Running head: Effects of Outsourcing Labor on the Economy of the US 1

Effects of Outsourcing Labor on the Economy of the US

Students Name

University Affiliation
 Effects of Outsourcing Labor on the Economy of the US 2

Trade has a lot of impact on business whereby it can lead to specific jobs to disappear,

guaranteed industries to go out of business and some sectors which are critical to the economy to

shrivel. Thus that is what we do expect from increased competition both from domestic as well

as in the international arena. However trade as a rule it does not influence the total number of

jobs or the overall rate of employment or unemployment, From Ross Perot, he does not consider

the differences that do exist in productivity between the American and the Mexican workers. The

United States have a larger supply of capital than Mexico which reflects that the American

workers are highly skilled better than the Mexican which gives an upper hand not to go foreign

countries to seek for cheap labor which leads to lowering the products qualities being

manufactured form the unites states. This paper will focus on the effects that will affect the

economy as a result of outsourcing labor (Berman, 2013).

The issue of job outsourcing assist the United States companies to be more competitive

on the international map, which allows them to sell their products to the foreign market through

their overseas branches. The issue of labor cost is reduced since most foreign countries offer

cheap labor for instance from Asian countries. However, this has a striking contradictory

impression on the economy of the country since this has led to an escalation in the fraction of

unemployed professionals in the country whereby according to statistics almost 14million jobs

have been outsourcing with nearly 7.5 million unemployed Americans. As a result, some issues

are challenging the issue of outsourcing jobs. Firstly despite that, these third party companies can

often provide quality labor at drastically reduced prices some moral issues are accompanied by

this type of work. For instance, the working conditions of the employees' are questionable.

Taking the case of Foxconn the company that deals with products for Apple, Amazon and

Hewlett the workers there are often strained to work up to late hours whereby they granted to use
 Effects of Outsourcing Labor on the Economy of the US 3

one-third of a seat to sit on to keep them more focused. Therefore the life of the workers in these

companies is terrible thus raising up the unethical issues at the places of work (Zhang, 2011).

The other problem of importing labor is the lack of transparency where the trust of the

customers reduces. For instance, a U.S company might outsource part of its enterprises to a

company say in China, the company in China might also outsource to another company for

staffing. Thus if the china company staffs are working in unsafe conditions, it is the fault of the

staffing company (Berman, 2013).

Another challenge of outsourcing is the issue of loss of the mental capital. At the first

place, outsourcing was intended to assign the low skill jobs opportunities out and grasp the

highly skilled jobs as a vital asset to propel the economy forward. Unfortunately emerging

economies have worked hard to create their intellectual capital which compels the American

companies to increasingly to contract various specialist from those countries at a far lower rate as

compared to the United States which has a long term repercussion on the American industries

(Zhang, 2011).

Besides outsourcing labor has some effects whereby the country loses its manufacturing

capacity, as such when a company moves to the overseas not only we lose the technical

knowledge also we lose that production capability of the enterprise. In the recent years, the

United States was the leading country in solar technology, but nowadays most of the companies

have moved to Germany to set up new plants there since they are given more incentives as

compared to the United States.

Another risk of outsourcing is the aspect of reliance on the foreign relation. For instance

the United States in 1996 they were forced to engage in a trade treaties with China to call upon
 Effects of Outsourcing Labor on the Economy of the US 4

the Chinese government to limit the levies imposed against the US companies. These issues of

international relation affect most businesses if the link between the two trading countries fails.

Further, without new jobs being created in the United States, the cases of unemployment is

becoming a norm. As a result, most of the citizens in the US are out of work with few

possibilities of docking a job (Berman, 2013).

The bottom line of this issue is that operations of outsourcing labor in the United States is

eclipsed by a long-term damage to the country's economy. As a result, the loss of jobs and the

expertise will lead to the level of innovation to diminish and become difficult to revive.
 Effects of Outsourcing Labor on the Economy of the US 5

References

Berman, E. (2013). The Labor Problem in the United States. E. E. Cummins. Journal Of
Political Economy, 41(1), 132-134. http://dx.doi.org/10.1086/254439

Zhang, T. (2011). International Outsourcing and Unemployment in a Minimum-wage Economy.

Review Of International Economics, 19(4), 776-786. http://dx.doi.org/10.1111/j.1467-
9396.2011.00981.x