Companies can outsource labor simply by using workers from temporary agencies instead of having employees on the payroll. Not surprisingly, as Business Week reports, western companies are beginning to buy up overseas suppliers, thus "internalizing" again what they had "outsourced" before.
Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank. When a large corporation hires a company in India to provide over-the-phone tech support for computer and software installation, again a function has been transferred.
Rather than pay Americans to produce goods, many corporations find it more profitable to produce goods in countries where labor is cheap and then transport the goods back to the USA for sale—the increased profitability that comes with outsourcing labor more than makes up for the increased transportation costs that stem from getting outsourced products back to the states.
Such a change would be very difficult politically and would require a significant transitional period to allow corporations to restructure and account for new labor costsbut it is possible.
It is easier to shop an activity around when higher quality or greater speed is the objective than to get an internal supplier to change its behavior. Do you have information you want to share with HuffPost? The argument on cultural disintegration points to the standardization of practices and norms as multinational corporations become involved with industries in regions culturally different from those in the country of origin.
The corresponding opposite to outsourcing is to "bring it in-house.
This means explaining to mechanics that our advantage is based on understanding how the system works, how profits are made, and why mechanics are key to making the airliner stay in business.
A bill that recently passed the Florida state senate would require that companies with state contracts have their call centers in the U.
Call centers, software development and support, bookkeeping and accounting services, bill collection and telemarketing are among popular off-shoring options. Governments that pursue these policies facilitate welfare protection given the context of increased unemployment in industries which cannot compete with the international market due to trade liberalization policies.
The driving force behind outsourcing, narrowly viewed, has always been and continues to be the desire to lower costs—although it has additional benefits. The study by AlixPartners estimates that the cost of outsourcing manufacturing labor to China will catch up to the labor costs in the U.
Many of those half-million jobs no doubt went to India and the Philippines, the two countries with the largest call-center industries. But when a producer of bedsprings closes its U. Higher labor rates, currency fluctuations and shipping costs, for example, have made China a more expensive option than it would have been a decade ago.
The Argument For Outsourcing of course is not new. These overhead costs include utilities, such as gas, electric and water, and the maintenance required to operate production equipment. Drawbacks of Outsourcing One of the main drawbacks of labor outsourcing occurs when the primary contractor attempts to communicate with the outsourced labor force.
Additional Definitions Outsourcing Outsourcing is the movement of a function inside a company to an entity outside it. American corporations outsource for the very simple reason that it is often far less expensive to produce goods in countries with lower labor costs than the United States.
Second, control is lost by distance and the presence of an institutional barrier. Outsourcing Outsourcing Law and Legal Definition Outsourcing refers to the practice of buying services externally rather than producing them internally.
While outsourcing is not viable for some goods ex.
A further example of environmental de-regulation with the objective of protecting trade incentives have been the numerous exemptions to carbon taxes in European countries during the s.
But their legal status changes. Standpoint of labor[ edit ] From the standpoint of labor, outsourcing may represent a new threat, contributing to worker insecurity, and is reflective of the general process of globalization and economic polarization.
For example, if the higher wages of American workers are consistent with their relative productivity, there should be no reason for a company to move its operation overseas. These jobs may also have been relocated to reduce wages.
Supervisors may have to go overseas to train local supervisors or deal with local government officials, adding travel costs and requiring someone to fill the gap while that manager is away. An outsourcing job that requires specialized skills or client interaction will cost more than one with more general duties.
Outsourcing also has its disadvantages many of which are easily overlooked in the hurry of achieving the costs savings that appear to be possible. Fraud is a specific security issue as well as criminal activity, whether it is by employees or the supplier staff.
Outsourcing is economically justifiable only once the wage differential is large enough to more than make up for lower labor productivity.Mar 21, · Anti-Outsourcing Bills Would Punish Companies That Send Jobs Overseas. By Dave Jamieson. Labor Reporter, The Huffington Post United States.
Jun 28, · Top 10 Reasons Offshoring is Bad For Business. Share; typically involve a long supply chain that may very well include companies with labor practices which, if publicized in the United States.
While many pro-outsourcing executives blame the educational deficiencies in the United States, the actual issue is much less complex: Engineers in India are paid one-tenth or less as in Silicon Valley or Boston.
versus free trade. It is the potential backlash by labor against corporate America that concerns the editors and “enlightened.
Benefits of Outsourcing. The primary benefit that companies gain when they outsource is a reduction in labor costs. When companies hire internal employees, they must include a.
Outsourcing jobs is when U.S. companies hire lower-paid workers overseas instead of Americans. Here are the types, countries, causes, and impacts. That lowers prices on the goods they ship back to the United States.
India has three qualities that attract American companies. First, the labor force already speaks English. Second, its. Manufacturing companies have a myriad of reasons for outsourcing production, but the main impetus for deciding in favor of outsourcing usually boils down to one thing: cost reduction.