Nowadays, a combination of various factors led to American companies outsourcing moving their production abroad. Many American corporations refuse to comply with growing wages and (or) tax rates in the country and decide to move their operations overseas to less demanding job markets and a more pleasant tax climate. The main argument against job outsourcing is that it directly impacts the American job market by causing unemployment. Sometimes outsourcing jobs abroad results in positive outcomes for the domestic labor market as it may boost the demand for high-skilled labor. However, the negative impacts for those left behind would always prevail because sometimes even high-skilled jobs can get outsourced.
One of the biggest threats of outsourcing is domestic unemployment. For the past few decades, IBM has been outsourcing jobs from the U.S. to India to work on its AI systems (Strickland, 2019). This caused a contraction in the amount of those employed in the U.S.A. When an IT giant such as IBM moves its operations abroad, it has a direct impact on the American job market. The outcome of this is rather negative since it shows that even higher-skill jobs can be lost in the company’s pursuit of higher economies of scale and, as a result, profit. Not only does it threaten unemployment, but it could also lead to the complete loss of the domestic job market as qualified workers would simply move to another country that may employ them.
Outsourcing is undoubtedly beneficial for both home and foreign countries. The former often gets profits redirected through it and, thus, is able to tax them, whereas the latter gets higher lower unemployment rates and more developed infrastructure through the FDI. There is always the backside of the medal, however. Many U.S. companies tend to abuse the advantages they are given in foreign job markets. This often results in scandals such as child labor and inhumane working conditions. Therefore, the U.S. gains more diminutive than a foreign country can lose out on the job outsourcing.
In conclusion, the example of IBM shows that even the demand for higher-skilled jobs today may suffer due to outsourcing. This proves that adverse outcomes for the American job markets may often prevail whenever a U.S. company decides to exploit a foreign country for a higher profit margin. Overall, outsourcing jobs often results in the contraction of domestic employment rates and particular harm for the country these jobs are outsourced to.
Strickland, E. (2019). IBM Watson, heal thyself: How IBM overpromised and underdelivered on health care. IEEE Spectrum, 56(4), pp. 24-31.