How has outsourcing and offshoring impact on workers and employment

In recent years, outsourcing and offshoring have become increasingly popular strategies for businesses looking to reduce costs and improve efficiency. While these practices have undoubtedly had an impact on workers and employment, the extent of this impact is still a topic of debate.

Outsourcing: What Is It and How Does it Affect Workers and Employment?

Outsourcing is the practice of hiring a third-party supplier to perform services or tasks that were previously carried out in-house by a company’s own employees. This can include everything from accounting and finance functions to customer service and IT support.

One of the main benefits of outsourcing is cost savings. By outsourcing certain functions, companies can reduce their labor costs and avoid the expenses associated with hiring and training new employees. This can be particularly beneficial for small businesses that may not have the resources to invest in a large workforce.

However, outsourcing can also have a negative impact on workers and employment. When companies outsource certain functions, they are often cutting back on their internal staffing levels. This can lead to layoffs or reductions in hours for existing employees, as well as making it more difficult for new workers to find employment in the industry.

Another potential consequence of outsourcing is the erosion of skilled labor. When companies outsource certain functions, they may be relying on less experienced or less specialized workers from the supplier’s pool. This can make it harder for these workers to develop the skills and expertise required to perform more complex tasks, which in turn can lead to a decrease in demand for skilled labor within the industry.

Offshoring: What Is It and How Does it Affect Workers and Employment?

Offshoring is the practice of outsourcing work to a supplier located in another country. This can include everything from software development to manufacturing, and often involves sending workers to the offshore location for extended periods of time.

One of the main benefits of offshoring is cost savings. By offshoring certain functions, companies can take advantage of lower labor costs in other countries, which can help them reduce their overall expenses. This can be particularly beneficial for businesses that operate on a global scale and need to maintain a competitive edge in terms of pricing.

However, offshoring can also have a negative impact on workers and employment. When companies offshore certain functions, they are often cutting back on their internal staffing levels, which can lead to layoffs or reductions in hours for existing employees. This can be particularly challenging for workers who may not have the skills or experience required to transition into other roles within the company.

Another potential consequence of offshoring is the erosion of skilled labor. When companies offshore certain functions, they may be relying on less experienced or less specialized workers from the offshore supplier’s pool. This can make it harder for these workers to develop the skills and expertise required to perform more complex tasks, which in turn can lead to a decrease in demand for skilled labor within the industry.

Case Studies: The Impact of Outsourcing and Offshoring on Workers and Employment

To better understand how outsourcing and offshoring have impacted workers and employment, let’s examine some real-life examples:

Outsourcing:

• In 2013, General Electric (GE) announced it would be outsourcing its aviation maintenance operations to a third-party supplier called Wipro. This move was intended to reduce costs and improve efficiency, but ultimately led to layoffs for many GE employees. According to a report by Reuters, more than 200 GE workers lost their jobs as a result of the outsourcing decision.

• In 2017, Daimler announced it would be outsourcing its IT services to Infosys and Tata Consultancy Services (TCS).