You are here: Home » Economics » The Dangers of Outsourcing to Foreign Countries

The Dangers of Outsourcing to Foreign Countries

The drawbacks of outsourcing work to foreign countries.

According to a report put out by the Bureau of Economic Analysis, the median income in 1969 was equal to $33,072. Almost thirty years later, that figure stood at $35,172. In twenty years time, incomes have only risen approximately $2,000. Given the much higher cost of living, this report shows how we are working harder to earn less. The rising cost of fuel, cars, heating, electricity, the advent of cable and the Internet, all play a large part in the difference in costs of living. It is no wonder that more couples are forced to work and the day of the stay-at-home parent is coming to an end.

Today, the average unemployment rate stands at 4 ½%. Alaska, Michigan, and South Carolina have the highest unemployment rates, each set at more than 6%. One of the largest contributors to the national unemployment rate is outsourcing work to foreign countries.

According to Goldman Sachs, between 300,000 to 500,000 jobs have been lost to date. The company estimates that this will lead to a loss of 6 million jobs over the next ten years. With 140 jobs located in the United States, this may not seem like a lot, but it would be similar to eliminating every job in Arizona. That is a significant number of jobs to be eliminated.

Most of the outsourced jobs are in these related fields:

  • Business Applications
  • Communication Services
  • Data Operations
  • Help Desks
  • IT Infrastructure
  • IT Security
  • PC Management
  • Specialized Manufacturing
  • Websites

Many companies are outsourcing jobs to other countries. A small list follows.

  • Cisco Systems
  • Dupont
  • General Electric
  • IndyMac Bancorp
  • Marriott Hotels
  • Penske
  • Proctor & Gamble
  • Unilever
  • Wachovia
  • Wyeth

Low labor, production, and energy costs in many countries including China, Japan, India, and Mexico is causing companies to shut their factories within the United States and open new factories in foreign countries. This leads to the loss of jobs within the United States, a lower standard of quality, and resentment by those who are living within the United States and are sick of seeing jobs go overseas.

In 1994, NAFTA (North American Free Trade Agreement) was passed by then President Bill Clinton. His goal was to open the trade routes to all countries. Unfortunately, it led to many plants moving across the borders to Canada and Mexico. While outsourcing had begun in the 1980s, it grew by leaps and bounds in the latter part of the 1990s. Jobs went overseas to China, Japan, and India and the economy began to falter as American’s lost their jobs and suddenly faced living on minimum wage as higher paying jobs went to these other countries.

Look at the average annual salaries in these other countries, and it is easy to understand why companies find it appealing to outsource their business. Especially in China where the average yearly salary is pathetic.

  • China – $1,290
  • India – $14,500
  • Japan – $17,000 to $50,000 (Depends on the region)
  • Mexico – $9,000 to $16,000 (Depends on the region)

Outsourcing U.S. jobs to these areas are allowing many formerly poor areas to increase their standard of living. Meanwhile, it is taking away from many families in the United States.

Outsourcing jobs to foreign countries can impede customer relations. Thick foreign accents can make it hard for customers to understand what the call center employees are saying. This can lead to frustration and drive customers away to other corporations who use operators and sales staff who speak clear, accent-free English.

This is only part of the danger. In 2005, Citibank announced it had been using Indian call centers to outsource some of its workload. The workers in this call center used the access to American accounts to embezzle money from customer accounts. As it turned out, a worker in the United States holds a social security number that can be used for background checks. Outsourcing business to foreign companies eliminates the possibly for completing background checks. This makes it easy for the foreign workers to steal important account information.

Unfortunately, companies are not going to stop outsourcing work until Americans stand up and fight. Write to your local politicians, your federal government, and make yourself heard. Start boycotting companies who do outsource their business to foreign countries. To fight outsourcing, it is going to be up to those at risk of losing their jobs.

Liked it
User Comments
  1. Lori

    On April 20, 2008 at 6:58 am

    Many medical billing jobs are being outsourced at an alarming rate. The danger here is that HIPPA is next to impossible to enforce in foreign lands. Your PHI (Personal Health Information) is being viewed by these individuals, and they know that enforcement of HIPPA is weak, at best. Worse yet, your personal information such as your Social Security Number, date of birth, address, phone number, mother’s maiden name, employer, and other information is being put out there. In this day of identity theft and terrorism, this is not good. And, when you call your insurance company or the billing office for your doctor or hospital, don’t be too comfortable paying your co-pay or deductible with your credit card, as these individuals may be foreign outsourced employees. The Government is not only turning a blind eye to this, but it actually rewarding companies who outsource by providing tax incentives.

