Question

Outsourcing of services to foreign countries:

1. Cost the U.S. economy an estimated 5 million jobs by 2005.

2. Mainly impacts workers in business services such as data entry and software development.

3. Is a serious concern for workers in high-wage manufacturing industries.

4. Will have a serious negative impact on all service sector jobs in the United States.

Please explain. Thank you!

Answer 1

Globalization has seen increased flow of capital and revenues for most countries including the United States which has been the pioneer of global innovation.

However that said, over the years some negative impact have also been there because of which it is long debated whether or not globalization can exist in the current scheme which is being currently implemented.

The above case, is a clear representation of the same. When countries such as India and China opened up to globalization, companies across the globe entered the market with profit making as their core objective.

Gradually over the years, these countries and their population gained knowledge and local companies sprung up which started giving competition to the foreign counterparts.

On the other hand, the salaries demanded by people is relatively lower in these countries and therefore such services can be offered at most times for half the cost than the United States offers.

As a result, the service industry of the United States is largely suffering and jobs in software development and data sciences are vanishing fast and even American companies today prefer outsourcing them to the Asian counterparts due to the costs involved.

On the other hand countries such as India are imposing up to 100 % taxation on imports of American goods such as Harley Davidson motorcycles.

This highlights the fact, that developed countries including the United States require a strategy shift which has been highlighted by the current Trump administration also.

Please feel free to ask your doubts in the comments section.