Dangers of Outsourcing to the US Economy (Research Paper Sample)

Name: Professor: Class Course: Date of Submission: Dangers of Outsourcing to the US Economy At a time when unemployment in the United States stands at 5.5%, the debate on the drawbacks of outsourcing is here again. However, it is more intense and sustained this time. There is increasing evidence that outsourcing jobs to foreign nations has disastrous effects to the US economy. As a matter of fact, the importance of this issue can be demonstrated by the fact that it is already shaping political discourse as the US prepares for the November 2016 general election. While some have defended outsourcing arguing that it is in line with the economics of globalization, others have sharply disagreed. This paper will argue that outsourcing is dangerous for the US economy, hence it must always be checked at all times, especially now. To begin with outsourcing hurts the economy, by taking away jobs meant for Americans. When firms relocate their production activities to other nations – especially developing ones where the cost of production is lower – they take the jobs with them as well. Jobs are a byproduct of economic productivity. Therefore, when productivity is relocated to other countries, jobs go to those countries too. While a 5.5% rate of unemployment may not be a cause for panic, authorities and economic planners need not rest easily – and allowing unlimited outsourcing amounts to resting easily. This is especially so given the debilitating effects of unemployment. Unemployed people have no income, which means that their purchasing power diminishes as a result (Wessel 1). With diminished purchasing power, they cannot demand goods and services, meaning that firms will have to scale down output to match the reduced aggregate demand. The dangers of this are obvious – it could spark a depression, which is worse than unemployment. Besides, it must not be forgotten that unemployed people cannot pay taxes, meaning that the government’s ability to fund public expenditure will be weakened. To the extent that outsourcing causes unemployment, it indeed ruins the American economy. While the dangers of outsourcing cut across the economy as a whole, they weigh down heavily on the manufacturing sector. Research has revealed that manufacturing jobs are more likely to be outsourced than any other. This raises a serious concern because no economy can survive without a strong manufacturing sector (Williamson 47). From the times of Andrew Carnegie and John D Rockefeller, it has continuously been proved that manufacturing has always been the backbone of the US economy. Outsourcing threatens the economic stability of the United States; hence there is an urgent need to tame it, before it leads to a total collapse of the US manufacturing sector. The Export sector also stands to lose greatly from unchecked outsourcing of jobs. For instance, when some of the greatest exporting employers like the International Busi...