Chapter 29: Problem 9

Explain what outsourcing is. Explain what offshoring is. Do you believe that unemployment is being created by CEOs who send jobs to less-developed nations such as India and China?

Short Answer

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Question: Explain the terms outsourcing and offshoring, and discuss whether or not unemployment is created by CEOs who send jobs to less-developed nations like India and China. Answer: Outsourcing is the hiring of external firms or individuals to handle certain business functions or tasks, while offshoring refers to relocating a company's business processes or services to a different country. The relationship between offshoring and unemployment is complex, as it can create job losses in the originating country, but also may generate new job opportunities due to reinvestment and changing economic factors. It is important to consider the broader context and various factors influencing employment levels, and not solely blame CEOs for unemployment resulting from offshoring.

Step by step solution

Define Outsourcing

Outsourcing is the practice of hiring external firms or individuals to handle certain business functions or tasks, instead of having their in-house employees perform those tasks. This is done to save costs, increase efficiency, or gain access to specialized skills and expertise.

Define Offshoring

Offshoring refers to the practice of relocating a company's business processes or services to a different country, typically to take advantage of lower labor costs, reduced operational expenses, and/ or favorable tax conditions. Offshoring can involve moving an entire department or just a specific function within a company to another country.

The Link Between Offshoring and Unemployment

The relationship between offshoring and unemployment is a complex one. On one hand, it can be argued that when companies offshore their jobs to less-developed countries like India and China, they are taking jobs away from local workers. This can potentially lead to increased unemployment in the countries where the jobs were originally located.

Factors Affecting Unemployment

However, there are other factors that should also be considered when examining the impact of offshoring on unemployment. These include automation, advancements in technology, and changes in the global economy. Furthermore, it is important to note that offshoring can also create new job opportunities in the domestic market as companies may reinvest savings into other areas of their business or create new services which require local expertise.

Personal Opinion

While it is true that CEOs sending jobs to less-developed nations such as India and China can contribute to unemployment in some cases, it is essential to consider the broader economic context and various factors that influence changes in employment levels. It would be too simplistic to solely blame CEOs for unemployment, and a more thorough analysis is necessary to understand the full impact of offshoring on the job market.