  2. unOutspoken

    On May 6, 2008 at 10:07 pm

    You would think that after 9/11, people would think more about the security of our own lands and protect ourselves, but instead we fight a war that gets us no where, and hand over valuable information to people we don’t know and can hardly understand.

  3. Ben Harper

    On May 8, 2008 at 1:58 am

    New ways to do outsourcing are emerging, one site, Telecommute Review, is set up to provide an interactive environment between potential employers and workers from different regions of the world. Its free to use for both employers and workers, it seems like a “next generation” site, could make it easier to outsource work even for small businesses:

  4. shelly rosenkranz 9209600401

    On June 29, 2008 at 11:44 am

    I will never buy an i-pod again. outsourcing to call center in India. Serial # and registration only protects the apple co. from i-pod tune theft. Does not protect consumer from i-pod theft even though they have the capabilities to do so. They don’t care about the fact that my daughter saved up all her birthday money for a year to purchase an ipod touch $400 plus i-tunes. When I called it was difficult to contact the co. unless I wanted to puchase something. When I was put on hold for 20 minutes the operator told me there wasn’t anything I could do. They were from India.

  5. Silent spoken

    On September 9, 2008 at 5:10 pm

    I”m losing my job to mexcio here in about 3days, yeah its sad to say. Its cleary stating that outsourcing jobs; Company benifits-cheaper labor, less restriction, no 401k or any other benitfits, cost reduction, yes this sounds goods to thick headed money hunger CEO/Companys. The down fall that I’m seeing is the turnover. How to you get a plant to function properly if you can’t seem to hold on your (employees that were train or taught how the process works inorder to train others) key employees. How does quality work, how does cost reduction work. The only thing I see that will benifit them in the long run is cheap labor. Point blank – Supposely outsourcing jobs is going to create new and better jobs, but what happing when jobs are outsourcing more than creating new ones. But what they don’t understand is that losing your job that you dedicated for so long that employees there are a 2nd family. Its just like murder. I’m not mad at the people taking my job, I’m glad that they can work and feed their familys. We can’t really do much but stay positive and hope for the best ( Finding a better jobs or watching the plant bankuprty or fail) Boths sounds good to me
    thanks for reading my vents

  6. wonder123

    On September 26, 2008 at 11:46 am

    Just lost my job today due to outsource to India, not only that we had to train these people to take over our jobs also and I am still trying to figure out what had happened..Cheap labor, cheap service..Seems America is not the place to be anymore..Land of cheap freedom, too free, want all lose all they say.

  7. Economy

    On October 2, 2008 at 10:05 pm

    When you mention the rising cost of living, you forget that rising cost is caused by restrictions on free trade, lack of competition, and unwillingness of the American worker to be mobile. The high cost of cars relates back to our government restristions on imports put in place many years ago eliminating the needed competition to keep prices down. Three major companies were able to run with out fear of competition.

    Imagine, how much you would have to pay for clothes, eletronics, and basic need items if it was not for competition and free trade around the world. Our cost of living would be so high that we would all be living in poverty.

    When it comes to outsourcing American jobs to other counties you must keep the following in mind. Yes, it does create an immediate and short term loss of jobs that is very hard on a group of American workiers. Now, the other side, the cost savings to a company by outsourcing select jobs, will boost our economony, keep the cost of living down, ensure the survival of the company for those jobs remaining in American, and create more American jobs in other areas. So, what our government needs to do instead of trying to stop outsourcing is create programs for those Americans thay have lost thair jobs to outsourcing. Programs that can help them relocate, help them receive new education in other fields, and help provide them with short term financial and heath care support during this transition. This in turn will drive our economy.

    Which is worse, a company that employs 10,000 Amercian workers outsourcing 5000 of those jobs to cut expenses and stay competitive and in business still providing jobs to 5000 Americans or that company failing because of high payroll cost restricted by laws against outsourcing and failing because they can not remain competitive in the American market causing all 10,000 American jobs to be lost.

