Question

Many service-sector jobs in the United States have moved to other countries where these jobs are done at a fraction of the cost. The outsourcing of jobs overseas is heavily debated by politicians, policymakers, and economists in the United States. Based on your understanding of trade and the benefits and losses from trade, how do you think outsourcing affects social surplus in the domestic economy?

Answer 1

Outsourcing is when a part of services are being done by an external organisation. Also the developed countries now a days move to other countries a part of the production so that it is produced at a lower cost,

This increases efficiency because the company performing that outsourcing business is specialised in those activities. Also it is seen that developing countries have abundant labour supply and so the labour is available at low cost and skilled also.

There are debates on outsourcing which are mainly centred on the fact that due to outsouricng jobs to the developing countries , the jobs in the home countries are being reduced . But some other argued that due to this the cost of production has reduced for firms since the labour and costs in developing countries is available at low cost so the social surplus in domestic country will increase as the same work will be done at a lower cost

For developing countries too this is seen as a good opportunity as the employment opportunities inj a labour abundant economy like India and China will increase . Also due to outsourcing the better and high quality are available in the home country as well.