Quality of Life & Corporate Responsibility

Life is tough and unfortunately it’s just as tough for US military service members. Every time you turn around the government is cutting the budget used by all the services. I have seen this in action as well. Many don’t understand this but the military is a business and the Air Force has been outsourcing to civilian companies for years. Congress figured this was a great way to save money. This allowed the government to stop paying monthly wages and when the employee gets to retirement age the government no longer has to pay for their retirement. It is the responsibility of the contractor that was hired due to out sourcing. In theory, it’s a great idea however, Liebelson (2012) stated, “defense service contracts cost taxpayers more than $200 billion. That’s nearly $50 billion more than the cost of active duty, reserve, and National Guard personnel combined”. In layman jargon, if we stop outsourcing and enlist more individuals into the military it would ultimately be cheaper in the long run. The tens of thousands of positions that were eliminated could be put back on the books and employ some well-educated service members to help protect this nation.
Liebelson, D. (2012). The problem with outsourcing the military. Retrieved from http://theweek.com/article/index/224161/the-problem-with-outsourcing-the-military

I see globalization as a double edged sword. It has brought us together as a truly networked world. Communication, access to information, and trade have never been easier. One major impact is that globalization is working to flatten the divide between nations.
What I mean by that is that companies are looking for ways to compete, which leads them to look to find the best talent at the lowest cost, regardless of function and location. This in turn means that for previously high wage countries, wages will begin to decline for many professions. Inversely, as lower wage countries begin to become more in demand, their wages will begin to increase (Bigsten, Durevall, & Munshi, 2012).
For companies with the resources to do so, they will likely continue to try and find the competitive balance that works best for them, regardless of consequence to locals. This leaves smaller/localized businesses to fill the gap and provide opportunities that may not be available at larger companies. I believe this is why we see the continued growth of the local service industry in America, particularly in healthcare, which cannot be outsourced in many cases.
Bigsten, A., Durevall, D., & Munshi, F. (2012). Offshoring and occupational wages: some empirical evidence. Journal Of International Trade & Economic Development, 21(2), 253-269. doi:10.1080/09638191003615612

I work in the technology services field where offshore contracting has become a popular tactic to obtain cheap labor for functions such as development and first tier support. It is interesting to monitor this trend and how companies deal with the communication and quality issues this trend has introduced.
The American business has to consider if the offshoring of technology, white-collar jobs, results in a financial savings for their stockholders. Another factor is the decline on the average white-collar hourly wage for Americans by 18% from 1973 to 2005 (Wood & Maniam, 2009). American Businesses must strike a careful balance that provides a strong wage at home while also participating in the world economy at a level that produces growth.
Wood, M., & Maniam, B. (2009). OUTSOURCING AND THE US ECONOMY: HOW CONSUMERS AND THE ECONOMY BEING AFFECTED?. International Journal Of Business Research, 9(4), 152-156.

Jennifer,
Insightful!
All,
Will we ever return to more permanent work in America if health care cost continue to increase?
Professor Green

You can call it several names; runaway plants, offshoring, global sourcing, or outsourcing. American businesses love to look out of country for cheaper labor. This practice has been around for a long time and is only getting worse. According to (Wessel 2011) companies cut their work forces in the U.S. by 2.9 million during the 2000’s while increasing employment overseas by 2.4 million. I don’t care what you say. Outsourcing is not helping us to come out of this recession. The lower class is falling deeper into poverty because there are fewer jobs available for unskilled workers. They are not alone; today there are plenty of middle class as well as upper class jobs being outsourced. If you believe this problem is fun now, wait for Obamacare to really kick in. Are companies going to pay for the insurance of their employees? No they will not. They will bypass this expense by either outsourcing or by hiring temporary employees who work under 30 hours a week. Either way will not help the American people. Maybe a solution would be to go to another country and find cheaper labor to replace all of our lovely politicians.
Wessel, D. (2011). Big U.S. Firms Shift Hiring Abroad. Retreived from: http://online.wsj.com/news/articles/SB1000142405274870482170457627 0783611823972

In today’s competitive economy, I feel that it is almost necessary for companies to deal with looking for cheaper labor outside of the U.S. This applies to small companies as well as large ones. In the article Small Companies Going Global, Louise Uchitelle states, “The globalization of small business underscores corporate America’s belief that in the future most companies, even small ones, must compete internationally to be successful” (1989). Judging by the date of this article we know that this is not a new issue, but an issue that is more relevant than ever before. Small businesses have given many Americans stable jobs, but with this new trend of outsourcing the consequences could be great.
Uchitelle, L. (1989). Small companies going global. The New York Times. Retrieved from http://www.nytimes.com

