outsourcing could therefore eradicate additional jobs in the U.S.
Taking advantage of the cheap labour in developing countries, many MNCs have set up subsidiaries in India and elsewhere. In the past decade, US companies alone have invested $7 billion in their subsidiaries in India, reaping a net saving of more than $26 billion. Telstra, an Australian telecom company, for instance, saved more than $75 million a year by outsourcing many jobs to Indian enterprises.
This is a clear indication that, despite divided opinions in the US, Britain and other countries, corporate managements will continue to favour outsourcing. On the employment front, there are two schools of thought: One, that outsourcing is leading to massive unemployment; and, two, that it has not contributed to unemployment, as is sought to be made out. In fact, as pointed out in a recent report by the US Chamber of Commerce, the main cause of increased unemployment in the US, Britain and other developed countries is the enhancement in productivity due to continuing advancements in technology.
The report quotes the example of General Motors (GM) in the US. While three decades ago, the company used to employ over 4,50,000 workers to produce five million vehicles annually, it now employs less than 1,18,000 hands to turn out the same number of vehicles. This reduction is mainly due to the evolution of designing, manufacturing, assembling and testing technologies including robotics.

The article sponsored by A-1 Technology Inc, dealing in offshore outsourcing and software development outsourcing.