With the United States economy in shambles and the unemployment rate at the highest it’s been in years, analysts are trying to figure out how to solve the crisis. In 1989 the economy of the United States would be changed forever when businesses across America officially declared outsourcing an official strategy. The history of this begins during the Industrial revolution when a change in the work force occurred throughout America. Prior to the industrial revolution, majorities of the people in the United States were employed as farmers, or in some cases skilled craftsmen but when factories started to develop and areas of urbanization began to arise, the American economy shifted. The factories produced many jobs, and caused an increase in the amount of money being printed. American businesses flourished at this point in time, as wages and the labor force were not federally mandated. Companies could pay workers however much they wanted and a person of any age could be a factory employee (More 40-45).

However, this great amount of freedom that business had also created an immense number of problems. The standard of living in many cities was very poor and many children were forced to work at a young age instead of going to school. These conditions did not improve until the early 1800’s when the Factory Acts were created. These acts established guidelines for how factories were to treat their employees and the number of hours an employee could work. Another step in the right direction was when President Franklin Roosevelt signed the Fair Labor Standards Act of 1938, which set the first minimum wage. Although the move was beneficial for the American people, both large and small business owners fail to appreciate it as much as the more they have to pay their workers the less revenue they will receive. Many business owners realized a logical solution to this was to place their factories where the work was much cheaper. Today in the United States outsourcing has become a major trend in a wide variety of industries. Since the minimum wage is continuing to increase businesses need to find a way to combat the rising cost of labor (More 138-140).

As a result, the American people are suffering a massive decrease in the number of unskilled labor jobs available in the United States. Nowadays it is almost impossible to make a decent living with only a high school education and staying above the poverty line is totally unfeasible if you have any less than that. The lack of jobs is the reason why many politicians and government officials are opposed to outsourcing and are trying to make legislation to lessen or even prevent it from occurring. From a non-business perspective, all signs are pointing to the decision that outsourcing is a very awful thing, but if that is the case then why does it seem to be becoming a rapidly popular trend. There must be some positive aspects besides an increased profit for the business owners. America is struggling to remain the prosperous nation that it claims to be, and in this day and age where what happens in this country is controlled by what people feel is truly right, there must be reasons why outsourcing exists. This raises a question about what American companies should be doing in the current situation the economy is in. Do the benefits of American companies outsourcing their labor outweigh the cost of a loss of jobs to American citizens?

Outsourcing in the United States occurs when companies move factories and customer support facilities overbroad to where labor is inexpensive. Many businesses that we all know such as, Dell, AIG, Microsoft, Quaker Oats, and Ford are just some of the hundreds of popular and well-known companies that participate in outsourcing (http://www.cnn.com/CNN/Programs/lou.dobbs.tonight/popups/exporting.america/content.html). Ford, a company known for its American roots has been laying off thousands of Americans simply because it is cheaper in the long run to outsource. The first significant increase in outsourcing took place when the production of toys and clothing apparel goods took place. Since these items required a low level of technology and were relatively easy to produce, these became the first products that United States companies really took advantage of sending their fabrication to other countries. This simple manufacturing was the first time companies really took into consideration the cut in costs offshore production would provide them. As the availability of affordable transportation improved offshore manufacturing became increasingly popular. United States companies took advantage of poorer countries starting to achieve more progress and education and used their new capabilities to their advantage. As this spectrum of countries increased, companies started to use them for more than just manufacturing. It became more common for service jobs such as accounting and customer support positions to be opening up overseas (History of Outsourcing).

Even though outsourcing was not made an official business strategy until 1989 many companies took advantage of its benefits before that. Businesses have always relied on external suppliers to aid them in areas in which they are lacking. It was not until the end of the millennium however, until companies started taking a serious interest in outsourcing as a cost-saving measure. From that outsourcing has evolved into giving businesses even deeper levels of motivation to practice it. Many companies now see outsourcing as a strategic plan of making new partnerships, and it provides them with a better market position.

While the media often looks at the negatives of outsourcing there are positives in the system. Outsourcing generates a vastly higher profit for companies because they do not have to pay their workers nearly as much as they would if their factories were in the highly government regulated United States of America. However the good aspects to it become slightly blurry when we totally disregard any gain businesses might be receiving. The real question deals with how the people of this country and of this world are benefiting by a large world power such as the United States send a majority of their factory labor elsewhere. From a “global” perspective, outsourcing actually does a large amount of good. According to Robert Reich, Americans have a skewed view on the way outsourcing affects other countries. We primarily see companies as taking advantage of weaker countries’ dire situations. The general company sees America’s outsourcing businesses as reaping the benefits of their low standard of living and paying them inhumane wages for the menial labor. Reich thinks this is a direct contrast to what is actually happening. Even though Reich agrees that we are using their low level of capital need to our advantage, he also sees that we are benefiting them by giving them our business. He uses the example of an American data entry company outsourcing its labor and paying their employees above the average income of their country. Reich states that, “Compared with the average Philippine income of seventeen thousand dollars per year, data entry operators working for Saztec earn the pricey sum of two thousand six hundred and fifty dollars.” This contrast shows that although the Philippine standard of living is way below what it is in the United States, America’s companies are actually aiding progress in heightening the expectations of what employees in that country can expect to make (Reich 420-422).

