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Myths about outsourcing in general

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  • Myths about outsourcing in general

    The American and asian economy never rest, in fact, as the technology develops further and markets grow in every aspect (specially for supply chains and e-commerce market), previously poor countries in former decades are right now going through a fast growth in regards
    of manufacture and Internet Industry. India is a prime example of market growth for example.

    Yet every time there is a minor issue in the acceleration of output, jobs, or incomes, the undying myths of a sputtering, backfiring economy rise again. Today, many of those myths concern the ills of outsourcing, because you know, many people still believe that companies owe them jobs only for the matter of being native.

    These plain facts, backed by research by economy majors, however, lay all of today's myths about outsourcing to rest. But there is still a real danger that politicians working with incomplete or incorrect information will cripple American competitiveness. Scapegoating poor Third World countries, and regulated Trade will not improve the U.S. economy or labor market, but would likely cause great harm.

    Myth A: Outsourcing will cause a net loss of 3.3 million jobs.

    Fact: Outsourcing has little net impact, and represents less than 1 percent of gross job turnover.

    Over the past decade, America has lost an average of 7.71 million jobs every quarter. The most alarmist prediction of jobs lost to outsourcing, by Forrester Research, estimates that 3.3 million service jobs will be outsourced between 2000 and 2015-an average of 55,000 jobs outsourced per quarter, or only 0.71 percent of all jobs lost per quarter.

    Myth B:A job outsourced is a job lost.

    Fact: Outsourcing means efficiency.

    Outsourcing is a means of getting more final output with lower cost inputs, which leads to lower prices for all U.S. firms and families. Lower prices lead directly to higher standards of living and more jobs in a growing economy.

    Myth C: Outsourcing is a one-way street.

    Fact: Outsourcing works both ways.


    The number of jobs coming from other countries to the U.S. (jobs "insourced") is growing at a faster rate than jobs lost overseas. According to the Organization for International Investment, the numbers of manufacturing jobs insourced to the United States grew by 82 percent, while the number outsourced overseas grew by only 23 percent.[5] Moreover, these insourced jobs are often higher-paying than those outsourced.

    Myth D: American manufacturing jobs are moving to poor nations, especially China.

    Fact: Nations are losing manufacturing jobs worldwide, even China.

    America is not alone in experiencing declines in manufacturing jobs. U.S. manufacturing employment declined 11 percent between 1995 and 2002, which is identical to the average world decline.[7] China has seen a sharper decline, losing 15 percent of its industrial jobs over the same period.

    Myth E: Only greedy corporations benefit from outsourcing.

    Fact: Everyone benefits from outsourcing.


    Outsourcing is about efficiency. As costs decline, every consumer benefits, including those who lose their jobs to outsourcing. A 2003 study by Michael W. Klein, Scott Schuh, and Robert K. Triest, which includes dislocation costs in its calculations, shows the benefits of Trade outweighing its costs by 100 percent.[8]

    Myth F: The government can protect American workers from outsourcing.

    Fact: Protectionism is isolationism and has a history of failure.


    Proposals to punish businesses that outsource jobs, institute tariffs, or change tax rules will carry unintended consequences if enacted. Such measures would injure U.S. firms that export goods and services and erode U.S. competitiveness, often in unexpected ways. Recent steel tariffs, for example, cost jobs in dozens of industries while raising prices for consumers

  • #2
    Re: Myths about outsourcing in general

    Well thank you compiling this list, it lays out a nice summary of these myths, and while I agree with most of them, I would like to state something in regards to the first one about total percentage of job losses. I think that it does have more of an impact than that little number of 0.71%, and I say that because when these companies choose to outsource, it often comes in large chunks and so you have a large number of people suddenly unemployed at once, usually in an area that is already struggling. That is where I see the real impact of this outsourcing trend. I just thought that I should mention that.

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    • #3
      Re: Myths about outsourcing in general

      Those that cannot put in a good word for outsourcing are actually in a state of denial (since they can't quite believe that workers from other countries are benefiting from Western based jobs and projects). Western media, commissioned by protectionist companies/influential peoplel, may have spearheaded this black propaganda against outsourcing. However, unless you work in this industry or you happen to be a business owner who's outsourced a number of jobs and projects, then you won't truly see the good side of outsourcing.

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      • #4
        Re: Myths about outsourcing in general

        Great post. I'd also add another one I frequently notice which is that people seem to think outsourcing is a choice for most owners for them to earn more. Most of the time they are forced to do so because even if they can afford labor in their own country and keep their business running that way, chances are that their competition will outsource and by doing that they will eventually gain massive advantage. My point is that even when they seem to have a choice, technically it would be much more irresponsible for them to stick to their guns and stay put because it will inevitably kill their business and all its employment potential by doing so.

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        • #5
          Re: Myths about outsourcing in general

          This is a very informative post and I do believe that you make a lot of valid points. However, I don't fully agree with the assertions here. I get the feeling that this was written by someone who fully supports outsourcing. This is why a lot of the myths provided are in support of outsourcing. In my humble opinion, the myths mentioned here are looking at the issue in black and white. Although the points that support outsourcing are mostly true, we should not forget the fact that outsourcing also has negative effects on the American economy.

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          • #6
            Re: Myths about outsourcing in general

            Well since I'm not from USA, my perception could be biased for not getting the whole picture given I'm not currently living there. Please elaborate which are these facts about the negative effect of outsourcing over the American Economy.

