Title: The Unintended Consequences of Outsourcing
Headings: The Unintended Consequences of Outsourcing
The Unintended Consequences of Outsourcing
Outsourcing Lowers Barriers to Entry and Increases Competition
Outsourcing Erodes Company Loyalty
Outsourcing Can Eliminate Jobs From the Domestic Workforce
Outsourcing Affects Insourced Countries
The Bottom Line
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Adam Hayes
Updated Jun 16, 2020
The outsourcing of labor overseas is a natural result of the globalization of markets, and businesses' drive to cut costs to maximize profits. If workers in countries such as India or China can do the same job for a fraction of the price that domestic labor demands, those jobs will be sent abroad. It's a good business strategy that allocates labor to its most efficient use, at least according to economists. In the end, the effect should ripple down and help consumers by lowering the costs of production which can be passed on to buyers, and to shareholders who will see increased profit margins. Without outsourcing, the United States may not have maintained its status as an economic superpower as the world became an integrated global marketplace. But as with most things, outsourcing isn't all good; it does cause some unintended negative consequences. Outsourcing Lowers Barriers to Entry and Increases Competition
While increased competition is encouraged by free markets and generally benefits consumers, it can hurt businesses that can't keep up. Outsourcing allows new entrants to industries where labor would have been too expensive otherwise. A startup company seeking to manufacture electronic devices might not be able to get off the ground if it had to hire American factory workers, but can now easily find eager and cheap skilled laborers abroad.