Around 5000 years ago, humans first began to trade with each other over long distances, allowing cities to thrive as never before. At the time, textiles, spices, and precious metals made up the bulk of goods that were traded. Fast forward to modern times, and international trade is a lucrative business around the globe.
In the U.S., almost 60% of purchased goods were manufactured overseas. That’s a significant jump in the number of imported goods found on store shelves in 1960, reports ABC News. At the time, “foreign goods made up just 8% of Americans’ purchases.”
The meteoric rise in worldwide communication and an increased number of companies that are conducting business across borders is known as globalization. And of course, globalization has myriad benefits, from the prolific exchange of low-cost goods to greater knowledge of cultures that are vastly different from our own. But there are also downsides — for instance, the ability of a business to operate on an international scale also brings with it an increased reliance on outsourcing.
Outsourcing: A Necessary Evil?
Put simply, a company that outsources is one that obtains goods or services from a foreign supplier. Outsourcing seems like a win-win for companies and consumers alike, at least on the surface, but that’s only part of the story. Contract workers can also be recruited via outsourcing, and those workers aren’t afforded the protections guaranteed to traditional workers, such as benefits and job security. What’s more, international outsourcing can exacerbate current global inequalities more than necessary, keeping global wages low even as corporate profits are at an all-time high.
And with those high profit margins are further boosted by corporate subsidies on an unprecedented scale. On an annual basis, McDonald’s receives $1.2 billion in government subsidies. Yet the subsidies awarded to America’s most ubiquitous fast food chain pale in comparison to the $6.2 billion given to the Walton family, owners of Walmart, and Bank of America, which receives a whopping $457 billion yearly.
Outsourcing has become standard in the business world, but what happens when everything is eligible for outsourcing, including education and decent-paying jobs? Should major corporations be allowed to outsource without discrimination, even while receiving subsidies and denying a living wage to the majority of their employees? Do the downsides of outsourcing outweigh the positives, and how can we adapt the model to include more equitable outsourcing from within the country?
Technology and the Spread of Globalization
Let’s start with the basics: Despite the rich history of international trade, the emergence of globalization would not have been possible without the internet and smartphones that give us worldwide connectivity 24/7. And that technology, which we rely on for everything from scheduling appointments to shopping, communicating, and sharing information, may actually enable global social problems, such as income inequality, to thrive.
One unfortunate side effect of technology is job automation, where machines now perform jobs that were once handled by human workers. While companies benefit from automation when it comes to their bottom line, shareholder value, and overall production cost, workers are left behind and communities suffer. Reporters at The Guardian attest that those companies demonstrate “no responsibility for the collateral damage they had wreaked on communities and lives.”
In addition, there are numerous forms of inequity that come from technology itself. Those in the global workforce who have limited access to technology are at a distinct disadvantage when it comes to job opportunities. Thanks to the ubiquitous nature of outsourcing, a company has the freedom to overlook underprivileged workers with only a basic grasp of technology in favor of a more tech-savvy person overseas. This grim reality is raising questions about whether or not access to technology is a fundamental human right: In today’s technology-driven job landscape, the ability to access digital channels and devices seems to be a necessary skill.
Near Shore Versus International Outsourcing
Interestingly, outsourcing doesn’t have to span the globe to still be classified as such. Generally speaking, there are three main types of outsourcing: Onshore, nearshore, and offshore. Onshore outsourcing campaigns recruit workers within the same country, a phenomenon often seen in industries such as content marketing and rideshare platforms. Offshore, also known as international outsourcing, is when a company’s goods and/or services are produced by workers in a country that’s far removed from the main office, both culturally and geographically.
Conversely, nearshore outsourcing involves a team in a neighboring country, often in the same time zone as the home office. Nearshore outsourcing is increasing in popularity, as it can be more equitable on a global scale than offshore or international outsourcing. As goods or services are produced in closer proximity to the main corporate office, shipping costs can be drastically reduced. At the same time, depending on the country of origin of the workforce, labor and operational costs typically remain low.
For the global workforce itself, however, nearshore outsourcing may be just as problematic as its international counterpart. Despite the outsourcing-fueled increase in job opportunities in developing nations, for instance, the average income in those countries remains stagnant and cost of living has actually increased. Thus, quality of life is greatly impacted.
What’s more, data indicates that much of the purchase price of goods produced via American outsourcing actually goes to workers and businesses in the U.S. When a label says “made in China,” close to 56% of what you pay remains in the U.S., reports The Washington Post. This fact indicates that international outsourcing may have little impact on the economy of countries where workers actually live.
How Outsourcing Impacts Quality of Life
As technology advanced so that humanity could travel past Earth’s orbit as well as instantaneously communicate with those across the globe, globalization was essentially inevitable. Yet the unfortunate reality of an increasingly connected world is that income disparity is greater than ever, impacting quality of life in numerous countries that produce goods and products for the U.S. consumer market.
Quality of life isn’t only about wages and working conditions. Basic human needs such as food, shelter, and access to clean, fresh water, which we typically take for granted in the U.S., may be hard to come by in other countries. And a lack of fresh water access is particularly problematic for the global workforce in areas such as India, rural China, and Africa. Without fresh water, workers cannot properly wash their hands, allowing germs to spread easily.
Outsourcing has obviously had a negative impact on the U.S. workforce, as goods continue to be produced overseas, and the gig economy is thriving. Mass-produced goods with a reasonable price tag sure are enticing, but we need to be aware of the aspects of outsourcing that help fuel global inequality.