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The Effects of outsourcing work to Chinese



“Made in America” is quickly becoming a lost phrase. outsourcing work is a new phenomenon that is sweeping through major American companies.   It would be interesting to ask any American to gather ten items from around his or her home.  There is a good chance that anywhere from 5 to 7 of the items would be made in China. The economic boom that is occurring in China has a direct tie with the United States’ recent outsourcing movement. This presents the question that many Americans have: Are domestic companies fueling China’s economy by outsourcing work that would otherwise be kept in America? Evidence shows that U.S. outsourcing is the backbone of the new and ever growing Chinese economy. 


U.S. jobs are lost as a direct result of overseas outsourcing. Forrester Research estimates that 3.3 million white collar jobs will be outsourced by the year 2015 (Drezner, 2004). In 2004, the Bureau reported 4,633 jobs lost between January and March of that year.

A recent study shows that 46,417 jobs were actually outsourced during that time period. Of the 46,417 jobs lost, 8,283 were sent to China (Myers,2004). Many middle and lower class Americans that depend on these jobs are concerned that the large number of jobs lost to outsourcing are the reason employment is becoming difficult to find.


In doing my research, I conducted an interview with James Chen, M.B.A. Mr. Chen works for the Texas Department of Economic Development & Tourism. He specializes in work with the Asia/Pacific region of the globe. He was born and raised in southeast China. I used many of his points and views as a basis for my research because of his credibility. Mr. Chen provided much insight regarding both sides of the outsourcing debate.


Mr. Chen pointed out that the main purpose for U.S. Companies to outsource is to maximize profit and lower cost. He said, “The cost of operation and especially research and development for many companies is high. If companies did not outsource, then the cost would be passed down to the consumer.” Motorola, a major U.S. electronics provider, defended its outsourcing movements using the low-cost approach. The company recently signed a 1.6 billion dollar outsourcing deal. A spokeswoman for Motorola issued a statement saying, “We would not be approaching this deal unless there were significant cost savings” (Ryan, 2008).  U.S. companies stand behind the idea that outsourcing benefits not only the company but also the consumer.


Mr. Chen also pointed out the difference in air-quality laws. “Some companies move work to China because of the weak pollution laws. The factories in China have to meet severely lower standards than factories in America.” An apparent advantage for companies in the United States to outsource is that they can operate without having to worry about environmental efficiency.  The United States and Europe have transferred much of their steel production to China in order to cut down on pollution domestically. One internet source points out, The U.S. is in turn seen in a negative light globally because the country is not being responsible. It seems many U.S. companies are abusing their outsourcing privileges and leaving China worse off environmentally than ever before.  American companies have to begin building and operating factories that are eco-friendly as well as the Chinese government placing tougher regulations on pollution.


In addition, there has been a constant question of quality regarding items imported from China. Many Americans feel that goods made in China are made of poor quality. There have been recent issues with certain items coming from China, including a major toy recall in 2007 in which Mattel trains recalled 9 million toys from China because of lead contamination (The Associated Press 2007).  UPI (2008) calls Mattel “a victim of its own-outsourcing success.” The world’s largest toy provider accuses Chinese contractors of subcontracting out work to Chinese subcontractors without the companies’ permission.  Mattel and other U.S. based toy companies have promised to inspect items coming from China more closely.


Small U.S. businesses such as McCrocklin’s typically use a sourcing partner in order to find a factory to move operations to China. Many accuse these sourcing partners, or “middle men”, of being unreliable and out to take advantage of American business owners.


Outsourcing in not only China, but the rest of Asia will continue to grow and evolve in the future. Mr. Chen felt that the U.S. companies are depending on Chinese factories so much, that the workers now have options. Just being able to work in a factory would be a dream for many Chinese ten years ago.  There are now so many factories that the Chinese workers can choose. This in turn is causing the factories to be competitive with rates and living conditions. The competition causes higher prices for the U.S. companies who outsource work to the factories.  Alexandra Harney, author of The China Price, feels that China is becoming more expensive. She expects the change to start showing up in American price tags this year and next year (China’s Labor, 2008).


Chinese companies are also using money made off U.S. outsourcing to make new investments. By establishing U.S. presence, Chinese companies open up endless possibilities as far as technology advancement and global contacts. The irony of the Apptec situation gives us a look into where the outsourcing movement is going. Outsourcing started by American companies investing in China. Now, the investment flow has begun to reverse and Chinese companies are using money made from outsourcing to invest in America.


Other Asian countries are beginning to follow China’s lead in the outsourcing movement. One of the most attractive new locations for outsourcing is Vietnam. Many experts see Vietnam as becoming a primary location of technology outsourcing. Balfour (2008) pointed out “some of the biggest names in technology are turning to the Asian country for top-notch game design and software development.”  American technology companies such as Microsoft and Intel are taking advantage of the low wages and quality products coming out of the country. “Computer programmers in Vietnam earn about one tenth what computer programmers make in the U.S” (Balfour 2008).


The outsourcing work battle between American companies and the American worker shows no sign of coming to an end.  According to Senator Barack Obama, “China is rising and it’s not going away.”  Everyday life reveals how America has found itself dependent on China for many goods and services. U.S. companies began outsourcing as an exception to the common idea of “made in America.” Now, the idea of “made in America” is quickly becoming an exception to the newly established outsourcing norm. While domestic jobs are being lost, U.S. businesses feel they have to lower cost in order to compete. The goal of lower cost is worth the risk of contaminated and defective items in the eyes of many companies.  It has become apparent that the balance between patriotism and financial gain has never been more controversial.   Both American and Chinese governments have the difficult task of weighing the positives and negatives of outsourcing, and forming regulations regarding its future. The feud over the principles behind outsourcing work will continue no matter what the future entails.


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