Offshoring Service Sector Jobs - Essay Example

?Running Head: Offshoring Service Sector Jobs Offshoring Service Sector Jobs [Institute’s Offshoring Service Sector Jobs As theglobe has entered into the eon of twenty first century, the inhabitants of the nations with their immense and colossal potentials and capacity have made the world a much developed and advanced place. One can witness the development and expansion that the world is experiencing in every facet of life, whether it is social, political, and economic development or technological and scientific advancements. Besides, these innovations in such vast fields are leaving an indelible imprint on to the entire populace of the world, thus, making the world a global place where all the people can communicate and travel promptly within no time (Feenstra & Taylor, pp. 1-10, 2011). In addition, this has also created a single platform for the businesses that can develop, broaden, and extend their business operations and activities from local to international arena. Indeed, these elevations and progressions has augmented the element of competition in the business community, hence it has now become one of the most imperative aspects for all corporations and businesses. As an outcome, the key emphasis of the organizations is now on the amplified productivity of goods and services (Feenstra & Taylor, pp. 1-10, 2011). The trends of the current market in the recent years have also depicted the fact that the businesses are constantly struggling with the challenges in order to survive and persist in the marketplace for which they are striving to work in the most effective and efficient manner. The notion and idea of globalization and globalized production has also broadened its capacity to the service industry as well. However, the human resource has always comes under the consideration to be the most valuable asset, because they can either make the organization witness the heights of success or can be the prime reason for its failure (Feenstra & Taylor, pp. 1-10, 2011). The records divulge the fact that the global economy is experiencing a structural change. With the increase in the global competition, pressures on profit margins have also come under its influence, which has given rise to the concept of offshoring. Through offshoring, likelihood of productivity increases as the enterprises have the option to work round the clock to send the data back and forth from the host country to the home country (Farrell & McKinsey Global Institute, pp. 3-10, 2007). Therefore, offshoring has become a prominent part of the recent trend, predominantly in the service sector that is the relocation or repositioning of an operational unit or process of the organization that include information technology, accounting and several others from one place to another either on a local or international basis. In addition, offshore also comes under association to outsourcing of people that has gained significant importance from the latter half of the twentieth century (Farrell & McKinsey Global Institute, pp. 3-10, 2007). The below graph is a representation that undoubtedly and noticeably demonstrates the idea that offshoring in the service sector is intensifying with the passage of time. (Schaaf, pp. 11, 2004) This is due to the reason that offshoring saved a huge amount of expense of the wages as the under-developed nations produce more skilled workers on relatively less wages when compared to the workers of the developed countries. Lower production cost coupled to the lower cost of labor is one of the leading and principal reasons that lead to offshoring in the service sector. The studies expose the piece of information that there is a huge difference between the labor costs of the underdeveloped nations when compared to the developed countries. Besides, the other costs such as health insurance and pension costs are also much lower in the underdeveloped countries relatively. Nevertheless, the saved amount can come under utilization for the telecommunications, data security, or the service quality of the products or services (Nilsen, pp. 30-34, 2006). Large pool of educated workforce is another prime and prevalent cause that motivates the enterprise to offshore to the low-cost countries. The statistical records of the recent studies have proved the fact that the developing nations produce far more students that have higher education level in comparison to the industrialized countries. Hence, it leads to greater potential and more productivity with greater amounts of jobs. Therefore, with offshore jobs in foreign countries also produce greater benefit to the enterprise for having a widespread pool of talented and proficient workforce (Nilsen, pp. 8-10, 2006). However, the other motives that promote the concept of offshoring incorporate reduction in other costs, development or enrichment of service quality, focus on core competencies, enlargement of service portfolio and several others. It has also come under observation that offshoring is becoming an escalating threat for the service sector jobs, which has also grabbed the attention of