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How does foreign outsourcing affect the American economy?

In business terms outsourcing commonly refers to a business contracting to a third party. Usually a business will keep its processes internally or within the company, but if it is economically beneficial they will contract elsewhere. Sometimes it involves moving recourses from one firm to another but not always. It can also include contracting to parties in foreign countries. The foreign outsourcing also called offshoring is the part in which affects the American economy the most.

Outsourcing is an effective method of moving around and maintaining quality products when it is used within a country. It allows businesses to specialize in just one or two things and pass the products to a different company with their own specializations. It is cheaper for a company to only specialize in one thing and usually they become very good at it. The companies then have more money to grow which allows them to hire more people, it also has positive effects on countries in which they outsource to which allows them to grow and continue the system.

Unfortunately more often than not outsourcing involves sending products overseas or creating products overseas and importing them to the United States. In many cases labor is cheaper in other countries, because the United States’ minimum wage is higher and required benefits are higher than other countries. By taking advantage of this loophole businesses can save a lot of money by hiring foreign labor. This only hurts the American economy because it creates a large gap between the middle/low class workers and the upper high class. Foreign outsourcing also creates jobs outside the United States but limits the employment in the home country.

Outsourcing can be a positive tool when it is used in cooperation with other companies in the within a country. It can lead to sharing of wealth and specialization and create jobs across the country. Products improve and more jobs are created. Just as easily it can be a very negative tool, when greed is the sole factor companies find max profit in taking advantage of other countries lower wages. They can save money and move around the system. Our country’s employment goes down and big business moves up creating a gap and a hostile environment between the lower class who are trying to find employment and the big business benefiting from loopholes in the system.