“Outsourcing does not reduce the total number of jobs in America.” It is difficult to find many people who agree with statement made by Robert Reich, former President Bill Clinton’s labor secretary. He goes on to say, “If other countries can do something cheaper we ought to let them do it, and concentrate on what we can do best.” Today’s economy and the high numbers of out-of-work citizens in the U.S. makes moving sending jobs overseas more difficult to do but some advantages still exist.
In the 1990s, the U.S. negotiated free-trade agreements like the North American Free Trade Agreement. The agreements reduced or eliminated import taxes, allowing cheap foreign-made imports to undercut the prices of American-made products. The high cost of labor in the U.S. forced many companies to move overseas in order to stay in business. Moving overseas was the only way U.S. manufacturing companies could compete with labor costs and product pricing. The addition of tax benefits was the final deciding factor for many businesses.
Jobs such as data entry, billing, accounting, processing of insurance claims and loan applications as well as processing U.S. income tax returns are being performed by cheaper paid workers overseas. Since 2004, the outsourcing of knowledge-based services along with high-tech and professional jobs has migrated overseas as well. This includes jobs in software programming, paralegal work, financial investment research, x-ray and CAT-scan analysis and drug testing. The advantages of sending professional service jobs overseas are huge cost savings. In 2004, a U.S.-based software programmer was paid an average annual salary of $70,000, whereas the same job performed by a programmer in India paid the worker only $8,000 per year.
Instead of moving the entire company overseas, some choose to move specific departments or services overseas to obtain benefits only other countries can provide. India has become the world’s outsourcing hub, focused on highly trained workers. Its large base of technically skilled people enables India to produce quality goods at much lower costs. People of India are highly educated, and the country has the highest number of English speakers next to America. India has one of the most stable governments in the world. Its government is focused on IT development and has a promising investment potential, allowing companies from other countries to benefit from high returns on their investments.
U.S. companies send jobs overseas in an effort to maximize profit. The country that offers a business the most benefits wins, so to speak. Sending tedious jobs overseas helps companies focus their highly paid personnel on core business functions. Sending jobs overseas also helps to level out seasonal fluctuations and peak staffing problems. It increases innovation by not having to chase after it. It reduces risk and enables management retain control of strategic decision-making processes. Fewer and less stringent laws of other countries make running a business outside the U.S. much easier.