How outsourcing helps generate more jobs in the US

How outsourcing helps generate more jobs in the US

February 27, 2014

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In a previous post, we shed light on a misconception that holds American businesses back from sending operations to an overseas location. We refuted the belief that outsourcing kills American employment. There, we explained that what really happens is the opposite—businesses that outsource a part of their overall operations are able to generate more jobs for the American public. Now, we present figures to back that up.

Finance advisory firm CreditLoan conducted a research on the same matter and affirmed the positive outlook economists have on the trend of offshoring work to countries with more affordable wages and operations costs such as the Philippines, India, China, and few emerging offshore spots in Europe. The findings deduced that the estimated 3.3 million jobs that would be moved to foreign destinations by 2015 are a mere iota of the total job count the US produces every year.

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Think about it. In a nation that employs almost 200 million citizens and creates 3.5 million additional jobs annually, isn t it an exaggeration to say that the 3.3 million jobs taken away in a span of a decade caused a dent in American employment?

And consider this: 70% of the American economy is part of the service sector—people who make retail, hospitality, healthcare, and other service-providers thrive. This 70% is not vulnerable to outsourcing because their jobs take place locally and entail personal contact with customers.

University of Michigan Economics Professor James Hines agrees with the positive effects of offshoring to US employment, noting that the 10% greater foreign investment equates to 2.6% more investments in America.
And here’s how it works:

  • The savings that a company makes from offshoring enable them to produce more goods with fewer resources.
  • The low resources consumed let companies lower the prices of goods and free workers from less crucial tasks.
  • The better prices, product quality, and workflow allow companies to grow, which means more jobs for Americans.

Of course we can’t ignore the fact that jobs were lost in the process of attaining this expansion, but as we said in the earlier post mentioned above, this is normal in a massive economy. In fact, 69% of the displaced workers due to outsourcing were reported to be fully re-employed afterwards, and at least 70% didn’t experience pay cuts.

This brings us to the conclusion that in the argument of whether or not offshoring steals employment from Americans, the overall long-term effect of the venture still outweighs the changes it caused along the way.

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