Offshoring

In the 2016 Presidential election, then-candidate Donald Trump repeatedly asserted that millions of jobs in the United States are being lost to China. From there, the issue of offshoring or, according to the Oxford Dictionary, the “the practice of basing some of a company's processes or services overseas, so as to take advantage of lower costs” was on the perceptual forefront of many American’s priorities. 

The trend of offshoring began in the 1970’s when corporation executives like General Electric’s former CEO, Jack Welch, began offshoring manufacturing jobs in an effort to protect shareholders as opposed to company employees.

Company's decision to move to other countries are derived primarily from the fact that the move is cost-effective. Offshoring primarily occurs to the countries such as China, India, Vietnam, and Mexico. With lower regulations in these countries, conglomerate business owners are able to pay substantially less and thus see moving jobs to these areas as a more economically viable option. For instance, according to the Bureau of Labor Statistics, the average hourly wage for a Chinese manufacturing worker is less than even a tenth of their U.S. counterpart. These regulations do not only apply to labor and business, but policies regarding the environmental impact of companies are also more lax.

Recessions in the United States along with increased globalization have also been notable reasons for an increase in offshoring. The 2001 recession along with the Great Recession in 2008 incentivized companies to slash jobs at home in an effort to gain greater capital. Moreover, increased communication globally have expanded offshoring beyond just manufacturing jobs as white-collar or educated workers are now easily accessible.

The issue of outsourcing can be differentiated into two categories: its harmful effects on the American worker and economy and its harm on foreign workers.

Clearly, offshoring negatively affects workers in the United States by moving American jobs offshore and thus compounding the issue of unemployment. Estimates of the total number of jobs moved out of the country range from 3.2 to 5 million since 2000. While the exact number is not certain, many American livelihoods suffered from this compounded issue.

Moreover, the ill-effect on the economy of outsourcing is another factor to consider. First and foremost, the loss of large companies results in the loss of a firm tax-base these companies provide. IBM, Lenvo, Nike, and Apple are just a few of the large-scale and diverse set of companies that have moved to lower-cost regions. By not only offshoring jobs, but profits as well, some have estimated that companies in the United States are offshoring around 2.4 trillion dollars in potentially taxable profits. In addition to a lack of tax base, the simple fact that there is an increase of imports into the United States while also a simultaneous decrease in exports rooted in a greater movement of companies can also harm the economy.

Looking to other countries as well, offshoring has played a negative role. As large corporations travel to these countries looking for less-paid workers, they destroy the livelihoods of global citizens. With a combination of child labor and unchecked working conditions, offshoring has caused international detriments. For example, in one 2010 study of Chinese labor conditions, in 87% of the factories, daily overtime work exceeded three hours or there was no guarantee of one day of rest each week. Moreover, outsourcing in Mexico has resulted in almost 2 million farmers being displaced due to the construction of large factories.  

The solution to offshoring is certainly tricky and many have attempted to address the issue It is through a combination of various past policies that we can work towards a mitigated impact of outsourcing. Many have advocated for greater incentives like tax breaks for companies, such as President Trump who recently created a deal with Carrier Corporation. However this solution undermines the everyday American citizen while simultaneously putting too much power in the hands of the business elite. Instead, a combination of foreign policy and education can work to solve this issue.

By working with other countries to create better working conditions, we can attack the multi-faceted issues of outsourcing on two fronts. To begin, with better conditions present in other nations, such as increased wages and less work hours, companies will be less incentivized to move offshore and thus will inevitably stay in the United States. Moreover, even if these companies still do decide to offshore, at the very least workers in other countries will be treated with greater dignity and respect. Obviously some diplomatic compromise would have to be achieved with countries that we offshore to such as India and Mexico, however the United States has worked in the past with other countries on controversial issues such as the collaboration seen to create Paris Climate Deal

In addition to utilizing foreign policy, incentivizing greater education for students belonging to all income brackets can make them more fit and prepared for the jobs of the future. As automation starts to play a greater role in manufacturing, many off-shored jobs are to professionals in other countries who have received greater education in areas such as informational technology. If Congress places greater emphasis on widespread better education through bills such as the STEM Education Act of 2015, companies will be less incentivized to offshore to professionals in other countries. In this respect, especially in the rising field of Information Technology, offshoring does not occur due to lower costs, rather just a simple lack of domestic specialists.