Companies often times have many legitimate reasons to want to move off shore but what it all seems to filter back to is the opportunity to make more money. That brings up the ethical question if it is wright to take jobs away from the American labor men and women to gain more capital. Business no matter what they claim go in to business for one reason to make money, sure there are plenty of things like they want to better the lives of others and help people but the end result is to make money off of their products and services. Many times companies in the us can afford to pay the workers its just that by having them here they are actually taxed more than if they were to move the jobs offshore. “More big U.S. companies are reincorporating abroad despite a 2004 federal law that sought to curb the practice. One big reason: Taxes.” says (McKinnon, Thurm). Many times the people that a company services is overseas. its not the companies fault that is where the market is located so to save on taxes they can move the manufacturing closer to the target market.
Source
John D. McKinnon And Scott Thurm (2012). U.S. Firms Move Abroad to Cut Taxes. Retrieved from:http://online.wsj.com/news/articles/SB10000872396390444230504577615232602107536

The current global economy is being shaped by machines. As technology develops, some middle class jobs are going to continue disappearing. Andrew McAfee, a principle research scientist at the Massachusetts Institute of Technology believes “the jobs that are going away are not coming back”. McAfee offers up four forces that are driving the changing middle-class landscape. First, businesses are renting IT equipment and services rather than hiring full-time IT staff. Second, robots are becoming more advanced. As a result these robots are replacing some middle-class jobs at an increasing rate. Third, devices that allow workers to work anywhere at any time have proliferated. As a result, fewer employees need to be hired in order to get the job done. Finally, computers are increasingly able to analyze greater amounts of data. The ultimate function of all of these forces is to increase the efficiency and effectiveness of employees in such a way that not as many employees are needed to run the company. So long as technology continues to develop, the middle class will need innovate or watch themselves slip into the lower class.
THE ‘HOLLOWING OUT’ OF THE MIDDLE CLASS. (2013). E-Scan Newsletter, 39(3), 2-3.

Headley (2009) mentions in his article that the lower to lower middle class worker has seen jobs decrease as illegal immigrants and foreign workers in general work for cheap labor wages. The biggest factor has probably been advancements in technology which have created a smaller demand for low-skilled American labor workers in the economy. Many of our factories now use advanced technology meaning they require fewer labor workers but also require workers skilled to work on the machines if they malfunction.
Therefore American businesses must deal with this issue because it is having a negative impact on the job market. The poor will never live comfortably and their standard of living will not increase. As a result, their quality of life will not increase.
Headley, R. (2009) Cheap labor is slowly destroying the american economy. Retrieved from http://voices.yahoo.com/cheap-labor-slowly-destroying-american-economy-2879315.html on January 20, 2014

No one likes the idea of outsourcing, but businesses like it because it saves them money and helps them to compete in a global market. In the article Why Money Chases Cheap Labor – The Outsourcing Phenomenon, Theodore di Stefano states, “This need to keep labor costs low is part of a very old capitalistic dynamic whereby a company is compelled to keep its costs down because consumers are demanding good products at cheap prices” (2006). While outsourcing makes sense to a business’s bottom line, it can also hurt them domestically.
Outsourcing is nothing new and will continue. However, if Americans are jobless they cannot purchase homes, cars, or spend money. According to Forbes contributor, Panos Mourdoukoutas, “If carried to the extreme, outsourcing turns corporations into opportunistic institutions without a vision, heading into a collision course with its most valuable partners—labor, customers, and the community” (2011). In a competitive world many can benefit from outsourcing; however, if this is not regulated at what expense — loss of American jobs, increased poverty, or social unrest?
Di Stefano, T. (2006). Why money chases cheap labor – the outsourcing phenomenon. E-Business Times. Retrieved from http://www.ecommercetimes.com
Mourdoukoutas, P. (2011). The unintended consequences of outsourcing. Forbes. Retrieved from http://www.forbes.com

When thinking about cheap labor and the global market, China seems to be a big part of this subject. China’s economy grew extremely fast because of their abundance of cheap labor. Foreign companies invested into China because of the money that they could save by paying less to produce products. However, the global market is still changing. Eventually, a country like China who provides cheap labor will evolve into a country with increasing needs that will bring balance back into the global economy. According to a publication on the International Monetary Fund, “foreign manufacturers may find it increasingly less profitable to produce in China, raising their domestic employment; Chinese goods could become less competitive in global markets, potentially raising export shares elsewhere; and rising Chinese prices could pass through to trading partners that rely heavily on imports from China” (Das & N’Diaye, 2013). This assessment indicates that employment from countries like China will decrease after their economies increase as a result from foreign investments. Likewise, U.S. employment would eventually increase after the employment costs of these third world countries increased. A company that wants to invest into a country for cheap labor should do so for now, but in the end a balance will occur.
Das, M., N’Diave, P. (June 2013). The end of cheap labor. Retrieved from https://www.imf.org/external/pubs/ft/fandd/2013/06/das.htm

