Building a Stronger Economy Through Outsourcing
Around fifteen years ago, outsourcing was a major political issue. There was considerable concern that the offshoring of tech sector work, in particular, was harming the economy of the United States. This was happening during the recession that followed the dotcom boom. A lot of tech companies were hurting and looking for ways to cut costs. For some, outsourcing was the only way to survive. What are the outsourcing benefits?
What’s interesting is that in the intervening years, the issue hasn’t gone away. It was arguably a major factor in the outcome of the 2016 Presidential election. This is in spite of the evidence showing that it wasn’t harmful to the overall economy.
Here is an insight into the ways that outsourcing is, in fact, beneficial to the economy and the people of the USA.
Outsourcing is Good for the Country and its Companies
“If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.” -Lee Kuan Yew, former Prime Minister of Singapore
Outsourcing benefits individual businesses and entire countries in the same ways. It’s based on the economic law of comparative advantage. Rather than being completely self-sufficient, firms and nations tend to specialize. By becoming experts and focusing on specific tasks and industries, they increase efficiency and drive down costs. They trade for the goods and services they no longer get in-house. Trade benefits both sides since each side gets something they valued more than what they gave.
A simple example: When a small business owner stops sweeping the floors of her shop herself and hires a new employee to do it, she saves a lot of time. She’s able to focus more on other aspects of her shop, like marketing, and growing her company faster. She’ll soon be hiring more employees to help with the increased customer traffic.
Scale it up further. Imagine she’s now running multiple warehouses full of goods, and dozens of stores. Outsourcing the inevitable large number of customer service calls to a contact center in the Philippines provides an enormous cost advantage over answering them in-house or even elsewhere in the USA.
Boomsourcing provides such contact center services, but there are many other opportunities for businesses to outsource non-core operations. Companies like SyncLedgers allow small businesses to deal with their bookkeeping needs at substantial savings, for example.
As John Sulzer explains, “the narrative that all outsourcing is bad is patently incorrect. Outsourcing factors of production can allow businesses to free up money and hire more workers in the US at higher wages. Another benefit is that those foreign firms who are paid by US companies have to spend the dollars they receive back in the US or trade them in so someone else can. This results in more investment and capital at home.”
Outsourcing Benefits American Workers
This idea clearly flies in the face of conventional wisdom. Many, many people would not think it good when an American car factory shuts down and a new one opens in Japan or Mexico. Least of all the former factory workers themselves.
We can’t deny that outsourcing in a particular industry has far-reaching effects and that some people don’t immediately benefit from it directly.
More do, however. Manufacturing and other jobs growth in the Sun Belt counterbalanced the loss of factories in the Rust Belt. The southern and western states have been experiencing decades of sustained growth in wealth and population at the same time. Many workers relocated from the Northeast to be a part of it.
This occurred at the same time the US economy saw a major increase in jobs related to finance and technology. Many such jobs were created in the Rust Belt itself. The overall American economy continued to grow and remain the wealthiest in the world, now with a GDP of over 19 trillion dollars. Much of this growth came because the country embraced its comparative advantages. We outsourced less efficient processes to lower- cost states and countries. The USA continues to this day to be the world’s leading manufacturing power. We produce more than ever before, but more efficiently. We also enjoy a higher standard of living than ever before.
Hard to See, but not Unreal
The reason outsourcing has been controversial is not because it’s bad. On the whole, it’s good for everyone in the long run. The problem is that its negative effects tend to be concentrated and therefore highly visible. Its benefits are spread out across the entire economy that it’s a part of. It’s enough though, that it makes the entire country stronger overall.
Outsourcing benefits the country because it allows job creators to save money. Savings are always key to growth through investment. With those cost savings, employers can afford to expand their core business more and faster. The benefits of that expansion are clear for every job seeker across the USA.
If you’re looking to expand your business, contact Boomsourcing. We’ll show you how outsourcing processes can make your business and the US economy boom!