The ongoing national debate about the employment practices of U.S. companies and private equity firms abroad features two phrases that confuse rather than clarify the issues: offshoring and outsourcing. For most Americans, the phrases are interchangeable, referring to the agonizing loss of jobs here in the United States, many in manufacturing, to workers abroad—aided and abetted by U.S. businesses and investors.
Indeed, a large percentage of Americans are concerned about jobs shifting from the United States to other countries. And they don’t put much stock into whether those jobs stay within a particular company or are contracted to a third party when the ultimate outcome is jobs lost at home. This is why most Americans find debates about outsourcing versus offshoring to be meaningless. To them it is all about the overseas outsourcing of jobs.
Still, before we present the five most important facts about overseas outsourcing, let’s first get the definitions right. According to Plunkett Research, a leading research group on outsourcing and offshoring practices, offshoring refers to:
The tendency among many U.S., Japanese and Western European firms to send both knowledge-based and manufacturing work to third-party firms in other nations. Often, the intent is to take advantage of lower wages and operating costs.
This differs from outsourcing, which Plunkett Research defines as “as the hiring of an outside company to perform a task that would otherwise be performed internally by a company.” The difference lies in the fact that outsourcing can take place within our domestic borders or abroad. But for the purposes of this column we will examine the combination of outsourcing to other countries and offshoring, and refer to the combination of these practices as “overseas outsourcing.”
So how pervasive is overseas outsourcing in our economy? Comprehensive data on overseas outsourcing practices are hard to establish, due in large part to limited government information which, according to the Congressional Research Service, were “not designed to link employment gains or losses in the United States, either for individual jobs, individual companies or in the aggregate, with the gains and losses of jobs abroad.”
Furthermore, companies attempt to limit exposure of their overseas outsourcing practices, leading researchers to believe that even the most extensive methodologies only capture one-third of all production shifts. Still, there are important factors to understand about outsourcing as the debate makes its way back onto the national stage.
According to the Washington Post, across-the-board federal spending cuts set to take effect on March , 2013 are likely to have a negative impact on the states, Democratic Governors Association chairman Peter Shumlin said Friday. Connecticut Gov. Daniel Malloy said, “This is another kick in the teeth by Republicans to the middle class of America. That’s who’s going to pay the price because they don’t want to meet the president in the middle, they don’t want to negotiate”.
The problem is America off-sourcing our jobs to China and other foreign nations. And yes, it still continues today and it will until we pass effective legislation that makes it unprofitable for U.S. Corporations to send our high paying manufacturing and high-tech jobs overseas. We have eviscerated our own tax base these past 30 years by our-sourcing over 30 MILLION JOBS to foreign nations through so-called “Fair-Trade Agreements” that have effectively destroyed our own…
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