The Negative Effects of Outsourcing Labor

In our rapidly globalizing world, the practice of outsourcing labor to third parties has become a common practice among businesses across the world. While offshore outsourcing does seem like a quick and efficient way for firms to maximize profits, in the long run it actually causes more harm to the very firms it was designed to improve. Many studies of this practice primarily focus on how it affects low-skilled labor, such as manufacturing, and ignore its effects on other levels of labor. Examining medium to even high skilled jobs like call centers and even the medical field show that outsourcing does have negative effects on those industries and that in the long run it can cause problems that will end up costing businesses more money in the future.

Before diving into outsourcing it is important to have some background knowledge on what causes business to decide to outsource labor. The main goal of any business is to make money by selling goods or services. The money made from selling goods and services is called revenue, but it is not the final amount of money that the business makes. Businesses also have to keep in mind the costs of producing the goods and services that they will sell, such as building rent and employee wages. By subtracting the total costs (TC) a business faces from the total revenue (TR) it earns we end up with the business’s profit (P). The simple equation of: P = TR - TC is a simpler way of visualizing that. Businesses will always look to maximize profits by maximizing TR or minimizing the TC, and because TR is very dependent on the willingness of consumers to buy their goods or services, it can be hard to consistently maximize TR. However, since businesses often have more control over their costs, minimizing costs is a more efficient way to maximize profits.  In N. Greogry Mankiw’s textbook, “Principles of Microeconomics,” it is stated that the fourth principle of economics is that, “rational people make decisions by comparing costs and benefits, they respond to incentives” (Mankiw, 7). The prospect of cutting costs is incentive enough for many people to turn to outsourcing as a means to maximize profits.

Having knowledge of what leads people to implement outsourcing we can now look at some of the risks that are involved with it. One problem that plagues medium to high skilled labor industries is the loss of knowledge. In Tomás F. Espino-Rodriguez’s article on the effects of outsourcing the IT services of hotel chains in Scotland and Taiwan, he states that outsourcing may lead to a, “ stage of decline that could leave them without the skills and capabilities necessary to compete and/or offer a high-quality service” (Espino-Rodríguez et al. 100). When a company decides to outsource services to another offshore party, they begin to lose the knowledge of how to do that particular service because another company is doing that job for them. This leads to the stage of decline that was mentioned by Espino-Rodriguez, as they will never be able to improve the quality of that service by themselves which could lead to losses in the future if another business with better service enters the market. This stage of decline can be easily avoided if the business decides to insource instead. Jeff Osbornes article on whether research labs should outsource or insource describes insourcing as, “work that could have been contracted out is instead done in-house” (Osborne 44), and while it this method does cost the business a sizeable amount of money in the short run, the benefits that it would bring to the business in the long run make up for the money lost. By implementing training programs, a business would not have to contract outside labor and at the same time improve the livelihood of it’s employees and increase the business’s abilities. This would have the opposite effect of outsourcing, as the business would be able to entire a stage of growth through it’s training programs.

One of the costlier problems that can arise as a result of outsourcing are legal disputes and the fees that accompany them. An article written by Richard Feyrer that addresses the costs and benefits of outsourcing labor in the cardiovascular engineering industry acknowledges this potential risk when it states that, “The hospital can also be confronted with disadvantages if the partner becomes insolvent or legal disputes arise” (Feyrer et al. 293). Legal battles can take years in court and coupled with the hefty legal fees can add up to billions of dollars wasted. Another externality that can have negative effects on a business is the potential of human error in the third party. While human error is a possibility in any business, the probability of it occurring when outsourcing is implemented is increased as more people get involved as miscommunication is more likely to happen. An article on the website The Economist published by the Schumpeter Blog also addresses this issue. In the article Schumpeter talks about how Boeing’s decision to outsource manufacturing parts for the 787 Dreamliner lead billions of dollars and time being wasted, reporting that, “Some of the parts did not fit together. Some of the dozens of sub-contractors failed to deliver their components on time, despite having sub-contracted their work to sub-sub-contractors; it will be billions over budget and three years behind schedule”(Schumpeter, 2011). Boeing’s failure in the production of the 787 Dreamliner should be proof to anyone that this method of manufacturing can come with devastating costs.

The costs that come with outsourcing labor as we will see not only affects the businesses that implement it, but also the temporary workers that are employed. Often times the workers that are the source of the outsourced labor are not given the proper wages. This phenomena is explained in Matthew Pierlott’s article discussing the morality of outsourcing labor where he states that, “if the supplier (of labor) is independent of the corporation (that is buying the labor); it becomes problematic for the corporation to police these independent suppliers and ensure the just treatment of the laborers” (Pierlott 592), and because most companies do contract labor from multiple suppliers this mistreatment of laborers affects millions of workers around the world and contributes to the continuation of the cycle of poverty. An example of this event happening can be seen in David G. Van Arsdale’s article on how outsourcing can lead to poverty. Arsdale’s article offers a great case study of this event as he reminisces about his time as a Waste Management (WM) company worker in New York and how WM’s decision to outsource labor hurt him and the workers that eventually replaced him. Within the article he talks about one of the temporary workers, Pete, who was not being compensated correctly because, “the temporary staffing industry gets away with (illegally) paying temps only for their work performed for clients regardless of how long they wait on-call” (Arsdale 91). Pete relies solely on temporary jobs given to him by a labor supplier and because he is not paid correctly he lives in poverty as a 50 year old man and is unable to retire. Even though Pete is employed he mentions how he feels like he has no control over his life because of the position that the staffing company has put him in.