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            • #7
              Re: Myths about outsourcing in general

              Originally posted by Norm View Post
              Great post. I'd also add another one I frequently notice which is that people seem to think outsourcing is a choice for most owners for them to earn more. Most of the time they are forced to do so because even if they can afford labor in their own country and keep their business running that way, chances are that their competition will outsource and by doing that they will eventually gain massive advantage. My point is that even when they seem to have a choice, technically it would be much more irresponsible for them to stick to their guns and stay put because it will inevitably kill their business and all its employment potential by doing so.
              Couldn't agree more. Businesses have to change with the changing times. Otherwise, the bandwagon will leave them behind. They can't move forward if they continue with the old ways. There are far too many innovations going on and refusing to take part will only work against them. Outsourcing is one such innovation.

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              • #8
                Re: Myths about outsourcing in general

                Originally posted by xTinx View Post
                Couldn't agree more. Businesses have to change with the changing times. Otherwise, the bandwagon will leave them behind. They can't move forward if they continue with the old ways. There are far too many innovations going on and refusing to take part will only work against them. Outsourcing is one such innovation.
                Yup and it's why it kind of bothers me when people knock outsourcing like it's a bad thing altogether because it doesn't provide jobs to the local people as if foreign people having those jobs were that much worse. Of course it is understandable to want to keep jobs local and to benefit your own community but not at the expense of thinking that people from other countries are somehow lesser people or less deserving of that opportunity.

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                • #9
                  Re: Myths about outsourcing in general

                  We are entering a paradigm shift with the popularity of outsourcing. In the olden days, I have heard of Marks & Spencer contracting their production to factories in Thailand. M&S is the most popular brand in London and has outlets in other countries. I wouldn't believe it at first until someone from London gave me a gift - a shirt made in UK... but manufactured in Thailand. That was a black eye for M&S because outsourcing was unheard of yet. But now, it is getting to be a standard to outsource factory work to countries with a cheaper labor cost. It is part of a business model that is now being used by popular brands.

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                  • #10
                    Re: Myths about outsourcing in general

                    There's going to be many myths surrounding a lot of things in business and that goes for outsourcing as well. Many companies these days use labour from other countries because it's cheaper, and let's get that right, right from the start. It isn't because they are trying to help the people of that country and it isn't a way to spread the wealth so to speak, it's simply about one company being able to manufacture something cheaper, thus making a bigger profit when they come to sell it.

                    There's nothing wrong with a company trying to increase their profit margins of course, but when they are putting profit over other more ethical things, then I do think it needs to be looked at more closely, and the last thing a company should be doing is lying to the people and claiming they are closing all their manufacturing hubs in the UK or US and moving them to Thailand for example, a move that will cost thousands of jobs, and say it isn't just because of the money when we can all see that it blatantly is.

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                    • #11
                      Re: Myths about outsourcing in general

                      Fact is outsourcing provides even more business opportunities for business-minded people. There are people I've heard who make huge profits from outsourcing. They act as the middleman. They get hired by someone who's looking to outsource some work and they the middlemen] hire others and pay them to do the work. So these guys hardly do any work but make some decent profits anyway. Outsourcing therefore doesn't necessarily translate to lost jobs.

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                      • #12
                        Re: Myths about outsourcing in general

                        Originally posted by Vampa View Post
                        Fact is outsourcing provides even more business opportunities for business-minded people. There are people I've heard who make huge profits from outsourcing. They act as the middleman. They get hired by someone who's looking to outsource some work and they the middlemen] hire others and pay them to do the work. So these guys hardly do any work but make some decent profits anyway. Outsourcing therefore doesn't necessarily translate to lost jobs.
                        I agree with you that outsourcing doesn't cause lost jobs. However, it can cause displacement of workers in a place (or a country) because the jobs are taken by the outsourcing company. Take for example the call centers in the US and Europe that contract their jobs in Asia, their local employment is somehow affected since thousands of jobs are given to the Asians. I've heard that China is also encouraging their people to learn good English so they can compete with Indians and Filipinos in the call center industry. There are far too many Chinese college graduates who have no jobs and are looking around for outsourcing companies.

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                        • #13
                          Re: Myths about outsourcing in general

                          In the USA we hear a lot of noise about how outsourcing creates jobs overseas that we need here. What gets ignored is some companies choose to outsource because the jobs are hard to fill here. Americans don't want the kinds of jobs being outsourced, or at least not enough of them do. What some people don't realize is that for an opportunity to be offered here there needs to be enough real interest in it.

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                          • #14
                            Re: Myths about outsourcing in general

                            The bottom line is that businesses want to make money. If they need to outsource it to other parts of the world to keep profits up and keep their business running, then that is their prerogative. It will always be about self preservation. As earlier stated, Americans want jobs that they are qualified for or went to school for, so some of these manufacturing and call center jobs aren't the most desired. That's why they get moved elsewhere to places that want the jobs. America can do better economically, but people just need to get off their high horses and stop living off of the system.

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                            • #15
                              Re: Myths about outsourcing in general

                              Originally posted by joshposh View Post
                              The bottom line is that businesses want to make money. If they need to outsource it to other parts of the world to keep profits up and keep their business running, then that is their prerogative. It will always be about self preservation. As earlier stated, Americans want jobs that they are qualified for or went to school for, so some of these manufacturing and call center jobs aren't the most desired. That's why they get moved elsewhere to places that want the jobs. America can do better economically, but people just need to get off their high horses and stop living off of the system.
                              It isn't always their prerogative. I don't know why you would think it was. It depends on international law as established by treaty based upon the business origin and the destination o f potential outsourcing. People actually do have a voice in this process, it isn't just up to a company. It may be a case of stopping an action or reversing it, but it isn't just up to a company and it shouldn't be.

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