the media and the world. Without a doubt, this threat of offshoring of service sector jobs is nowadays becoming a significant threat to the employment in advance economies of the developed countries. This is because of the loss of skilled and proficient employees in the fields of computer programming, accounting, call centers and many more due to outsourcing that is becoming a growing concern for the organizations in the developed nations. Furthermore, these service sector jobs came under vision as an economic developmental opportunity for the developing countries are now moving their operations to the low earning states. Therefore, this shift in jobs in the occupations from manufacturing to service industry has come under connection with an increased likelihood of more educated employees’ loss of jobs (Birkholz, pp. 8-14, 2007). This can very well come under justification from the below diagram. (Garner, pp. 7, 2004) The phenomenon of offshoring elucidates that some sectors of the businesses tend to come under more affection than that of others. Additionally, it leaves a diverse and dissimilar impact on to the pertinent employments and earnings that they can rule over, particularly in the home country. However, the predictions with related to jobs offshore in the service sector in the upcoming years of the twenty first century is prominent that the relocation of the service sector organizations would cause huge loss of jobs to the developed nations with the shift to low-cost offshore countries. Besides, a substantial percentage of service jobs that includes information technology jobs would come under relocation in the forthcoming years (Jensen & Kletzer, pp. 1-3, 2005). The drift of offshoring leads to the fact that the organizations are encountering with strong economic privileges in association with the technological advancements and deregulation that assists in expansion of the activities makes offshoring a prevalent reason of acceleration in the recent years. Nevertheless, alleviation or decrease in output and employment are two of the leading matter of concern for the developed nations that comes along with the offshoring. People in general do even have the feeling of insecurity and threatened to the outsourced jobs that are not in the home country. Moreover, the average standard of living and allocation of wages and earnings are also the subject matter of concern that affects from the offshoring (Birkholz, pp. 8-14, 2007). According to the economic theories, it has come under proposal that the international trade and offshoring of jobs in the service sector would not leave an adverse impact over the long run; indeed, it is more likely to have a positive effect in the long term. This is because of the reason that the GDP of the country in the long-term depend upon the productive assets that a nation have including the workforce, technology, and physical capital. Experts also articulate that export opportunities for the developing countries might emerge over the period by becoming a source of influence for the developing nations to have more growth at a rampant pace. After looking at the mounting trend of offshoring in the service industry, it can come to expression that employment in the distant future might not come under affection; however, it might affect the employment on a short-term basis. This is for the reason that the employees or the workforce might have need of reallocation to the sectors that produce jobs on domestic basis from the offshoring sectors. As an outcome of it, the offshoring would create permanent loss to such jobs for the workforce, thus consequential in unemployment, switching of professions or careers and find new employment (International Institute for Labour Studies & France. Ministere de l'emploi, de la cohesion sociale et du logement, pp. 113-118, 2006). Studies and researches have also demonstrated the piece of information that young people with more education found greater success in acquiring new jobs, whereas, the people who were older or less-educated and had long periods of unemployment found it more difficult to have jobs with even loss of substantial percent in their wages. According to the recent statistical data of the studies, it has come under observation that a considerable proportion of the employment in the industrialized nations have come under potential effect by the offshoring of jobs in the service sectors that include financial, insurance, computer and information technology related jobs (International Institute for Labour Studies & France. Ministere de l'emploi, de la cohesion sociale et du logement, pp. 113-118, 2006). Offshore facilitates in lowering the corporate cost that is another vital and key advantage, which brings benefit to both customers and shareholders. In addition, the overall profits of the enterprise also augment, that helps in ascending the confidence of the investors as well. However, it has come under examination that offshoring also facilitates the organization to not only survive in the globally competitive market but also to compete for their share (International Institute for