After looking at all the causes and effects of outsourcing labor it is clear that many of the risks that accompany this method hurt both the businesses that outsource and the workers that provide that labor. While it does seem like a cost effective solution to maximize profits, in the long run it can cause more harm to the businesses through legal disputes, miscommunication, and by stunting their intellectual growth. It can even hurt the workers it provides jobs to, as in many cases like Pete’s there is no regulation on how they are paid. Other methods, such as insourcing labor, while costing more at the onset, will benefit the company and it’s employees far more in the long run.

Works Cited

Arsdale, David G. Van. “The Temporary Work Revolution: The Shift from Jobs That Solve Poverty to Jobs That Make Poverty.” WorkingUSA, vol. 16, no. 1, Mar. 2013, pp. 87–112. Wiley Online Library, doi:10.1111/wusa.12025.

Espino-Rodríguez, Tomás F., et al. “Risks and Benefits of Outsourcing Hotel Operations: A Comparison between Scotland and Taiwan.” Tourism Economics, vol. 18, no. 1, Feb. 2012, pp. 95–120. Crossref, doi:10.5367/te.2012.0109.

Feyrer, Richard, et al. “Resource Management in Cardiovascular Engineering: Is Outsourcing the Solution?” Perfusion, vol. 20, no. 5, Sept. 2005, pp. 289–94. EBSCOhost, doi:10.1191/0267659105pf822oa.

Mankiw, N. Gregory. Principles of Microeconomics. 8th ed., Cengage Learning, 2017.

Osborne, Jeff. “Outsourcing vs. Insourcing.” MLO: Medical Laboratory Observer, vol. 48, no. 11, Nov. 2016, pp. 44–44.

Pierlott, Matthew F. “Moral Considerations in Outsourcing to Foreign Labor.” International Journal of Social Economics; Bradford, vol. 31, no. 5/6, 2004, pp. 582–92. ProQuest, doi:http://dx.doi.org.ezp2.lib.umn.edu/10.1108/03068290410529407.

Schumpeter, Blog. “The Trouble with Outsourcing.” The Economist, July 2011. The Economist, https://www.economist.com/business/2011/07/30/the-trouble-with-outsourcing.

Why the war on drugs is a failure

“In war, no one wins or loses. There is only destruction” - Bao Ninh. Sometimes, wars that aren’t actually real wars can be the most lethal. In 1970, following a major opioid crisis, Congress passed the Comprehensive Drug Abuse Prevention and Control Act of 1970. This categorized controlled substances based on their medicinal use and potential for addiction. In 1971, Nixon declared drugs the “public enemy number one”. This is when most people associate the start of the drug crackdown throughout the world. The war on drugs by the U.S government should be abolished because it’s a detriment to society, unethical, and a complete failure.

the wage gap in athletics

Male and Female athletes are treated extremely different in the sports industry as a whole.
One specific issue with this is the wage gap. In basketball specifically, women make a very small
amount compared to men. While the men make millions, women make a few hundred thousand.
I will specifically be looking at the wage gaps of different sports for athletes, coaches, and officials.
I am arguing that the way women are treated in sports is incredibly unfair, because they are paid
substantially less for doing the same work. In conclusion, I will be analyzing data of different sports
to determine why the wage gap between male and female athletes is so large and what can be done
to solve this issue.

Grade Inflation and How to Fix It

          Every student strives for As, and some may think that any grade lower than an A is unacceptable, but what if Bs and Cs were good enough too? If you think about it, a C on the grading scale should be the average grade, a B should be above average, and an A should be excellence. Average school grades across the nation have been constantly increasing over the last few decades, but this isn’t necessarily a good thing. According to Grade Inflation: A Crisis in College Education, 45% of higher education students in 1997 were given As when it was just 10% in the 1960s (Johnson 14). This is the effect of grade inflation, or a rise in the average grades students receive. Higher average grades reward mediocrity, so good grades rarely mean high achievement anymore. Students, teachers, and schools all contribute to grade inflation, which needs to be combatted simultaneously at all education levels so students can have more academic pride in their hard work, and GPAs can more accurately represent student achievement.

          In order to get grades back where they should be, there must be a drastic but simultaneous change across all teaching institutions. If only one school decides to reform its grading policy, the school would appear as if it has many underperforming students in comparison to other schools. That school could face consequences of lower enrollment and less funding due to its new negative reputation. But if every school follows similar grade reform at the same time, then all students will have lowered grades and the competition is still fair. This process begins with teachers seeing the value in giving honest feedback on students’ work in the form of grades. It may appear that awarding higher grades makes students happier, but this is already known to be misleading. If a professor truly cares about the progress of their students, he/she should grade as honestly as possible so students can see that they have room to grow. When students receive honest grades, they can find and learn from their mistakes, as well as get a much better understanding of their academic performance. 