    Companies run a fixed budgets, if they can save money in any area of expense, that money can be used to cut the cost of it’s product, create new jobs in other areas of the company, be put into research and development to create the next best thing. The possibilies are unlimited.

    If done correctly, outsourcing and free trade can create more American jobs and keep the cost of living down. There will be short term hardships for some, however, the current downfall of the American people is that they only think in the short term and they don’t consider the benfits of the long term which far out way the short term.

    Should you have any questions about this or would like to debate it, email

  8. What now

    On October 16, 2008 at 1:41 pm

    Is there any way we can get a listing of companies that outsource their labor, customer service, or any other parts of their business?

    We need to start boycotting and refusing to buy from these companites. We need to start making wiser choices with whom we do business. For example, you have cell phone choices; if T-mobile doesnt outsource their customer service and Verizon does, then you should choose Tmobile and vice-verse. Make wise choices and the companies will start reconsidering where they have thier workers.

    Are you willing to pay a few dollars more for a pair of jeans made and produced here? GET WISE AMERICA

  9. James

    On October 27, 2008 at 10:39 am

    I would have to agree with comment #8 which states that outsourcing and free trade can create more American jobs and keep the cost of living down. True,Americans are hurt in the process but the positive results of lower prices and increased competition between buisness outweighs the jobs lost to outsourcing. Also on another note, who are we to say where Private businesses can do business? These businesses are Private companies seperate from government and any restriction by government or force hiring of Americans would be unconstitutional, and most importantly undemocratic.

  10. production worker

    On October 29, 2008 at 2:03 pm

    Boeing is a prime example of outsourcing!!

  11. Nicola

    On November 4, 2008 at 3:42 pm

    Yes I am surprised to find out that HSBC bank has outsourced their collection offices to India. Social security numbers are asked for verification and it is shocking to know that these foreigners have access to our personal information, just like the government. People wake up and smell the roses instead of just blogging and complaining help each other to fight this. This is America and we are the land of the brave…… Vote Obama he is our only way out. It is time to get back our country. White americans, black americans, hispanics, native Americans wake up as I say. Boycott companies that do outsourcing. I feel for our people in this country. They need to live……

  12. filius Nullius

    On November 7, 2008 at 7:15 pm

    What is happening is economic treason, no different than political treason or military treason. When a nation fails to protect it’s own citizens from greedly corperate pirates whose sole ambition is to increase their own weatlh and force American citizens out of work, then that nation no longer deserves the loyalty of its people. When the call comes for our children to take up arms tell your military and political leaders to look in india for cannon fodder as our children are too busy trying to find work.

  13. ELI

    On November 16, 2008 at 2:40 am

    I heard in mexico that the women of sweatshops get killed after being raped and that no protection i being offered at night when these women go home.

  14. Bert

    On December 19, 2008 at 3:38 pm

    The notion that outsourcing is beneficial to most Americans is laughable and not supported by a scintilla of evidence. Outsourcing of services begin in earnest in the late 90’s. Since then, we’ve had two recessions and minimal income growth. Almost all our job growth has been in non-tradeable service jobs or government employment. Ousourcing IT jobs is scaring some of our best and brigthest young people from going into studying math and science, skills that our country needs. But whooppee, I can be cheap POS sneakers made by Chinese political prisoner and someone in a third world nation with an accent so thick I cannot understand him and can only read from a script can try to help me resolve my credit card balance in about an hour.
    Look, its ridiculous to wish this away. It’s not going away and some of these jobs will never come back. Maybe most of them won’t, but we can work to make this more fair and managable. Americans who speak in favor of outsourcing are destroying this country, wittingly or uwittingly. How can American remain a superpower if high paying blue and white collar jobs flee this country, our tax base errodes and future generations of would be students question the value of a college education? Can we ALL be waitresses, barbacks, and hairdressers? Can a country exist with an in house capacity to make products, design things, research etc. Is this really worth $45 DVD player? I’ve never seen some damaging groupthink in America. We are heading down the toilet and the outsourcers are crapping more turds on top of us.

