At this blog, I only talk about our finances. Let me break the trend and give you some food for thought. This is about the economy as a whole, not our own personal economy. This is about outsourcing and the trend here in the US. If outsourcing hasn’t really impacted you yet, it will be soon. Either in a positive or negative way.
Be watchful and be acquainted with the socio-economic changes happening around you. So, important to grow One Cent at a Time.
Let me first give you my opinions here, about outsourcing, and, the recent trend of American job outsourcing. Over the last weekend, I came across three different news reports on the web. All related to outsourcing trend and the political and economic impact of it. The three articles covered the aspects of:
- Highest company profit and lowest employee wage (in BI)
- Million Dollar income on the rise again (in CNN Money)
- Obama slamming Mitt Romney for his outsourcing record (in BI)
The first one went on to say that corporate profit is at the highest level historically whereas the employee wage is at lowest in terms of percentage of GDP.
Off-course by absolute margin wages can’t go down in a growing economy, due to inflation. the article showed another graph to depict that the employment is at lowest as well in last decade, compared to any other decade.
In summary, the essential conclusion is ‘outsourcing’, which increases company profitability as they now pay lesser in wages. The result is in job loss and lowering of domestic salary due to competition.
It could be an interesting data to see if, as a whole, what difference outsourcing made to the overall GDP. Is the gain in GDP due to increased profitability overshadows the decrease in GDP due to Wage depletion?
If it’s not the case then outsourcing is doing harm to this country.
Apparently, outsourcing is a bad word in the political circle. Our politicians know that outsourcing pattern is not liked by the masses. Otherwise, why would Obama term Mitt Romney as ‘Outsourcing Pioneer’, as per Washington Post columnist?
Business Insider reports Obama’s speech
“My plan will stop giving tax breaks to businesses that ship jobs and factories overseas, and start rewarding companies that create jobs and manufacturing right here in the United States of America.“
In the second report, CNN money stated that an absolute number of millionaires are on the rise again after the recession.
One reason could be the booming stock market which gained in double digits since 2008, making many stockholders millionaires.
Apart from that, the other factor could be the outsourcing again. Company profitability is producing many neo millionaires.
There are many self-made millionaires and small business owners who import goods from China and sell on Amazon/eBay, forget about Walmart.
Just make sure you have picked a trustworthy outsource partner otherwise you will face a lot of headaches with regards to trust and quality issues. Do your homework and it will save you from all the hassle.
I have my opinion, which I stated in the past in my post on Banning Chinese Imports. I am neither socialist nor politically inclined Democrat or Republican. I have my opinion, which I will express in this free country.
Obama said the same line before as well, yet in last 4 years no law was passed and outsourcing is ever increasing.
If Mitt is a pioneer, Barack is not a stopper either. Ordinary people are also not exempted from my scrutiny. As a stockholder, you want to see your stock value grow.
You wish the company had more profit. Now in order to get you more profit, the company outsources which in turn costs your friend’s job. Very soon it comes down to your employer and job.
And, you start crying foul!
Not only in big corporate houses, even individuals, entrepreneurs, and small business owners outsource a lot of work overseas. Have a look at eLance or freelancer sites.
More than 80% of their provider base is in countries like India, Bangladesh, Pakistan, Nigeria, and Philipines. People do not want to hire a writer for $20 per 500 words when they get it for $5 from a writer based in one of these countries.
Although you might feel I took a side against outsourcing but, believe me, I do favor it up to some extent. I was able to come in this country because of the software outsourcing only.
Outsourcing is an important part of globalization. If America outsources to India, China, etc. These countries also outsource their purchase of heavy machinery and scientific instruments to America.
I would like to get an opinion from readers, what they feel about outsourcing and whether they got the benefit/victimized because of the outsourcing trend.
Readers, What do you think of outsourcing? Has it affected you yet?
jefferson @SeeDebtRun says
I have found that in my industry (IT).. finding Americans with an appropriate skill-set, experience, and training can actually be a challenging thing to do.. There are just not enough Americans getting degrees in the appropriate fields.. So businesses that clearly have a need, often find themselves looking instead to those on visas, and they tend to work hard and do a great job, often for a lower salary.. I understand this, and have no issue with it..