Labour Studies & France. Ministere de l'emploi, de la cohesion sociale et du logement, pp. 113-118, 2006). Living standard is another crucial and critical factor that has come under immense affect from the offshoring jobs of the service sector for the developed states. Since the developed nations tend to have additional human capital that result in boosted labor productivity, therefore, with the reallocation of the workforce towards industries with higher real output would prove to be more effectual. While looking at the other end of the continuum, which is the negative impact of offshoring, the industrialized nations develops the feeling of being threatened with the pressure on high skill wages, which would even weaken the tax base. The loss of jobs to the local workers is the primary, apparent, and noticeable impact of offshoring. According to the current occasions of offshoring, the future predictions for high skilled jobs are giving the impression of badly lit and dim. This is particularly due to the reason that the professions with the largest jobs are coming under the process of offshoring, which is creating a potential concern for the industrialized nations. Likewise, the education degrees would come under the threat as the less jobs in the service industry would not even be an influential factor for the students to pursue their studies in those areas (Organisation for Economic Co-operation and Development, pp. 20-27, 2007). Although the impact of offshoring from the statistical data is difficult and complex to determine, yet, it can come to conclusion that it creates both positive and negative impact on to the jobs of the service sector. The records provide with the evidence that even though the percentage of the loss of the jobs in the service sector has proved to be moderately small up to now (as explicated in the below graph), the rate of offshoring have the probability to have a higher fraction in the near future. In fact, it has come under finings that the practice of offshoring has also increased a significant amount of jobs on annual basis in several countries. Even to some extent, it has come under surveillance that due to more knowledge and awareness with respect to its benefits, offshoring in the service sector has witnessed escalation (Organisation for Economic Co-operation and Development, pp. 20-27, 2007). (Rudiger, pp. 24, 2007) However, according to some schools of thoughts, offshoring can also come under consideration to have a positive impact on to the growth of the country in political and social terms. This is because offshore outsourcing facilitates in securing high value domestic jobs because the increased productivity due to higher demand of the jobs generates growth and security for the jobs. In addition, it has also come under monitoring that outsourcing results in increased competition through increased productivity and producing efficient and better products and services to the customers. Thus makes offshoring valuable and favorable for the industrialized country (Schaaf, pp. 10-15, 2004) While looking at the other perspective, for few regions and realms, it can also serve as a disturbing interval. This is because offshore outsourcing weakens then development of the employment and job markets for the home countries as the workers and employees get outsourced as an outcome of the structural change (Schaaf, pp. 10-15, 2004). In addition, offshoring has made jobs in some of the sectors of the trade industry vulnerable as well. References Birkholz, A. 2007. Offshoring of German High-tech IT Jobs to Low-wage Countries. GRIN Verlag. Farrell, D., & McKinsey Global Institute. 2007. Offshoring: understanding the emerging global labor market. Harvard Business Press. Feenstra, R. C., & Taylor, A. M. 2011. International Economics, 2nd Edition. Worth Palgrave MacMillan publishers. International Institute for Labour Studies & France. Ministere de l'emploi, de la cohesion sociale et du logement. 2006. Offshoring and the internationalization of employment: a challenge for a fair globalization? International Labour Organization. Jensen, J. B., & Kletzer, L. G. 2005. “Tradable Services, Understanding the Scope and Impact of Services Offshoring.” Brookings Trade Forum, 2005. Nilsen, S.R. 2006. Offshoring of Services: An Overview of the Issues. DIANE Publishing. Organisation for Economic Co-operation and Development. 2007. Offshoring and employment: trends and impacts. OECD Publishing. Rudiger, K. 2007. “Offshoring, a threat for the UK’s knowledge jobs?” The Work Foundation. Retrieved on October 24, 2011: http://www.workfoundation.com/assets/docs/publications/193_ke_offshoring.pdf Schaaf, J. 2004. “Economics: Digital economy and structural change.” Digital Economy: Economics. No. 45, pp. 10-15. Retrieved on October 24, 2011: http://www.dbresearch.de/PROD/DBR_INTERNET_DE-PROD/PROD0000000000179790.pdf Garner, C.A. 2003. “Offshoring in the Service Sector: Economic Impact and Policy Issues.” Thomas Schwartz: Federal Reserve Bank of Kansas City. Retrieved on October 24, 2011: http://www.kansascityfed.org/publicat/econrev/Pdf/3Q04garn.pdf Read More