Negative Effect of Outsourcing

Topics: Unemployment, Economics, Outsourcing Pages: 2 (454 words) Published: November 30, 2008
Negative Effect of Outsourcing

The outsourcing trend has become a concerning, and debated topic in American politics and economics. The main outsourcing purpose is cutting production cost by transferring U.S jobs to lower paid foreign workers. Some views outsourcing as the way company‘s completeness, others see this as negative effect due to losing jobs. As a student of College Management who major in Business and also minor in Economic, I strongly believe that outsourcing is damaging America‘s economy.

Unemployment issue
The US’s growing unemployment rate is related to this outsourcing trend. One figure from Forrester’s Research shows that at least 40% of Fortune 1,000 companies are sending US jobs overseas. The proponents of outsourcing argue that the outsourced workers will be able to find job replacements through retraining. However, according to a report by the McKinsey Global Institute, 31% of workers who lost their jobs never found employment, (Reingold). In addition, The negative effects of outsourcing are obvious. As Americans lose their jobs to cheaper overseas labor, their spending must reduce to minimum level of surviving. This, in turn, will reduce sales and services in domestic national, thereby affect other people incomes. By outsourcing, companies are able to reduce cost of products, but who could afford to buy them?

Rising Government Spending
When many people losing their jobs as a result of outsourcing, there are fewer payroll tax receipts and fewer contributions to Social Security and Medicare. Government revenues mainly depend on income and sale tax. Reduction in this payments, add to outgoing payments for unemployment benefits will result in increasing government spending. If those moneys were using for educational, healthcare or other funding, it would have been better for America’s economy.

Disrupting the Education System
Besides effect of rising government spending, outsourcing also is threatening education system....
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