Opposing Perspective
Drawbacks for businesses
Although the general consensus among business owners is that outsourcing is an effective business practice for reducing costs and increasing efficiency, outsourcing bears pitfalls that owners should be cognizant of as well. Paul Spiegelman, CEO of the Beryl Companies and contributor for Yahoo Small Business, explains that outsourcing is a bad business strategy, not only due to knowledge and communication issues, but because of price-driven competition as opposed to value-driven competition. This implies that companies should not merely implement business strategies for the sake of reducing costs, increasing profits, and lowering prices; instead, they should actively and strategically position themselves to create more value for customers than their competitors. As the founder of various companies, Spiegelman advises business owners to keep their businesses in the United States no matter the cost.
Remington Rhett, tax analyst and customer service representative at the Indiana Department of Revenue, argues in his LinkedIn article that outsourcing is harmful to American businesses due to decreased workplace morale and bad corporate publicity. He continues by suggesting that this results in the loss of competitive advantages among U.S. businesses. Rhett is implying that the workers of a company that heavily practices outsourcing will have a decreased sense of morale and confidence due to fears that their department’s business process will be outsourced abroad. This decreased workplace morale can have notable implications on business performance as well, making it an issue for business owners to assess. However, the bad corporate publicity is also important for business owners to take note of, as customers and the community at large may find businesses’ outsourcing practices distasteful, prompting them to avoid those businesses’ products or services. Since this directly impacts a company’s bottom line, a company’s public image is especially important to hold in high regard, which is why companies may want to steer clear of intense outsourcing.
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Drawbacks for workers
While the business side of outsourcing has its ups and downs, American workers also have the fair share of suffering and difficulty when it comes to outsourcing. Dr. Paul C. Roberts, American economist and Assistant Secretary of the Treasury for the Reagan Administration, maintains that offshore outsourcing results in the loss of millions of white-collar jobs, and more than a third of these displaced workers remain unemployed. According to Roberts, the loss of these high-skill jobs also impacts U.S. tax revenues, since white-collar jobs produce a bulk of U.S. tax revenues, posing harm to the U.S. economy as well. Roberts suggests that new, better jobs are not on the way for displaced American workers. Likewise, Roberts is proposing that since displaced workers are not receiving new jobs as purported by other economists and journalists, this contributes to higher unemployment in the United States. Ultimately, outsourcing leads to a lose-lose situation for American employees and the American government.
Adam Hersh and Ethan Gurwitz, a senior economist and research assistant at the Center for American Progress respectively, contend that offshoring work results in increased import competition, thereby weakening the U.S. labor market. Offshoring and outsourcing also put downward pressure on wages in most import-competing industries according to Hersh and Gurwitz. Looking at outsourcing from a purely economic perspective, these points are particularly concerning for American workers and the American economy at large, as the practice seems to directly impact the U.S. labor market in a negative fashion.