Offshoring and Outsourcing Outsourcing, As Term Paper

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By relocating their businesses, companies save significant amounts of money, time, and other resources that can be better used for other purposes, therefore increasing the company's productivity and general efficiency. Also, "this positive effect of offshoring is considered the primary reason why companies prefer to outsource their jobs to other countries, especially those in the South East Asia since wages are undeniably cheaper" (ePacific, 2007).

In addition to this, it has been proven that offshoring and outsourcing are responsible for creating significant numbers of domestic jobs in certain domains of activity. In other words, "outsourcing appears to be connected to increased U.S. employment and investment rather than to overall job loss. Some U.S. jobs are certainly lost to other countries. On the whole, however, firms involved with offshore outsourcing are not shifting net jobs overseas but instead are creating jobs both in the United States and in other countries" (Mankiw & Swagel, 2006).

Amounts of money saved by companies by offshoring

In their paper, Mankiw and Swagel revealed the cost-benefit calculation for one dollar of outsourcing: savings accrued to U.S. investors from lower costs due to outsourcing are of $0.58; imports of U.S. goods and services by providers in India are of $0.05; profits transferred by the U.S. overseas affiliates to parents are of $0.04; the value from U.S. labor reemployed is estimated to be reaching $0.45 to $0.47 (Mankiw & Swagel, 2006). The profit emerging from using these practices is mostly reinvested in the company, in other areas that require increased financial resources. Therefore, with a better resources allocation, the company's productivity and efficiency is increased, which positively affects all the parties involved: the company, its customers, and the U.S. economy.

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Another category affected by offshoring is represented by entry level graduates from college. Given their level of experience and the job losses, they will not be favored for being employed in certain areas, on the one hand. On the other hand, their chances might increase, given the jobs created and domains developed by the practice of offshore outsourcing.

Reference List

Outsourcing (2007). Wikipedia, the free encyclopedia. Retrieved September 19, 2007 at http://en.wikipedia.org/wiki/Outsourcing.

The Future of Outsourcing. How it's transforming whole industries and changing the way we work (2006). BusinessWeek online. Retrieved September 19, 2007 at http://www.businessweek.com/magazine/content/06_05/b3969401.htm.

Offshoring (2007). Wikipedia, the free encyclopedia. Retrieved September 19, 2007 at http://en.wikipedia.org/wiki/Offshoring.

Kirkegaard, Jacob Funk (2007). Offshoring, Outsourcing, and Production Relocation - Labor Market Effects in the OECD Countries and Developing Asia. Peter G. Peterson Institute for International Economics. Retrieved September 19, 2007 at http://www.petersoninstitute.org/publications/wp/wp07-2.pdf?jmid=850290484.

The Employment Situation (2007). United States Department of Labor, Bureau of Labor Statistics. Retrieved September 19, 2007 at http://www.bls.gov/ces/home.htm#news.

Regional and State Employment and Unemployment (2007). United States Department of Labor, Bureau of Labor Statistics. Retrieved September 19, 2007 at http://www.bls.gov/lau/.

Mankiw, Gregory N. & Swagel, Phillip (2006). The Politics and Economics of Offshore Outsourcing. Harvard University. Retrieved September 19, 2007 at http://www.economics.harvard.edu/faculty/mankiw/papers/Outsourcing%20-%20march%207%202006.pdf.

Positive Effects of Offshoring (2007).….....

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