5 Ways Outsourcing Helps America’s Economy Grow
A recent study states that nearly 70% of Americans believe outsourcing is hurting their economy… but are they right?
As an American citizen from Minnesota, I’ve heard all of the arguments from people against outsourcing…
“Yes I am all for helping others, but why not employ our own people and then help others!”
“Outsourcing is taking jobs from millions of Americans.”
“It’s taking away jobs from young people.”
“American jobs need to remain in America.”
I even remember one early and bitter-cold Minnesota morning, my dad and I were watching the news while routinely sipping our strong, black coffee. I was headed to university… he was headed to work for the day.
The story on the news was about a quarrel between Steve Jobs and Barrack Obama on the subject of outsourcing. Obama is known for his opposition to outsourcing and Steve Jobs is well-known for his success with outsourcing.
During a Silicon Valley dinner with many big names in technology, Jobs responded to Obama’s question “Why can’t that work come home?” by resolutely saying “Those jobs aren’t coming back”.
America was just recovering from a recession and I remember my dad saying “Steve Jobs has helped create 1 million American jobs, how can anybody, even Obama, argue with that?”.
Although the negatives of outsourcing are constantly thrown at Americans… the bottom line is that outsourcing results in lower costs for firms, greater profits for stockholders and lower prices for consumers — leading to an increase in the standard of living and an overall increase in employment.
In other words… America’s future depends on embracing global trades.
So to get the ball rolling, here are 5 reasons you need to think rationally and not give in to the fear/hysteria surrounding outsourcing (unless you don’t care about America’s future)
1. Outsourcing allows America to do what it does best
America is extremely good at innovating and starting new businesses — and outsourcing boosts this efficiency.
There’s a good reason that the iPhone is “Designed by Apple in California and Assembled in China”
The outsourcing “revolution” began in the 1970’s with outsourcing manufacturing to China. But even today your average manufacturer (including Apple) outsources 70–80% of their finished product. All successful companies like Apple began with someone with a brilliant and innovative idea, but not enough resources to develop and build that idea into a successful business. This is why Apple continues to outsource nearly 700,000 manufacturing jobs.
When you use cheap labor to help increase profits at your company, those profits allow you to give higher quality jobs to Americans. Which in turn helps build a stronger economy, instead of spawning more lower class workers and families. Yes… outsourcing is truly a mutually beneficial trade. Global trade like outsourcing allows America to thrive in its most efficient areas, thus creating more productivity and wealth.
According to the Social Security Administration, 51% of American workers are now making less than $30,000 a year.
38% of working age Americans are living below the poverty line. ($28,410)
Why would you contribute to the growing lower class and shrinking middle class by forcing Americans with higher potential into low wage jobs, when you can just give this work to an Indian worker that is used to making next to nothing and needs to feed his family? (see #4 for more)
2. Outsourcing creates CAREER opportunities
For many countries that struggle with poverty and war, outsourcing is a golden opportunity to a better career and a better life.
To give just one example, the ongoing and somewhat hidden conflict going on between Russia and Ukraine is creating thousands of refugees from the eastern regions of the country. Some of these refugees are able to relocate to European Union, Canada, or America, but many of them have decided to relocate to Kyiv, capital of Ukraine, because visa restrictions prevent them from moving outside of the country.
Masha, a college student, and supervisor at a Ukrainian call center, SupportYourApp, is from the Donetsk region of Eastern Ukraine, but now lives in Kyiv. Masha is multilingual in French, English, Russian, and Ukrainian. Finding well paying work that the outsourcing industry offers, simply isn’t available in her hometown of Mariupol, but with the recent surge of outsourcing jobs coming to Eastern Europe, and her unique set of skills, Masha was able to easily find work upon moving to Kyiv.
Masha’s family still lives in Mariupol which for two years has been the target of artillery attacks by Pro-Russian militants. Although the ongoing conflict makes it very difficult for her to meet them, working at an outsourced call center in Kyiv that supports US-based clients, allows her to make enough money to help support them and herself as she continues finishing her university education.
A Forbes article below perfectly explains the logic behind outsourcing (read the full conversation between Trade & Fear):
Mr. Fear : It is wrong to outsource American jobs to China.
Mr. Trade: Why is that?
Mr. Fear: when you do this you are aiding someone in stealing a good American jobs, you take a job from an American and give it away.
