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How Jobs Outsourcing Affects the U.S. Economy

The Different Types of Jobs That Are Outsourced, Why and Their Impact

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Jobs outsourcing describes how U.S. companies, of all sizes, hire lower-paid workers in emerging markets instead of Americans. The advantage of jobs outsourcing is it helps U.S. companies be more competitive in the global marketplace by keeping costs low. The disadvantage is that it causes U.S. unemployment. Efforts to artificially restrict jobs outsourcing may give more jobs to Americans, but could make U.S. companies less competitive, eventually driving them overseas. Furthermore, different types of jobs are outsourced for different reasons. Find out how the different ways they affect the economy.

1. Technology Outsourcing

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Tech workers in India speak English, are well-educated and earn less thanks to a lower cost of living. (Photo: ImagesBazaar/Getty Images)
American companies send IT jobs to India and China because the skills are similar while the wages are much lower. A company only has to pay an entry-level IT worker $7,000 a year in China and $8,400 in India. Companies in Silicon Valley outsource tech jobs by offering H-1 visas to foreign-born workers. 

2. Human Resources Outsourcing

(Photo: John Moore/Getty Images)

Human resources outsourcing reduces costs by pooling thousands of businesses. This lowers the price of health benefit plans, retirement plans, workers’ compensation insurance, and legal expertise. Human resource outsourcing particularly benefits small businesses by offering a wider range of benefits. Surprisingly, the recession may cause some human resource outsourcing firms to hire American workers.

3. Call Center Outsourcing

Call center firms now hire U.S. workers in their homes (Photo: Joe Raedle/Getty Images)

In the past 20 years, many call centers have been outsourced to India and the Philippines. However, that trend is changing. Unlike technology outsourcing and manufacturing, there is a much smaller discrepancy between call center workers in the U.S. and emerging markets. Thanks to rising wages in India, and the high unemployment in thee U.S., call center workers only make 15% more than their counterparts in India - and some of these jobs are coming back to the U.S.

4. Why You Feel Underpaid

(Photo: Getty Images)

One-quarter of American workers make less than $10 per hour, or are living in poverty. Meanwhile, the top 1% of workers earned more in income than the bottom 40% of workers. This was in 2005, when the economy was still booming.Outsourcing is just one reason. Technology, globalization and a passion for "low prices" above all else are others. Find out how income inequality has dramatically risen in the last 20 years.

5. How We Compete - Book Review

Is globalization the real reason jobs have been outsourced? Will protectionism create jobs for Americans? According to the authors of this book, the answer is no. Instead, they point to research that shows that technology is the real culprit. Workers in many manufacturing industries have been replaced by robots. To compete, these workers must be retrained to operate the robots. Another point the authors make is that innovations in technology are what actually allowed U.S. companies to move call centers to India. If technology is the culprit, it is also the answer. It's made the U.S. more competitive as a nation. Education, rather than protectionism, is the best way to both take advantage of technology and create jobs for U.S. workers.

6. NAFTA Pros and Cons

NAFTA was created to expand trade between the U.S., Canada and Mexico, and make them more competitive in the global marketplace. Why is NAFTA criticized for reducing U.S. jobs, and exploiting Mexico's farmers and its environment? How and why was NAFTA created, and has it fulfilled its purpose?

7. How to Find Jobs in the Freelance Economy

The freelance economy means that companies are laying off full-time, often older, workers and replacing them with part-timers, temp help and free lance workers. Here's how to find jobs in the freelance economy.

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