Global Outsourcing of Engineering Jobs - Essay Example

NEGATIVE IMPACT OF OUTSOURCING JOBS TO OTHER COUNTRIES Introduction Today, outsourcing has become a common word of usage similar to globalization. Technically "outsourcing" is transferring or sharing management control and/or decision-making of any business function to an outside supplier (espacially based outside country), which involves a degree of two-way information exchange, coordination and trust between the outsourcer and its client. Typical examples of outsourcing jobs include medical transcription, information technology, human resources, law, education, and accounting. It is also not uncommon for companies to outsource customer support and call center functions, manufacturing and engineering. As a result, there is a debate concerning the benefits and costs involved in outsourcing (Wikipedia, 2007). This paper discusses some of the negetive impact of outsourcing jobs on US economy and society. Outsourcing jobs to other countries will negatively impact American Society by depleting the availability of jobs in the US, decreasing the level of customer service we receive, and reducing our privacy. There are arguments for and against outsourcing of jobs in United States. Many of them suggest that outsourcing has had a negative impact on the American economy. However economists and government officials who are supporter of outsourcing of jobs to other countries stress the overall benefit and long-term advantages of this practice for the American economy. Unfortunately those who have lost their jobs due to the emerging outsourcing businesses to foreign competition often discover that the creation of higher paying jobs to replace ones that are lost has not occurred. As a result of this there are many who are undergoing mental trauma. There is a great deal of impact of outsourcing on the economy. It contributes to a deteriorating the economy as it contributes to the trade deficit and exports the American knowledge base to other countries. While outsourcing has helped to improve the lives of people in other countries, it should not be done at the cost of creating unemployment in America. Outsourcing of jobs at a lower wage may benefit the company, but it has serious impact on those who loose jobs and deteriorate their living standards. Taking a correct estimation of the costs of outsourcing would establish the fact that keeping jobs in the United States is more competitive than otherwise. Outsourcing has resulted in increasing unemployment problem in America. While those who are in favor of outsourcing argue that as a result of outsourcing, high-value jobs will be created to substituting jobs lost by outsourcing, the facts reveal quite different situation in future. Projections made by the Bureau of Labor Statistics in 2004 have clearly said that outsourcing can only increase unemployment. According to a CNN commentator Lou Dobbs, among the top-ten projected areas of job growth only three categories require a college degree. He also interprets that those who take new jobs will provide only 80 percent of their former pay rate. Some of the statistical data reveal the following facts. Unemployment among America's engineers has sharply increased from 2.0% in 2001 to 4.2% in 2002 to more than 6.0% in the first quarter of 2003. The unemployment problem is even worse for people belonging who have the basic degree in electrical, electronics, computer and software engineers. According to the Bureau of Labor Statistics at the U.S. Department of Labor, unemployment among electrical and electronics engineers reached 7.0% in the first quarter of 2003. 6.5% of all computer hardware engineers and 7.5% of computer software engineers were also unemployed during the same period. It is also evidenced that outsourcing has negative consequences for the overall American economy. Even though free trade is often cited as a reason for outsourcing, Dobbs suspects that eminent economists such as Adam Smith and David Ricardo, who regularly advocated free trade, would take a different opinion if they realized that decisions like outsourcing were made at the expense of national self-interest that will have far reaching consequences. Dobbs states that "they also could not have imagined that one nation would effectively risk bankrupting itself by transferring its comparative advantage of knowledge base, expertise, and capital to its trading partners, and then ship its jobs overseas as well,". Dobbs further argues that the education and career choices that people are making to adjust to a society that embraces outsourcing the position of American economy in the world (The Gale Group, 2007). If we consider the impact of outsourcing on the improvement of scientific knowledge, it can be pointed out that it is bound to decrease. Earlier, the United States was known to be a leader in technological innovation and also a major contributor to improvements in productivity, economic growth and personal well-being that took place during the 1990's. People from different parts of the world after obtaining their degree used to look for jobs in America and seek for citizenship. However, today the trend is changing with jobs being outsourced. Engineers and scientists belonging to various organizations have long been prime movers in the exchange of scientific discoveries into useful products and services and in technological innovation. It is a well known fact that a nation's ability to innovate is at the foundation of its economic and technological strength. It can be side that outsourcing of high wage or high value added engineering jobs threatens this leadership of a nation on a number of fronts. For instance, the movement of more and more manufacturing and related service functions to offshore locations means that many technological innovations or improvements in manufacturing processes that are discovered and perfected as goods are produced will be developed in other countries. There by sharing the secrets with other countries. Secondly, the outsourcing of information technology applications development and delivery outside of the United States will reduce opportunities for continuing domestic innovations in software, data communications and data security applications. The third most important point here is the downward pressure on job opportunities, wages and working conditions that will occur as more and more scientific and engineering jobs are shifted to lower cost offshore locations. In particular it is likely to reduce the willingness of America's best and brightest young people to pursue careers in science and engineering. As a result of all these personal economic and national security will be subject to increasing threat as responsibility for more and more private, proprietary and mission critical military and national security data is transferred to other countries. To summaries the negative impacts or the adverse consequences of outsourcing, it is the loss of employment and income for more and more American professional workers if outsourcing continues to exert downward pressure on job opportunities, wages and other forms of compensation. Loss of payroll and income taxes at different levels such as national, state and local levels at a time when demands on pay as you go social insurance programs, such as Social Security and Medicare, and the need for improvements in our communications, educational, health care and transportation infrastructures are beginning to pick up the pace. There will be negative impacts of globalization, when a group of individuals lose their jobs to outsourcing. Loss of national economic and technological competitiveness through lack of innovations and increasing dependence on foreign sources of supply for consumer products, defense systems and military hardware as well as the technical talent needed to design, produce and maintain them. Further imbalances in international trade and the US balance of payments as America is forced to buy more products and outsourced services than its sells to its major trading partners is another problem (Hira, 2003). This paper has mainly focused on the negative impact of outsourcing in America. It is seen that outsourcing jobs to other countries will negatively impact American Society by depleting the availability of jobs in the US, decreasing the level of customer service we receive, and reducing our privacy. Moreover, when there is lot of talented brains in America itself, it is essential to make use of these talents. Reducing outsourcing will add to the nation's economy and will reduce the problem of unemployment. References Hira, R. (2003) Global Outsourcing of Engineering Jobs: Recent Trends and Possible Implications, A Testimony of Ronil Hira, Ph.D., P.E. Chair, R&D Policy Committee The Institute of Electrical and Electronics Engineers - United States of America To The Committee on Small Business United States House of Representatives. Retrived on 30 April 2007 from http://www.ieeeusa.org/policy/policy/2003/061803.html The Gale Group, (2007) Outsourcing Negatively Impacts the American Economy, Retrived on 30 April 2007 from http://socialissues.wiseto.com/Articles/FO3020630098/ Wikipedia, (2007) Outsourcing, Wikimedia Foundation, Inc., Retrived on 30 April 2007 from http://en.wikipedia.org/wiki/Outsourcing Read More