Mr. Trade: Tell me Mr. Fear, you don’t think it is wrong to spend a little less money on stuff for myself and donate it do you?
Mr. Fear: No, I would say that is a good thing to do.
By outsourcing any of your business tasks, you’re helping your business grow, while at the same time… supporting thousands of people in unfortunate situations by giving them a career that leads to a better life. You’re putting food on their table. You’re giving them a better salary that can lead to a better education. You’re increasing the number of intelligent minds like Masha that can potentially improve the world.
3. Outsourcing creates new American market opportunities in foreign countries
The more income a foreign worker is making, the more likely they will buy American merchandise.
Yes, outsourcing also creates new jobs in other countries, but the marketplace is not a zero-sum game. Aside from the obvious benefit of helping pull poor countries out of the economic basement, it’s also beneficial by stimulating economic growth overseas, the U.S. is creating new markets in which to sell its products.
American companies that outsource, pay their employees wages up to 6 times higher than the national average. For example, the average monthly income in Ukraine is from $100–150. This is hardly enough to pay for monthly rent and food, let alone a brand spankin’ new, imported iPhone.
Think about it: the more disposable income a Chinese engineer has to spend, the more likely it is that he or she will buy a new gadget from an American company or perhaps see Hollywood’s “Sky Captain and the World of Tomorrow.” TechNewsWorld
By outsourcing, you’re helping your company grow by influencing Masha that works on an iMac 10 hours a day, to purchase American products with her higher salary. You’re influencing outsourced workers to spread the word to friends and family about your product. And you’re influencing them to contribute more money to the American economy.
4. Outsourcing makes American startups more competitive
America is full of deeply entrenched enterprises, outsourcing enables small startups to compete with the big boys.
Outsourcing is the startup world’s secret to being able to complete a wide range of labor-intensive tasks that are expensive to scale up in-house. Without the help of outsourcing, huge companies like Slack, Skype, and AppSumo, probably wouldn’t be in the powerful positions they’re in today.
Starting a venture and developing your product or service requires working quickly and efficiently. You need to ensure your startup offers value in terms of innovation, quality and convenience, even though you have limited resources and may be racing against the competition to be first to market. Entrepreneur
Of course, outsourcing has come with its fair share of criticism, but for the small tech companies that need to focus on a big, innovative idea, outsourcing is key to stepping up their game. Bryce Maddock, CEO of Philippines-based BPO provider TaskUs addresses this criticism…
“You can’t skirt the fact that these are jobs that could potentially go to people in the US but instead are going to people in the Philippines,” Maddock says. “That’s criticism that we respect. But it’s important to recognize that we’re not trying to steal jobs — we’re trying to make US startups more competitive.”
By outsourcing your labor-intensive tasks, you’re enabling your company to stay fresh and relevant in a country where startups are popping up every day. You’re saving time, money, and resources that can be spent focus on the important business.
5. Outsourcing keeps product and service prices down for your consumers
At the most basic level, outsourcing is form of trade. It produces economic gains by minimizing production costs.
It’s funny… the same people that like to complain about how negative outsourcing to China, India, Eastern Europe, and the Philippines is… are more often than not, the same people that are wearing Nike shoes that they bought in an outlet store, texting on an iPhone 6s that was assembled in China, or calling Masha in Ukraine for customer support.
Many Americans don’t realize the positive impact that outsourcing has on their wallet. They pretend to act concerned when Chinese workers take away manufacturing jobs from Americans, but are openly ecstatic when they can buy the new iPhone 6s for only $299.
“The idea is simple: By outsourcing low-skilled jobs abroad — for instance customer service, data entry, or labor-intensive manufacturing — companies can obtain products and services at a lower cost than if they had tried to create or perform them. That allows companies to increase efficiency and productivity, creating an overall benefit to the economy. Meanwhile, the lower costs of less expensively produced services and goods are passed on to consumers. In short, all parties benefit.” Source
There you have it…
5 simple reasons to drop that old stereotype of an Indian cold call center in favor for a new age of globalization.
With that said, maybe it’s finally time to be open minded and accept the fact that outsourcing is and WILL remain to be one of the best strategies to grow your business, increase revenue, and boost efficiency.
All questions and criticism are more than welcome!
Jack P.