  15. Danielle

    On February 13, 2009 at 10:10 pm

    I think that outsourcing jobs can become a good thing and safe if our country wasn’t so stupid. If we were to think about who we were outsourcing jobs to then it wouldn’t be a problem. All we have to do it make it so the people in our country benefit from the jobs that are outsourced, just like people in other countries benefit. If we can have all these jobs and benefits, why souldn’t people in other countries. Why is the U.S so stuck up. You know something I am ashamed to be an american. You see children on t.v starving because of not having money. Outsourcing jobs to them could help. Just think people of all the good we could do. Seriously get over it, this is what is happening and I, for one, think it is a good thing.

  16. Proud American

    On February 24, 2009 at 3:53 pm

    I have to disagree with Danielle. I have no problem with helping people outside of the US, if we are in a position to help. The problem is currently we are not in a position to help any country. Our deficit is huge and the unemployment rate is skyrocketing with people losing their jobs everyday. Maybe I am stuck up, but I believe that in order to be able to help anyone else you have to help yourself first. Just like on an airplane where they say to put the oxygen mask on yourself first and then your child. What good are you to anyone else if you aren’t good yourself. So before we can help any other country we have to get ourselves out of the hole that we are in. Once the US is at a better point, I have no problem with helpiing out other countries. This just may be several years.

  17. World Leader

    On February 24, 2009 at 11:52 pm

    I agree with Danielle. This isn’t about America, India, Mexico or China. It is about our world and everyone who lives in it. Outsourcing has gotten such a bad rap. Sure, many Americans have lost their jobs with corporations to foreign laborers, but it is their responsibility to pick up the pieces and begin again. America isn’t a magical land where everyone makes all the money they want from a job that’s just handed to them. A lot of people fail to realize this. Labor will thrive where it will thrive. America is evolving- the world is evolving. It always has and it always will. Knowledge is power and securing yourself and your family’s well being can ONLY be acheived when opening your eyes to the changing economy on a large scale basis. NO ONE CAN OR WILL STOP OUTSOURCING. Let’s give an example to those hard-headed, ignorant Americans who just don’t get it- OK, try this: Everything that you use on a daily basis can only be made or grown by you! You want milk- go milk your cow. You want clothes- put down those Hanes and start sewing. Hope your cotton crop is doing well through this cold winter- that and your orange grove. I really hope you see what I’m saying- YES! YOU OUTSOURCE EVERYDAY! Now quit whining and go get a job that is CAN’T BE OUTSOURCED.

  18. greg lovering

    On March 29, 2009 at 8:35 am

    #17, you’re comment is proof that you’re a mindless republican, whose only interest is keeping the rich’s wallets fat at the expense of blue-collar Americans, who are solely responsible for making this country a land of opportunity. It won’t be too long until you see that this massive outsourcing is going to further separate the rich from the middle class, making the American dream nearly unattainable…..unless, of course, you’re able to turn a blind eye to morality.

  19. Disappointed with Corporate America

    On April 18, 2009 at 11:35 am

    If it were only the most menial jobs that are outsourced. #17 says we outsource everyday, but they’re talking about simple agriculture. The argument is that you should apply yourself, learn a valuable skill, and work hard. Well, that just won’t cut it America. At this stage of the game, offshore firms are providing middle management, business analysts, project management, software architects (the whole package). The point is VIRTUALLY EVERYTHING CAN BE OUTSOURCED. The point is that there needs to be a conscious decision to protect American jobs because that’s where we live. If you want your community to prosper, you take care of the community. We are shipping dollars overseas, jobs overseas, and business knowledge overseas. For some reason, corporate America is screwing up left and right. Enron, bailouts, CEO salaries and bonuses, and of course, offshoring. There needs to be an expectation on Corporate America to start acting responsibly.

  20. sandman

    On June 24, 2009 at 8:56 am

    First of all “World leader” or whatever your communist name is, you probably havent lost your job to outsourcing or you wouldnt be such an idiot and would open your eyes to whats going on. these corporations dont care about americans all they want to do is make more money no matter the cost. Also you retard no one here is talking about living in the 1800’s and having to milk cows and grow their own food. #17 Your probably one of the stupidist people ive ever heard in my life

  21. Dallas Guy

    On July 12, 2009 at 4:14 pm

    Please add EDS and IBM to the list of major companies outsourcing many thousands of jobs to India. The US Bureau of Labor Statistics ( does not track outsourcing and the cascading effect of this job loss and negative impact on the economy. As of July 2009, sales tax revenues in Plano, Texas declined by over 40% from 2008 (the highest in Texas). The BLS unemployment data reported by the media is only NEWLY unemployed and not TOTAL unemployed (almost twice as high). It seems the US government is trying to minimize the situation.

