Outsourcing is either harmful or beneficial for American economic - Essay Example

This activity assists companies in lowering their costs as the cost of production in US is quite high due to high cost of labor. With the economy development, more and more U.S companies would rather to choose outsourcing than the local service. To a certain extent, it is acceptable for America and American companies to be dependant on the labor of other countries. The activity of outsourcing of jobs conducted by US companies is not only beneficial for them, it is even beneficial for other nations because in these nations, there are low amount of jobs and the amount of salary they are paid is even low.

Because its lower cost can help the U.S companies develop and can save the money for local customers. Also with more working positions are moving out of the country, there will create higher income jobs for local citizens. The several benefits associated with outsourcing of jobs include higher level of creativity in production, low cost of production, higher quality of service and increased number of jobs and wages for the workers of other nations. Outsourcing is a term used to refer to the act of obtaining goods and services from suppliers that are not located in nations that produce those goods and services.

Murray Weidenbaum, a very famous economist and ex-chairman of President Regan’s Council of Economic Advisers, once announced that companies located throughout the US outsource their economic activities for several reasons. He feels that reasons for outsourcing include entrance into international markets, decrease the production cost, and to gain a competitive advantage while they compete in the global markets. The main benefit that a business within U.S obtains from outsourcing is the low cost of production as the product is produced at much lower cost in other nations as compared to the same product produced in the U.S. The U.

S is importing raw materials from foreign nations, and the transfer of raw materials to the destination where they are used to produce goods may increase the cost of production. If U.S manufacturers open their production line in areas where they obtain their resources, they no longer have to worry about the cost of raw materials transportation, and can direct deliver their products from the industry. It will become more profitable for businesses. For example, if in U.S organizations are importing raw materials from China and producing goods in the U.S. They not only have to pay the cost of the shipment fee but also need to afford the high wages in the state.

If the company decide to move the manufactory into China, the wages over there are much cheaper than the U.S and set China as a delivery center, and the company doesn’t need to pay for the raw material transportation fee and only needs to pay the shipment fee of production sale which the company always have to pay either they located the manufactory in China or U.S. With this decision making, the company can save lots of money from the labor and transportation fee, it can definitely help company to use the rest of money to expand the market and develop the company.

Also once the company less their cost on producing the product, they would also cut down the price attract the consumers to make more sales revenue. Therefore the US companies are not the only one benefiting from outsourcing, even the consumer side is positively