How Do Outsourcing Make Positive Effect On US Economy?

how do outsourcing make positive effect on us economy

The debate over the impact of outsourcing on American workers has been ongoing for a long time. However, this article intends to present a more positive perspective on outsourcing through the title “How do outsourcing make positive effect on US economy?”. Let’s go through the factors step by step!

1/ Outsourcing helps Americans focus on their strengths

Americans are very good at innovating and creating new businesses, and outsourcing enhances this efficiency.

Let’s revisit the theory of comparative advantage for a moment:

“If a country can produce goods or services more efficiently than another country, that is considered comparative advantage. The country will focus on producing that goods or services, while the other country will produce goods that they have a comparative advantage in. Both countries trade with each other to obtain products that they don’t produce efficiently. This will boost economic growth and prosperity.”

Competition between countries in a specialized field hinders the innovation process. It damages the entire global economy because companies are currently wasting valuable time and money while competing with each other.

When the US outsources, it allows American companies to focus on their specialized fields to produce higher quality and more efficient products. Focusing production on specialized fields enhances specialization in companies and stimulates the innovation and development of technologies. It also allows American companies to create unique and exclusive products, increasing their competitiveness in the market.

In summary, comparative advantage is a mutually beneficial situation for both the US and other countries. American consumers can receive cheaper products (due to reduced costs), businesses can save costs to invest in product research and development, and countries with a large workforce can invest in developing better manufacturing processes.

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Outsourcing helps Americans focus on their strengths

2/ Outsourcing helps startups in the US become more competitive

Outsourcing provides an opportunity for small startups to compete with well-established businesses in America.

Outsourcing is the secret weapon for entrepreneurs to accomplish a range of tasks that require a lot of labor and resources to expand their businesses. Without the help of outsourcing, large companies like Slack, Skype, and Apple may not have the powerful positions they have today.

When starting a business project and developing a product or service, you need to work quickly and efficiently. You need to ensure that your startup provides value in terms of innovation, quality, and convenience. Despite limited resources, you must compete with your competitors to be the first to enter the market.

By outsourcing labor-intensive tasks, startups are saving time, money, and resources that can be devoted to focusing on important business tasks. They are also helping their companies stay fresh and relevant in a country where startups are growing every day.

3/ Outsourcing creates new opportunities for American businesses to expand their market overseas

By stimulating other economies, the US is actually stimulating its own growth.

Outsourcing by American companies to foreign countries stimulates investment in those countries. This investment helps boost the economies of those nations by improving the standard of living and providing jobs for the unemployed. It also increases a country’s ability to repay its debt to the US and can foster better political relationships.

Once the economies of these countries are improved, it allows them to become part of the global market and increases the likelihood that they will consume more products exported from the US. They will also promote these products to their friends and families.

US companies often pay foreign employees much higher salaries than the average salary in their home country. For example, in Vietnam, the average monthly income of a civil engineer is around $500. With this salary, people can hardly meet their basic needs, let alone afford to use a new imported iPhone.

Another long-term benefit is that the US can build relationships with other regions of the world and engage in long-term trade agreements. Business activities between the US and other countries will stimulate the development of other businesses, and therefore provide more jobs for individuals who need them.

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Outsourcing creates new opportunities for American businesses to expand their market overseas.

4/ Outsourcing helps Americans get goods and services at a cheaper price

When American businesses outsource, the cost of labor decreases. This helps businesses reduce the cost of their products and services to be more competitive in the global economy. As a result, consumers benefit from lower prices.

For example, Americans can easily use an iPhone priced at $399 when it is designed by Apple in California and manufactured in China.

But how much benefit does the U.S. really get?

Satwik Seshasai, CTO of NextDocs, and Amar Gupta, Professor of Entrepreneurial Mindset/MIS and Senior Director of Business Research and Development, revealed that “For every dollar spent overseas, U.S. companies receive $1.12-$1.14, while foreign companies receive only 33 cents. Additionally, … software outsourcing provides an overall benefit to the U.S. economy of $16.8 billion” (Seshai and Gupta).

5/ Outsourcing helps Americans gain more employment opportunities rather than worsening unemployment

This is the most controversial aspect of outsourcing, as many people believe that outsourcing is taking away American jobs. However, as we have analyzed above, outsourcing can help the US economy grow and create more employment opportunities.

Some Americans worry that they cannot compete with cheap labor forces in other countries. However, it is important to note that we need to enhance the competitiveness of domestic workers instead of solely blaming outsourcing. Cultural fit is a big advantage for domestic workers, along with the ability to work in the same time zone and collaborate directly. Outsourcing has its own challenges and some companies prefer to hire employees domestically. It depends on the company’s vision, culture, and business objectives. Some products cannot be produced anywhere except domestically, especially when developed countries hold patents for some of the world’s most advanced technological solutions.

In countries that receive outsourcing, workers also need to demonstrate their value to be recruited. Competition is an inevitable part of a person’s career development, and therefore, it should not be seen as a specific consequence of outsourcing.

Outsourcing also has indirect benefits for the economy, attracting top talents from all over the world and bringing diversity to organizations.

Furthermore, currently, US businesses are promoting the process of automating production, which is also one of the main causes of unemployment in the US.

Furthermore, as production costs decrease due to outsourcing, product prices also decrease, resulting in increased consumer demand. This creates a higher demand for production to meet the market, enabling US businesses to expand and strengthen domestic employment.

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Outsourcing helps Americans gain more employment opportunities

Hopefully through the article “How do outsourcing make positive effect on US economy?”, we have presented the most positive aspects of outsourcing for readers to refer to. Please leave your comments below to let us know your opinion!

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