Since President Obama was inaugurated in January there has been a panic in India over his proposed outsourcing policy. Obama has promised the American people that he will make sure jobs stay in America and stop the transfer of job overseas to countries such as India. Obama “does not want America to shy away from globalization but he does not want Americans to suffer from job loss.” India has a huge share in outsourcing which accounts for seven percent of its national economy. Part of President Obama’s stimulus package would make it harder for companies to hire foreigners to work overseas (http://www.businessweek.com/globalbiz/content/mar2009/gb2009033_652807_page_2.htm). India’s current worries demonstrate the importance of outsourcing in the global economy. Suppose outsourcing is halted in India, which would result in a massive change in the economic structure, possibly even a depression. As a result the rest of the world would also suffer, as India would be unable to trade and interact with other countries as before. Outsourcing provides a regulation of business across the globe and keeps the global economy balanced.

Another advantage of outsourcing is seen when one explores what businesses can do with the money they save from outsourcing. Along with increasing their paychecks they can use the money to further different aspects of their company. This extra income could also rejuvenate some businesses that are on the verge of death. It also gives some entrepreneurs the chance to fund new research in order to develop new ways to run their company and innovative methods of manufacturing their products. Outsourcing may be the answer for how we, as global citizens, should approach the business world with progress in mind. In order to be able to make advances as a society, we need to have the means to afford it, and outsourcing may provide us with the necessary funding we need to make new technological strides that would have been otherwise impossible (Engardio).

There are a number of economists that feel outsourcing is a healthy aspect of the American economy, and it is a very natural occurrence that has many positive sides to it. According to the Ben Bernanke, the chairman of the Federal Reserve “Most economists believe that such job flows are normal and healthy phenomenon since trade increases economic welfare.” Many people that outsourcing is taking away jobs and there is no possible way that it could be doing any good, but according to Bernanke, this is not the case. He agrees that outsourcing does relocate numerous jobs, but he thinks that in that process it also creates many higher paying jobs (Greene).

Ask any politician and they will ramble for an extended period of time about the negative effects of outsourcing. Politicians feel somewhat of a responsibility for the people they represent, and when the unemployment rate is skyrocketing due to increased levels of outsourcing, they definitely have something to say about it. When New Jersey state senator Shirley Turner was interviewed by eWeek, she was unafraid to voice her opinions. She says tax payer money is being lost when local companies that pay residents around ten dollars an hour move to a place where they are paying their workers around one dollar per hour. She wants to be able to control this on a state level in an attempt to drastically decrease the unemployment rate. Ms. Turner defends her position by saying, “I’m protecting jobs in this country. Our economy is in a recessing. We have a deficit, just like any other state.” She feels that American businesses need to be more considerate of the citizens their effecting instead of solely making decisions because of the large raise they will get from less expensive foreign workers (eWeek Interview).

Politicians apparently are not the only people who have such strong negative feelings regarding outsourcing. According to a book on outsourcing by Ron Hira, “outsourcing is nothing less than a direct assault on hardworking middle class men and women in this country” (Hira, IX). He thinks that American companies are paving the way to destroying American jobs. The University of California has estimated that fourteen million white-collar jobs are going to be lost as a result of outsourcing, and around one ninth of all of the jobs in the United States have the possibility of getting outsourced (Hira 2)

These statistics show how low ranking manufacturing jobs are definitely not the only ones affected by offshore outsourcing. Jobs such in architecture, engineering, accounting, and information technology are all in danger of being outsourced. People who perform these jobs chose them because they thought their higher level of education would provide them with a stable career, but now they are finding that that is not the case. He does not see this being fixed in the near future either simply because the United States cannot compete with the low cost of labor in other countries. The cost of living in Asian countries such and China and India is one fifth of what it is in the United States, and it is not expected to catch up with us for a long time. He does not seem to feel that there is hope for those who have lost their jobs as a result of outsourcing to find work elsewhere. The Department of Labor has gathered that one in three workers who are laid off as a result of offshore outsourcing remain unemployed (Hira 5).

Although globally outsourcing is beneficial, as a country we are definitely suffering from its effects. Americans just cannot compete with workers in other countries who will provide the same service for one-fourth the cost or less. Outsourcing, especially to India, had been the cause of about ten percent of the two million jobs that have been lost to American citizens in the past three years. It is not just the unskilled labor jobs that are being taken either. Recently, more and more jobs in computer programming services have been transferred overseas. This is angering many Americans because they once thought that a white-collar job that requires an education would offer its employees a level of security. Apparently this is not the case as the jobs are simply being lost in the market.

Business owners’ looking after themselves is not totally a negative thing. From seeking cheap labor, American businesses truly are helping people in countries that really could use a hand. However, it is not clear that it is the United States responsibility to out the economy of other countries before its own. In order for us to aid others, we first have to be strong from within, and it seems as though outsourcing is kicking the stool out from under our economy. As our state and national deficits decrease, we are going to become nothing but weaker and weaker. If businesses continue this path of globalization, it is possible that local, state, and federal governments might have to step in order to prevent devastation to the American people and its economy.