However, I do have a bit of an issue when it comes to utilizing development and support teams overseas, because of the dramatic loss of quality of service that seems to go with it. The language issues, time zone issues, and the fact that the remote companies don’t have any “skin in the game” seem to lead to problems from day one..
I think you just talked about what I really think. I was here on Visa and that’s purely to match a skill gap. But there are jobs, even in IT, which can be done by any college graduate. We could perhaps employ local in those jobs, but we are talking about 1/5 of the cost with which a person can be hired overseas.
Basically, for the cost of one support personnel, you can hire 5 at offshore. Even if they are mediocre, 1 vs 5 is no deal.
Miss T @ Prairie Eco-Thrifter says
I think just like with everything else we need balance. We do live in a globalized world where countries rely on each other for products and services and that is ok. However we still need to make sure we can look after ourselves too. I think we need to ensure that the unemployment rate is low while still supporting other countries. It is only an issue when things get thrown off balance for greed or money.
Its a vicious cycle. You own stocks and we want them to go up. Stocks can only go up when profit is higher. Profit can be increased by cutting cost. Cost can be cut by off-shoring work. If your work is off-shored, you lose your job or accept lower pay. So at the end of it, your stocks will go up but salary would come down.
Sean @ One Smart Dollar says
I’m not proud to admit it, but from a business perspective I have outsourced overseas. If the quality of work is just as good and they cost is half it doesn’t make much sense not to.
That’s the thing Sean, if you are an owner, you need to cut cost. Imagine you are the employee and your job just went east..what will you do?
Veronica @ Pelican on Money says
Americans can think President Clinton for opening up U.S. trade with China. Wait, what? Wasn’t he the best president we’ve ever had?! Hehe
I think trade with China opened up much before that, during Reagan era.
DC @ Young Adult Money says
I spent the last week I was at work training someone from India. We are starting to transition accounting work over there, which can be a bit scary (for me) when you look at the numbers (long term it could be a big cost savings, though short term it’s a huge money and time suck). It definitely makes you think about the whole “what if I lost my job today” question.
yeah to compete here we need to reduce wages. But then we pay very high price for things too.
No because you cannot outsource K-12 education. I think things are starting to come home because costs are rising overseas.
May be decades later Larry
Tie the Money Knot says
Outsourcing is just a part of the business environment in a global economy. The world is shrinking, so to speak, and complaining about it simply relieves stress and not much else. Best for people to realize that there are folks outside the US that are able to do work for much less.
Now, in some cases the quality will be compromised, or simply not tailored for the end user in the client country (for lack of a better word). However, in other cases some work can be a commodity where price simply matters.
Bottom line is that while I might not like outsourcing, the world and technology have changed, and we all have to adapt quickly in order to suceed .
I’ve been getting a ton of letters (marked “Paid for with Taxpayer Dollars” mind you) from Senators and Congressmen this election season highlighting outsourcing. It seems like it’s more of a hot button issue than it was even four years ago. I guess up until not too long before election last time, enough Americans had jobs that they hadn’t thought to high light it. I agree with Jefferson that when there aren’t enough qualified Americans (which is absolutely the case in many technology fields,) outsourcing only makes sense. I’m no expert, but I’m not a fan of manufacturing in other countries for multiple reasons. The biggest is that there are quality standards enforced here that aren’t in the countries where many American companies actually manufacture their products, so we end up buying inferior or unsafe products either because we’re unaware or buying American is just too dang expensive. That’s more of a lofty ethical issue than the hard numbers of employment, but still something that irks me.
your sentiments very well explained. When I go to Walmart I see more than 50% made in certain country. You buy them because it cost less. Soon you realize the quality cheap as well.
Jerry Wolf says
Awesome post dude. You are going really well in blogging. I like it really much. Keep up the good work !
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