OUTSOURCING

Outsourcing

Abstract

There are two sides of debate on trends of outsourcing. On the one hand, companies in favor of offshore outsourcing claim that according to globalization, outsourcing is the one of the strategies moving companies toward world-class. Outsourcing is not only reducing labor cost, but also helping companies extend their service globally. On the other hand, many experts are opposed to the practice believe that it takes jobs away from the country and compromises the security and stability of American industries. Trends in outsourcing do not seem to exist. The study presented in this research explores the linkages between outsourcing and productivity, focusing on measurement issues in United States manufacturing. More specifically the research investigates the impact of outsourcing on manufacturing employment. The data analysis shows that the productivity, especially in high-tech industries, as it related to outsourcing measurement is not accurate. This poor measurement of outsourcing, both domestic and international, may result in understand of the amount of outsourcing that occurs in aggregate or in the manufacturing sector. The research also indicates that offshore outsourcing is not a direct cause of high rates of unemployment. The amount of outsourcing has been low proportion of total unemployment rate of the country. In the manufacturing sector, domestic outsourcing is an important issue of mass layoffs. Off shoring, however, is not the key subject of mass layoffs due to the low proportion.

Table of Contents

Abstractii

Introduction1

The Problem2

Research Questions2

Significance of the study3

Literature Review3

Trend in outsourcing manufacturing3

The Impact of Outsourcing on the American Economy4

Data Analysis and Methodology8

Labor Productivity8

Multifactor Productivity Measures (KLEMS)9

Discussion10

Conclusion12

Outsourcing

Introduction

Outsourcing of American jobs to offshore workers has been at the center of debate over the last several years. When the word 'outsourcing' is used Americans often think of jobs being stolen from Americans and being sent offshore where labor is cheaper. Today, American workers from various industries including manufacturing, technology and customer service have been impacted by offshore outsourcing. Many large companies have argued that outsourcing is beneficial to American consumers because it allows companies to lower costs on products. However, many Americans that have lost jobs to outsourcing view it as a way for greedy corporations to make even more money. Indeed, there are two sides to this debate. On the one hand, those in favor of offshore outsourcing assert that it is necessary to ensuring that companies can compete in the ever growing global market. On the other hand, those that are opposed to the practice believe that it takes jobs away from American workers and compromises the stability of the American industries. In either case, this is a critical issue that is sure to continue for years to come. Outsourcing is typically thought to improve productivity by increasing the efficiency with which inputs are transformed. Many experts agree that the trend of outsourcing, both domestic and international outsourcing, is continually increasing. This implies many jobs in the U.S. have been taken from the states. Meanwhile, the report from Bureau of Labor Statistics (BLS) showed that manufacturing productivity growth in the United States accelerated in ...