One of the reasons the participation number has dropped is the senior citizen demographic. People now live longer lifespans than ever before and technology is getting more advanced at exponential rates. The more elderly work sector cannot keep up with the technological changes in the workplace. Part of this due to lack of experience, part of this due to stubbornness. (we all some seniors who get set in their ways) But what this does is leaves them unemployable to the sectors they once knew. Dr. McCarren from our International Business course had a great example of this. He told us the story of an elderly woman who her entire life she mastered the upholstery trade. she was the fastest that people could get at it and was very successful. She worked her entire life at a shop where she was a valuable employee…until a machine took her job. The skill set she had was obsolete due to technology. The job market left to her is difficult. While the NCPA reports that while displaced workers in their fifties have a 70 percent to 75 percent chance of finding a job within two years of losing one, their new employment is often short lived. (cit.) The participation number also has many other factors, but this is certainly a contribution.
NCPA (2010). Elderly unemployment. Retrieved from http://www.ncpa.org/sub/dpd/index.php?Article_ID=8009

Outsourcing is just a way of business today. The company I work for manufactured products in another Asian country because if we were to manufacture it here we could not successfully compete in price. Companies are far more interested today in he bottom line of their income statements than with the ethical dilemmas that may be associated with cheap over seas labor. “True, the labor savings from global sourcing can still be substantial. But it’s peanuts compared to the enormous gains in efficiency, productivity, quality, and revenues that can be achieved by fully leveraging offshore talent.” (Bloomberg, 2006) Inversely, the existing system does sustain the company and thus sustains the jobs of us here and those people there who manufacture for us. If we went with an American company for this manufacturing, we would be unsustainable and they would lose business and possibly lay off their workers. Its a Catch 22 scenario, and that seems to be the case with many of these more significant ethical dilemmas. Globalization has opened up a realm of possibilities and complications that we are having to discover, adapt, and repair for some time to come, and in a world of hierarchical society, it’s unlikely that we will ever reach the ethical nirvana which allows everyone to win, as sad as that is to say.
(2006) The future of outsourcing. Bloomberg. Retrieved from http://www.businessweek.com/stories/2006-01-29/the-future-of-outsourcing

In today’s economy, every business will eventually have to consider outsourcing and for good reason! Labor is infinitely cheaper outside of the U.S. Jay Bryson, a global economist for Wells Fargo explains, “When jobs move from a factory in the South to one in Guatemala or China, it certainly has a negative impact on that community in the short run…but in the long run it makes things more efficient.” As horrible as it may sound, I think Mr. Bryson is correct. With outsourcing, prices for consumer goods are ofter less expensive.
Hargreaves, S. (2012). The case for outsourcing jobs. Retrieved from http://money.cnn.com/2012/09/14/news/economy/outsourcing-jobs/

Outsourcing has become a red word in today’s culture. Many Americans peg this as one of the key reasons the job market struggles so much. While it is key, one must really look at why consequences would take place should businesses move everything back home. Jobs would surge, sure. But profits and growth would be devastatingly low. I have always been of the thought that a business owner’s job is to create as much profit as possible, within the law and ethical boundaries. While that sounds shrewd, its the simple fact of today’s culture. If you aren’t willing to globalize and find cheaper labor, land, and material you simply cannot compete and survive. Americans are quick to arms about outsourcing, but in my opinion they would be much quicker in arms about pricing if companies were to move everything back to the US. Ultimately, I think that there is a balance that can be met between outsourcing and providing jobs here, but that balance simply has not been met.

Many companies are forced to search for cheaper labor if they are to survive in today’s economy. While this might work financially for some industries, for other industries, outsourcing abroad is not an option. Another way in which some industries are decreasing human resource cost, is by changing the mix of the workforce, employing more part time and temporary staff. This lowers costs by having fewer benefit-eligible employees and allows more room for flexing a schedule to the needs of the organization, hence decreasing the financial impact to the company. While this is effective in helping the bottom line, it has significant consequences to employees. A study conducted by Schultz and Doorn (2011) demonstrated in fact that overall, employer dollars spent on health coverage for workers have declined. Much of this has been due to fewer workers covered as a result of a higher percentage of a variable workforce. One can appreciate the negative impact on quality of life that could be experienced if the availability of full time employment, with benefits, were to become more challenging to find.
Schultz, J. and Doorn, D. (2011). Employer health benefit costs and demand for part-time labour. Applied Economics Letters, 18, 213-216.