Question

5) What are the economic impacts of outsourcing? What can governments do about outsourcing? What groups favor and oppose outsourcing in the political debate and why? Please reference assigned readings in your answer.

Answer 1

Outsourcing occurs when a company ( suppose in US ) gets a part of its job done by workers in such a country where labor costs are very low . Outsourcing is mainly done to reduce costs of production . The labor is hired from emerging foreign markets with lower standards of living . So when the good is shipped back to US it has a lower cost . This aggravates the problem of unemployment in US . Also the cheaper goods is sold at a higher price in US markets which can lead to inflation , income inequality etc .

Government can restrict outsourcing by laws or the government of countries with emerging markets can set minimum wage laws to prevent exploitation of their labor .

Owners of companies , entrepreneurs favor outsourcing in order to cut down on costs of production . Workers or the working class oppose outsurcing since that reduces job opportunities for them or put a downward pressure on wages .