2. Definition:
"Outsourcing is the process in which a business
contracts with a service provider or manufacturer
for services or goods that would otherwise have
been performed or produced in-house by
employees of the business. Outsourcing can be
contracted with providers in the same locale as the
business, but when outsourcing is provided by
firms outside the country where the business is
located, it is called offshoring. Unlike domestic
outsourcing, offshoring has wide social and
economic ramifications because of its potential to
transfer jobs abroad." (Outsourcing Dominates U.S.
Manufacturing Economy)
3. Motivations for Outsourcing
• Significant cost decreases
– Lower labor costs
– Availability of laborers
• Higher quality product
– The service providers specialize and excel in their
field
• Companies don’t have to
deal with management
or liability, and don’t
have to hire employees
4. Impact: Pros
• Costs are drastically lowered,
mostly because of the lower cost
of labor
– In foreign countries labor is less
organized, and there are lower
standards of living
• Higher profits for the companies
• Increase in efficiency, and higher
quality of products
• Another viewpoint: Other experts
believe that outsourcing is good
for the economy because there is
a wider range of available jobs,
5. Impact: Cons
• Industries that used the most
outsourcing also saw the highest loss
of jobs
– “Employment in the US manufacturing
sector declined sharply from the late
1990’s” (Outsourcing Dominates U.S.
Manufacturing Economy)
– The greatest loss of jobs was seen in
the computer, machinery, and clothing
industries
• One viewpoint: Outsourcing is
harmful to the US economy because
it causes the loss of blue collar jobs
– Jobs in the industries were wiped out,
while there was a bigger demand for
the higher paying jobs on the
management side of business
