Submitted by: Submitted by outsourcing
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Category: Business and Industry
Date Submitted: 03/22/2011 04:21 AM
Disadvantages - Outsourcing affects the US negatively
Job losses:
In terms of the number of jobs moved offshore, many predictions are based on experts’ judgments and vary depending on underlying assumptions. In 2003, the estimated number of US service jobs moved offshore was 315,300, and for 2004 it was 536,500 (Cummins, 2004). According to Forrester Research Predictions, about 3,314,000 workers are expected to lose their jobs to outsourcing by the year 2015 (Tarbouni, 2004). McCarthy (2004) believes the pace of outsourcing will increase. He estimates job losses of over 300,000 per year and a cumulative loss of 3.4 million jobs by 2015, representing $151 billion in wages. Fortune 500 companies like Amazon, General Motors, Dell, American Express, General Electric, and many others, as well as a range of more moderately sized firms, have already outsourced millions of jobs overseas. It is estimated that up to 25 percent of traditional information technology jobs will be outsourced to developing countries by 2010 (Ball et al., 2006). Recent outsourcing of jobs includes not only a large number of blue-collar jobs but also white-collar ones. According to Bardhan and Kroll (2003), about 14 million white-collar US jobs are at risk of outsourcing.
Frequent career changes and retraining for American workers:
Outsourcing is part of international trade, in economic theory will not reduce the USA’s production and employment in the long run; however, in the short run those workers losing their jobs to outsourcing may have to relocate to other states or move to other industries where jobs are available. They also often require retraining to be suitable for jobs. This retraining can be difficult for less skilled, less educated or older workers. This group of workers, even when reemployed, may lose more than 30 percent of their earnings (Bahrami, 2009). Earnings losses rise with previous job tenure and age but are less for more educated workers (Kletzer, 2001). In fact,...