Question

(a) In the short run, outsourcing leads to job (b) In the long run, outsourcing benents domestic

Answer 1

A. In the short run, outsourcing leads to job loss.

In the short run there is no definite impact of outsourcing. We cannot say that due to outsourcing jobs are being lost because when we outsource then we relocate from high labour cost area to low cost area. Therefore, we can say we relocate. When a country outsources it's job to a US based company then the domestic labor demand will increase. Or,when a US based firm outsources it's work then it reduces both US , wages and employment.

B. In the long run, outsourcing benefits domestic consumers and producers.

Due to outsourcing the jobs will move to highly skilled worker. Hrnce, the productivity will enhance as a result both consumers as well as producers will get benefitted.