Outsourcing Manufacturing Jobs and the US Economy

Outsourcing has emerged as one of the most controversial subjects in the US in recent years. This strategy, which has become popular among American companies, has elicited many reactions. While some regard it as a positive force that increases efficiency and decrease production costs therefore promoting organizational growth, others see it as a negative force that is detrimental to the well being of US workers and the US economy. The outsourcing trend is expected to increase even as technological advances make it easier for firms to outsource most of their production aspects. This paper argues that outsourcing of manufacturing jobs oversees is detrimental to the wellbeing of US workers and the US economy.

Outsourcing of manufacturing jobs leads to a reduction in the number of employment opportunities available in the US. Mohr (2012) asserts that without new jobs being created to replace the jobs being taken overseas, the unemployment rate in the US will continue to be on a rise. Some of the world’s largest US-based multinational companies such as Nike are outsourcing all of their manufacturing processes overseas. Pearlstein (2012) adds that outsourcing of manufacturing jobs has contributed to the structural unemployment currently being experienced by many blue collar workers.

Entrepreneurship in the US is adversely affected by outsourcing since this strategy promotes the movement of skills from the US. Mohr (2012) explains that when a certain aspect of production is moved oversees, over time there will be fewer Americans who have that skill due to lack of opportunities. This will lead to a “brain drain” thoroughly compromising innovation in the US.

Outsourcing curtails the growth of entrepreneurs by eliminating the industries that many small businesses emerge to support. Many entrepreneurs emerge to support large industries or provide auxiliary services to these companies. Lagrone (2014) confirms that the presence of a company in a town leads to many economic advantages since many additional businesses emerge to provide auxiliary services to the company or act as suppliers. When the company is closed down due to outsourcing, the supporting businesses are forced to close.

Outsourcing decreases the capability of the government to support entrepreneurs. Government support, through grants and tax incentives, has historically contributed to the growth of entrepreneurship in the US. However, this government support is dependent on the government having adequate revenue. Lagrone (2014) documents that the US suffers from reduced taxes when manufacturing jobs are moved overseas. Job loss leads to lower income tax as former workers are rendered jobless or have to move to lower paying jobs.

According to Mohr (2012), outsourcing of manufacturing jobs leads to a loss of the manufacturing capacity of the country. As more jobs are moved overseas, the US loses its capacity in the specific industries. US companies engaged in outsourcing end up dedicating more of their capital resources to the plants in the foreign countries. This leads to a neglect of the home industries leading to stagnation in the manufacturing sector.

This paper has argued that outsourcing of manufacturing jobs overseas has a negative impact on the US economy. From the arguments made in this paper, it is clear that outsourcing leads to job losses and destroys the manufacturing industry in the country. This phenomenon also damages entrepreneurship and this had adverse impacts on our society and the economy of the US as a nation. The government should therefore take action to curb the practice of outsourcing and therefore safeguard entrepreneurship and the US economy.

References

Lagrone, R. (2014). Outsourcing/Offshoring: The Cost to America’s Economy and Working Families. Web.

Mohr, A. (2012). 4 Ways Outsourcing Damages Industry. Web.

Pearlstein, S. (2012). Outsourcing: What’s the true impact? Counting jobs is only part of the answer. Web.