Perceived Effects of Outsourcing in America

The strategy was promoted during the 1980s and rationalized by experts that the United States is evolving from manufacturing to a service-based economy (Hira Hira. 2005) According to experts, the phasing out of manufacturing jobs through outsourcing is part of economic progress. Labour-intensive jobs such as manufacturing will now be relegated to developing countries so that the U.S. can focus on high-wage, high-skill service and other jobs. According to them, the shipping of these labour-intensive low-paying manufacturing jobs will not hurt the economy as the country will then move to a higher level.For developing countries and its people across the globe, this is a welcome opportunity since the presence of multi-national companies in their territories would mean more jobs, more manpower development and more taxes. Thus, most of these countries give incentives to multi-national companies. In the Philippines, Singapore, Malaysia, China and other Asian countries, the government offers tax exemptions for export-oriented companies. For instance, the Mactan Export Processing Zone on the island of Cebu, Philippines, hosts a number of US companies. Not only does the Philippines offer high conversion rate of the dollar, where one dollar is equivalent to approximately 50 pesos, the materials and equipment imported by these companies for business purposes are also tax-exempt.The dawn of the new millennium disputed the most experts’ opinion that outsourcing would bring the US economy to a new level. As hundreds of companies based in the U.S. migrated to developing countries all over the globe in search of cheap labour and better tax incentives, the effects of outsourcing are beginning to take its toll on the US economy.Contrary to the theory that high-paying and high skilled jobs will be given to Americans, companies found a way to minimize cost further by hiring local experts in countries where have set their plants and offices.