Singh 1 Jaydeep Singh Ms. Ball World Literature 9 October 2009 Outsourcing is Detrimental to the U.S.

Economy Hello, this is Rajesh Srinivas- I mean Roger Smith, how doing today? Your problem what is? Thick accents, bad English, and incompetent troubleshooting skills are the major frustrations of a customer support call taking place with an operator half a world away. When a company utilizes independent contractors or another company, usually in another country, to perform services on its behalf, the organization is engaging in outsourcing. The purpose of outsourcing, also known as offshoring or offshore outsourcing, is to cut costs and thereby gain an important competitive advantage, especially in the global economy of today. Outsourcing is detrimental to the United States economy because it reduces jobs available to American workers, decreases the US clout in the world market, and the disastrous effects of its misconceived efficiency on companies and our economy. Offshore outsourcing has been a significant cause in job loss, which in turn detrimentally impacts various areas of the U.S. economy. Job loss creates a decrease in the income tax base available to the government in a two-pronged manner. First, the unemployed pay significantly lower taxes and second because jobs lost to outsourcing are only regained at a fraction of the original pay. (Cooper) With a decrease in the amount of taxes received, the government is forced to make budget cuts in other sectors within its control, such as education and health care. A recent report states that the government has

Singh 2 doled out $450 million more to the TAA (Trade Adjustment Association) to be distributed among states for career training, employment, and case management services for workers who lose their jobs due to outsourcing and foreign trade. (Dubie) This report demonstrates how the government increasingly is being forced to spend more and more money because of the unemployment attributed to outsourcing, especially when unemployment is at an all-time high of 10.2%. There are also 3.3 million jobs that could be moved to China, Russia or India, with an estimated loss of $136 billion by 2015. (Drezner) and currently more than 14.1 million American jobs are at risk of being outsourced. (Drezner) Although it would be moral for the U.S. to stimulate the economies of other countries, there is no rationale to take such action, seeing that it undermines the United States economy and takes away American jobs and salaries. Through offshore outsourcing, we are fueling the fire to our own doom, by sending China on its way to being the worlds largest economy. It appears highly likely that China at some point will overtake the United States as the world s largest economy. Global Insight s projections, project that China will achieve 7.1% average real growth over the next 20 years. In comparison, the U.S. economy is projected by Global Insight to grow at an average annual real rate of about 3.0%, less than half China s rate. Global Insight s projections indicate that China could overtake the United States as the worlds largest economy by 2013. By the year 2025, Chinas economy is projected to be 59% larger than the U.S. economy, according to Global Insight. (Elwell)

When was the last time you read on a shirt label, Made in the U.S.A? As expressed in Elwells example above, the U.S. is harming itself by exporting a myriad of services overseas to India or China, such as the fabrication of products, information technology and customer support. By doing so, we are boosting Chinas economy, and sending the U.S. to the second position. Couple this with an increased trade deficit, Chinas newly

Singh 3 gained power, and it will liquidate its vast holdings of U.S. Treasury bonds, thus diminishing the value of the American dollar. Offshore outsourcing then leaves the U.S. in a state to be pitied, and paves the way for the rest of the world to take over our place in the market, and our leading positions in newly found industries. Outsourcing is largely seen as a practice that seems too good to be true; this stems from the fact that it really is too good to be true. The nave unsuspecting company decides to outsource its jobs, expecting that the costs will be lowered, and that it would be able to quickly expand its company. To the companys dismay, a financial report one month later forces them to realize that outsourcing entails not just greater productivity, but also hidden costs, problems in communication, inefficient completion of tasks, and third class quality of product. The end result: companies either end in disaster and bankruptcy or companies suing each other over the inefficiency of the promised outsourcing contracts. Take for example the Sprint-IBM deal, in which IBM promised to save Sprint $550 million dollars. This plan backfired and ended up costing Sprint roughly $6.4 million dollars. (Cooney) Tales like this are not uncommon and provide a clear perspective of the truly disastrous consequences which outsourcing can create. Outsourcing clearly harms the U.S. economy, because of the inherent impacts of job losses reducing government funds, a reduction of its power as a leading economy and the increasing number of disasters, which occur due to the misconceived portrayal of outsourcing. The solution to this problem is not to completely seal our borders and completely ending outsourcing, but rather mandating certain sanctions that create a balance between outsourcing and insourcing, in order to reinvigorate the economy.

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Works Cited Cooney, Michael. Sprint sues IBM over failed outsourcing deal Ed. John Dix. NetworkWorld, May 2006. Web. 8 Dec. 2009. <Http://www.networkworld.com/news/2006/052506-sprint-ibm-outsourcing.html>. Cooper, Mary H. "Exporting Jobs." CQ Researcher 14.7 (2004): 149-172. CQ Researcher. Web. 9 Dec. 2009. <Http://library.cqpress.com/cqresearcher/ cqresrre2004022000>. Drezner, Daniel W. 1-800-INDIA Essay: Offshore Outsourcing: Perceptions and Misperceptions PBS, 13 Sept. 2005. Web. 8 Dec. 2009. <Http://www.pbs.org/wnet/wideangle/episodes/1-800-india/essay-offshoreoutsourcing-perceptions-and-misperceptions/71/>. Dubie, Denise. Feds dole out $450 million for U.S. jobs lost to outsourcing Ed. Eric Knorr. The IDG Network, 12 June 2009. Web. 8 Dec. 2009. <Http://www.infoworld.com/t/job-search/feds-dole-out-450-million-us-jobs-lostoutsourcing-293>. Elwell, Craig K., Marc Labonte, and Wayne M. Morrison. "CRS Report for Congress: Is China a Threat to the U.S. Economy Congressional Research Service, 23 Jan. 2007. Jstor. Web. 9 Dec. 2009. <Http://www.fas.org/sgp/crs/row/RL33604.pdf>.