Tag: Offshore Outsourcing
There are different views on the impact of offshore outsourcing on the various societies affected, which reflects the attitude of Protectionism versus Free Trade. Some see it as a potential threat to the domestic job market in the developed world and ask for government protective measures (or at least closer scrutiny of existing trade practices), while others, including the countries who receive the work, see it as an opportunity. In fact, offshore outsourcing has led to Domestic factories and companies closing down leaving tens of thousands of U.S. workers jobless while underdeveloped countries such as Brazil, Turkey, etc. begin to flourish. Free-trade advocates suggest economies as a whole will obtain a net benefit from labor offshoring, but it is unclear if the displaced receive a net benefit.
Many companies offshore outsource because the wages are cheaper in other areas. This is beginning to create a conflict because many wages overseas are raising. For example, a study by the U.S. Bureau of Labor Statistics found that Chinese wages were almost tripled in the seven years following 2002. The wage increases could change the set up of offshore outsourcing in years to come.
One issue offshoring of technical services has brought more attention to is the value of education as an alleged solution to trade-related displacements. Education may no longer be a comparative advantage of high-wage nations because the cost of education may be lower in the nations involved in the controversy. While it is true that education is usually considered helpful to competitiveness in general, an “education arms race” with low-wage nations may not pay off.
