You have probably encountered outsourcing. A lot has been said about the issue and the media have brought up the issue again recently.
One of the more popular consequences of outsourcing is that people can lose their jobs. According to the Government Watchdog Committee, the United States lost about 15 million jobs between 1989 and 2003 as a result of trading with China.
This report largely blames the growing U.S. deficit with China on China’s “refusal to revalue its exchange rate.” In this trade, while the United States loses in such old-line industries as textiles, apparel, furniture, rubber and leather, China bears the loss in electronics and computer industries. A recent Nation Council of Textile Organizations analysis shows that Chinese apparel prices are 76 percent below U.S. prices and 58 percent below the rest of the world’s prices. Moreover, the current safeguard limiting imports of knit fabric from China established in 2003 expired last month.
In addition to the focus on old-line industries, China artificially depresses prices for its goods using currency manipulation. As a result, the benefits that the United States expected to gain from Beijing’s entry to the World Trade Organization are still up in the air while the country becomes more competitive in auto and airspace industries.
The U.S. policymakers are concerned about the health and efficiency of the state economy, meaning that they consider such issues as globalization, outsourcing, off-shoring and free trade. Is globalization a threat or an opportunity for the United States? Why are most economists in favor of free trade?
Concerning free trade, they say that if it costs less to make some products outside the United States, U.S. consumers face lower costs as a result. The problem is that a high-wage country like America loses jobs for low-wage countries like China or India where labor costs are lower and suppliers use fewer workers. Experts point out that you can’t really outlaw outsourcing; it’s just trade.
You can lose your job for different kinds of reasons like voluntary employment changes, layoffs, and firings. Some people insist on better compensation that affected unemployed workers should get when being outsourced. Others count on education as the cradle of progress and productivity. Yet improving the performance of the U.S. educational system does not seem to be the best solution to the problem. Just think about it-as you get a better education you demand and deserve a higher wage for your job, right? But the firms are going to contract out your job to those who do the same service cheaper anyway.
Things are not so bad, though; management guru Peter Drucker says the country imports far more jobs than it exports. This refers primarily to white collar jobs related to computers, telecommunications, banking, engineering, law services and others. Also, the United States ‘gains’ some jobs as a result of foreign investments here. Actually, after the North American Free Trade Agreement came into effect, the unemployment rate dropped.
General economic growth seems to be the top priority issue and is valued much higher than other benefits in terms of the overall welfare of the nation. Experts say that in the long run, higher productivity is the only way to create higher standards of living across the economy.
In the end, globalization will increase productivity growth in the United States and build international ties throughout the world.
Milana Karayanidi is a freshman in general business administration. She can be reached at [email protected].