          Overall, inflating grades has not done students any favors over the last few decades. Because of grade inflation, students have become unmotivated and have lost confidence in themselves academically. Even professors have shown diminished morals by assigning higher grades than students deserve. Grades have a purpose other than making students feel they are doing well one hundred percent of the time. Grades should reflect the effort and achievement of students, so they can truly be proud of their grades. Professors who care about the well-being of their students should grade them on their effort and quality, instead of curving grades to make themselves or the students look better on paper. Grade inflation can be controlled by only allowing students to evaluate teachers on their ability to provide quality education. The grade inflation reduction reform has to be universal, and all schools at all levels must accept the new grading policies. Truly successful students can emerge when all schools and faculty cooperate to combat the causes and effects of grade inflation. 

2nd Short Post. Response to in-class presentation ESPM

Environmental and Natural Resource Economics

Jay Coggins came to our class to talk about environmental and natural resource economics last Thursday. He started of his presentation by explaining where most of the humans energy comes from. He claimed that if society moves to mostly renewable energy and eliminate all fossil fuels it would benefit our environment greatly but cost hundreds of trillions of dollars. Every year renewable sources get much cheaper while energy plants that use resources like coal stay around the same because they constantly have to buy materials and run the plant. Most renewable energy sources once they are up can stay running at a relatively low cost like solar panels and wind turbines. It may be expensive to setup these solar panels or wind turbines but would save society a tremendous amount of money in the long run. People claim that moving to renewable sources is more costly than continuing to use what we use now but Professor Coggins said it is not. There is actually a 2 trillion dollar difference between moving to renewable energy then if we were to do nothing and stay doing the same things we are today. He continued to strengthen his stance by giving examples like the cost of a solar panel is just 10% of what it was 10 to 15 years ago while the process of burning coal and fossil fuels has remained the same. All in all, Professor Coggins claims that is important to switch to renewable energy for economic reasons and for the environment.

Questions: Why aren’t there more solar or wind farms if it is cheaper?

How effective are these renewable sources?

Abstract

Ocean plastic levels are increasing at a rapid rate which affects aquatic ecosystems; consequently, the rising rate should lead to the United States of America banning single use plastics. While many people know about the terrifying visible effects like straws in turtles noses and plastic rings around penguins necks; they do not know about the effects to the ecosystem when the plastic dissolves into the water. My project will show the effects of plastic dissolving into the water and that banning all single use plastics will help solve this problem. I am examining data from scientists worldwide that show the amount of ocean plastic, effects of ocean plastic, and the ways in which the problem can be solved. I will show that this data supports the banning of single use plastics in the U.S. and that it indeed is a problem that needs to be addressed. In conclusion I will use the data collected from scientists worldwide to show that single use plastics are causing the pollution of ocean ecosystems and that they should be banned from the U.S.

Atomic Bomb Research Paper Intro - (Short Blog Post #2)

Post Atomic Bomb - Intro Paragraph

August 6th, 1945, was a normal day in the cities of Hiroshima and Nagaski, nothing was unusual about the Americans flying above,  air raids were common. The US usually sent planes above the island do reconnaissance. But then the whole mood shifted, as the planes swerved and diverted course, something they had never done before. Before the citizens knew what was truly happening above them an object came hurtling towards their feet. Then came a blinding flash and a massive explosion that incinerated miles of city and anything inside of them including themselves. If they were “lucky” enough to survive, the city became a living hell for the survivors. After the chaos and destruction from Atomic Bombs dissipated. Hiroshima and Nagasak were left in ruins, the United States  had left a lasting impact by using the Atomic Bombs on Japan, the people and the country itself felt many lasting effects such in the short and long term. But, most Importantly the Atomic Bombs that were dropped on Hiroshima and Nagasaki were permanent impulsive solutions to a problem that could have been handled in a far better way. Due to this, it created a laundry list of problems for Japan that will be explained and show why Atomic bombs should never be put to use again. Based on eyewitness accounts the cities looked as if hell had overcome and engulfed the city, Hiroshima and Nagaski became unrecognizable to their inhabitants. Along with the city looking like hell on earth they were now confronted with an extensive laundry list of problems currently and which would arise in the future. The large majority of the issues caused by the Atomic Bomb would be physical injuries, such as broken bones, burns, etc. After physical injuries, psychological issues were a close second issue in the short and long term, the most common psychological issues were issues such as PTSD and depression. Finally Japan's environment and the and the economy were virtually erased off the map in an instant by the atomic bomb. Once again, the Atomic Bombs that were dropped on Hiroshima and Nagasaki were permanent impulsive solutions to a problem that could have been handled in a far better way. Due to this, it created a laundry list of problems that will be discussed and why Atomic bombs should never be used now.