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Corporations Layoff, Offshoring Increases

Every day we read online or hear on the news that another company has decided to layoff their employees. At this rate, the amount of jobs created each year will not cover the jobs lost. In 2008, 2.6 million workers lost their jobs in the United States. That's the highest level of job loss in more than six decades. What is going to happen to all those Americans who are unemployed?

The U.S. government needs to give corporations incentives to keep jobs domestic instead of outsourcing them overseas during the current economic crisis.

About Outsourcing

Outsourcing jobs to lower-wage countries has become a common practice in U.S. businesses to decrease operating costs. Along with lower wages, U.S. businesses save millions by not having to provide benefits to workers abroad.

Corporations contract companies overseas that specializes in services that are usually performed by in-house employees. Call centers, payroll and e-mail systems are just some of the services that are being shipped abroad. According to YaleGlobal, "In the past, mostly blue collar factory jobs went abroad. Now, white collar workers, who previously benefited from cheaper goods, are bidding their jobs bon voyage."

Alternative Perspectives

The Corporations

Corporations look at outsourcing as a way to focus on broader issues within their business. They allow the experts to handle specific tasks that normally consume a great amount of time and resources at their firm. Adopting new technologies drastically increases overhead so companies hire firms abroad to avoid the cost of implementing them.

Outsourcing also serves as effective solution for companies who are looking to expand their business and build connections with other countries. As a result, this enables them to gain higher profits.

A Layoff Worker

My father lost his job as a software developer in 2003 as a consequence of offshoring. At BMC Software, his yearly salary would cover approximately five workers in India at the time. Since then, BMC Software has cut their staff every couple quarters to save hundreds of millions in dollars.

He said "the bottom line is how much you make, not the quality of your work when they decide to offshore your job."Companies no longer look at workers as human beings; they only see you as a dollar sign.

At the company, the atmosphere has drastically changed for many employees. My father's former co-workers told him that the company transferred many workers out of their offices and move them into cubicles. To make more money, the company rented out the office spaces to other corporations. Higher profits are all that matter these days, not the worker.

Economists

Economists argue that outsourcing is another form of free trade that increases the wealth in our economy. They also argue that it keeps U.S. businesses highly competitive in the global market.

Companies are able to create the same amount of goods at lower costs with fewer resources. As a result, goods are more affordable for consumers which results in higher revenues for the companies.

Not all economists believe outsourcing is beneficial for the economy. Depending on their political views, some economists view outsourcing as a threat to American workers. The economy always raises debates but some economists change their views overtime depending on the state of the economy.

In 2004, Alan Greenspan said "our standard of living would soon begin to stagnate and perhaps even decline as a consequence" if we reject offshoring. In 2008, Greenspan was asked if this is the worst economy he had even seen, he replied "Oh, by far."

Most economists agree that the toxic assets and the mortgage crisis are some of the biggest problems contributing to the recession. But isn't the increase in layoffs and offshoring another factor too?

More Americans Losing Jobs, Not Helping the Economy

In the short run, companies make a profit from outsourcing jobs. In the long run, does outsourcing improve everyone's standard of living or just the top executives?

Paul Craig Roberts, an economist, said "It is this replacement of U.S. workforces by foreign workers that explains the extraordinary rise in CEO compensation and the flow of most of the income and wealth gains to the few people at the top."

Roberts also said that offshoring helps the CEO make or exceed their forecasts which lead to bonuses that are multiple times greater than their salaries. Currently, top executives have been lowering their forecasts drastically. Companies are struggling to maintain their sales goals since consumers are spending their money mainly on necessities.

For the past three years, I have worked for the clothing retail store Express. I only work there on Saturdays, but I can tell consumer spending for apparel has dwindled. Even during the holiday season the signs were evident. For the first time in three years, the store did not reach their projected sales for Black Friday.

According to the New York Times, James K. Galbraith said "the most important current economic fact remains the loss of 600,000 jobs every month."

A great majority of these jobs are not being reintroduced into the market. Corporations have cut jobs to reduce their losses. As a result, the unemployment rate increased to 8.5% in March.

According to Fox News, "If part-time and discouraged workers are factored in, the unemployment rate would have been 15.6 percent in March."

The more Americans unemployed equates to less taxes for the government. People are depending more on state funded government programs such as unemployment insurance to help make ends meet.

A study conducted in Mecklenburg, North Carolina found that the $179.6 million that residents have received in unemployment insurance payments has helped boost the economy of their county. These payments may help their residents, but how long could the state government afford to help every unemployed resident?

Psychological Consequences

Job loss can lead people to do a lot of crazy things. When I lived in Houston, a man robbed a jewelry store just because he lost his job as a security guard. He seemed like a normal guy, but I guess being unemployed made him snap.

When my father lost his job, his main concern was finding a job to provide for our family. Job loss can put everyone in the household at edge. My dad masked his emotions from me so that I did not worry about him. I knew that he was stressed out and depressed. He also worried about medical benefits. If an accident occurred, he would have to pull funds from his savings which would decrease the amount of time we could survive without him finding a job. Luckily, he found one within three months, but that's not always the case for everyone.

According to the Los Angeles Times, a father killed his family and himself over financial losses. They said "this is a perfect American family behind me that has absolutely been destroyed, apparently because of a man who just got stuck in a rabbit hole."

Job loss is not only affecting families, but also Indian bachelors in the United States who attempt to find a bride back home. According to the Wall Street Journal, "prospective in-laws were worried that 'consultant' was a euphemism for 'unemployed'."

As jobs are outsourced, many workers feel obsolete. Some continue to search for jobs while others become too depressed and decide to stop their quest. Many people want jobs that pay like their former employers. The possibilities of recouping their original salaries are very low. On average, those who are reemployed have their salaries slashed tremendously.

Reverse the Process

As a student, I'm concerned if there is going to be jobs available for us when we graduate with this economy. As the economy shrinks, the job market dwindles. Outsourcing did not improve the economy; it just revealed its flaws.

The government needs to eliminate tax loop holes for corporations that offshore jobs. They also need to give incentives such as tax breaks to encourage more corporations to keep jobs within the states.

According to Reuters, Obama said "We will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas" during his address to Congress on February 24, 2009.

Sallie Mae plans to reverse outsourcing by bringing back 2,000 jobs to the United States during the next 18 months. This gives me hope that at least one company recognizes the importance of creating more jobs at home.

Overtime, foreign workers began to demand higher wages. My father's salary will now cover about three workers in India compared to five workers back in 2003. Corporations offshored jobs to decrease salary costs, but costs have only increased over the years.

The countries where the jobs are outsourced reap the benefits from increase consumer spending while our economy losses money. If U.S. businesses put their workers first over higher profits, the economy and many Americans lives will improve in time.