Effect of Outsourcing Jobs on the U.S. Economy

In 2015 , US overseas affiliates employed 14.3 million workers in the areas of technology, call centers, human resources, and manufacturing. 

Economy Effects 

It is undeniable that job outsourcing helps U.S. companies be more competitive and  It allows them to sell to foreign markets. Labor costs are kept low by hiring in emerging markets whose cost structures are lower. That in turn lowers prices on the goods shipped back to the United States.

About twenty years back,  NAFTA was created in order to help North America compete with the European Union. Unfortunately, it also sent at least 500,000 manufacturing jobs to Mexico. Hardest hit were California, New York, Michigan, and Texas. The major negative effect of outsourcing iwas that it increased the employment in the US. 

Then in that case, the jobs could, in fact, return to the United States if only they have the skills needed for those positions.  Many foreigners are hired to help with local marketing, contacts, and language. Unless American workers are willing to accept the low wages paid to foreign employees, American consumers would be forced to pay higher prices.

However, even in the medium run , Imposing laws to artificially restrict job outsourcing could make U.S. companies lesser competitive. Hiring expensive U.S. workers,  would raise prices and increase costs for consumers.

There the reverse pressure to outsource might lead some companies to even move their whole operation, including headquarters, overseas. Many others might not be able to compete with higher costs and would be forced out of business. 

American companies send IT and manufacturing jobs to India and China because the skills are similar while the wages are much lower. A company only has to pay an entry-level IT worker $7,000 a year in China and $8,400 in India. To acquire these employees in-house , companies in the US employ tech employees by offering H-1b visas to foreign-born workers.

In the past twenty five years or so , many call centers have been outsourced and sprung up in India and the Philippines. That's because the workers there speak English. But that trend seems to be changing. Unlike technology outsourcing, there seems to be a much smaller wage discrepancy between call center workers in the United States and these countries.

Human resources outsourcing reduces costs by pooling thousands of businesses. This lowers the price of employment plans, retirement plans, workers’ insurance benefits and legal expertise. This particularly benefits small businesses by offering a wider range of cost benefits. Now the looming recession may cause some human resource outsourcing firms to hire American workers.

Mexico is now the seventh largest auto manufacturer in the world. But apparently that growth came at the expense of U.S. auto workers. 

India has three points that attract American companies. First, many speak English. Second, its universities are among the highest-ranked in the world. Third, its legal system though archaic is similar to the United States, since both are rooted in the British system.

China is the world's largest "manufacturer exporter". And a lot of China's so-called "exports" are really for American companies. A lot of U.S. companies ship raw materials over to China, and the final goods are shipped back to the US or different parts of the world as American goods . 

Gradually now , workers in many of these emerging country bases have been replaced by robots. Now to come up to speed and get new jobs, workers need training to operate these new robots.

The fact is that over one-quarter of American workers make less than $10 per hour. Meanwhile, in 2005 , the top 1 percent of workers earned more in income than the bottom 40 percent of workers put together . 

President Trump focused his campaign on ending outsourcing to become the greatest job-producing president in U.S. history. He promised to pressure China to reduce its subsidies and raise its currency value. He said he would renegotiate NAFTA to require Mexico to end the maquiladora program. He says he would lure companies back by reducing corporate taxes and improving local demand for American goods.