Negative effects of Outsourcing Tommy Wu

Why Outsource?  Labour costs are the biggest expense in business.  In the 21 st century, we began to reduce labour costs.  Offshore outsourcing has become the most common way.  However, negative effects of outsourcing have been discovered.

Job losses

Labour abuses

Quality control issues

Environment problems

Negative effects on the balance of trade

Job losses  Production department is usually being outsourced  The problem is that jobs are being lost  Skilled and semi skilled jobs are the biggest losses  Purchasing power disappears  Fewer people will train for such jobs  And valuable skill sets will be lost to the society because demand is reduced

Labour abuses  Labour abuses are very common in many poor countries  Outsourcing company can’t control “double outsourcing” is happening  Workers often have low wages and bad working environment  Child labour is also a problem

Quality control  Developing countries don’t have a good quality control system  Investors don’t care because they are focused on reducing expense  Workers are not educated and well equipped  Products may contain harmful materials

Environment problems  Host countries are too eager to accept the contract  This caused that they failed to enforce environment practices  Workers in the factories may often be working in a toxic environment  Local communities are also suffer from the environment hazards

Loss in the balance of trade  In past 15 years, the trade deficit has increased by 400 % in US  In Canada, the deficit of trade has touched the bottom in the previous 20 years.  North America, is increasingly not making product anymore.  We send the raw material to others and then buy well goods back.

In conclusion  In conclusion, offshore outsourcing is bad for both parties: investors and the developing countries.

Thanks for your time  Tommy Wu