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Thread: Myths about outsourcing in general

  1. #1
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    Default 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

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    Default 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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    Default 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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    Default 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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    Default 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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    Default 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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    Default Re: Myths about outsourcing in general

    Quote 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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    Default Re: Myths about outsourcing in general

    Quote 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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    Default 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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    Default 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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