  22. Solution to Job Outsourcing

    On July 12, 2009 at 4:28 pm

    The US needs new privacy laws similar to Europe where it is illegal to export information on citizens and business outside of the country borders. New privacy laws will also reduce Identity theft that occurs every three seconds in the US. Without information on citizens, jobs in call centers would return to the US. Without information on business data networks, IT jobs would also return to the US. Although some people may consider new privacy laws to be protectionist, many other countries have already implemented such laws. This idea would not cost taxpayers a dime other than to pass the law and enforce it. The current recession (maybe depression) seems to be caused by US government policy and Congress.

  23. Correction regarding EDS

    On July 21, 2009 at 12:17 pm

    #21, you might want to mention that EDS is now owned by HP. EDS has been outsourcing for a long time, however, now that HP has bought them up thanks to Ron Rotten selling us out and then fleeing with his huge payout, it’s getting even worse. HP basically sums up what’s wrong with why they are outsourcing that many of you that tell us it’s good for the country don’t realize.

    In the last financial report sent out to all employees, HP showed increased profits across all areas and fields of business. This was not good enough, however, as they wanted a 20% growth across all and the only section to achieve this growth was EDS. Included was a big statement about not laying employees off and a mandatory pay cut for all employees instead. (yay for basically losing my only raise in 10 years). Within a week of this statement, EDS had mass layoffs across all sectors (which obviously I won’t even go into all the layoffs that happened prior to Ron selling us to HP). So instead of laying off their regular employees, they just continued to gut ours, I guess figuring they could squeeze us for even more profits to make up for what the other departments couldn’t do.

    So for a company that is making billions of dollars in profits a year, for them to continually lay off all their US workers and create ‘best shore’ locations (which can’t perform their jobs even half as well, and keep in mind that all factories of HP computers are in India), it’s not being done to remain competitive or keep consumer costs down. It’s simple greed, and it’s obvious to see with how the cost of living continues to go up as the outsourcing continues and gets worse. They see a way to make even more money for the upper echelon, and they take it..why lower prices because the labor is cheaper? Heck no..that’s lost revenue.

    Even before EDS was bought out they would try sneaky tactics like outsourcing the contracted help desk without informing the client they were doing so – they almost lost GM because of this because GM has a strict clause in their contract to prevent EDS from outsourcing their support. Also, with the client Sprint, they are not allowed to outsource. So instead, they are ‘laying off’ the majority of the agents who are making only $9-10 an hour(which by law, laying off an employee means the job is going away), only to hire new agents at minimum wage under a different job code to do the exact same work.

    There are no new jobs being created in the US as a result of outsourcing’s so called benefits, they are just being lost, and if it’s allowed to continue at the rate it’s going…Well, let’s just say that unless you’re already in a secure position at the top end of corporate ladder, eventually the only jobs left aren’t going to be of the quality (pay wise)or quantity that we will need.

  24. more thing

    On July 21, 2009 at 12:57 pm

    Forgot to mention this in comment 23, but we also have a client that instead of outsourcing we do a perverse kind of in-sourcing where we hire contractors in India, have them go through a ‘nationalization’ class, and then import them to work in the US. Finra is based out of Rockville with offices across the country, but a good 80% of the users we talk to are EDS hires that were imported from India. So not only do we snatch jobs away from the US and give them to another country, we bring them over here to take the jobs we can’t ship off.

  25. crazy

    On September 12, 2009 at 7:44 pm

    I just lost my job to outsourcing. I have a graduate degree and can work -nope every job is outsourced. We are just going to end up a s a nation of low skill workers that produce nothing and all the CEOs making million dollar payouts. I think it is time to make the govt step in and maybe put in a 30-40% tax on all outsourced contractors. China and India do not have free floating currencies-so why should we have free trade with countries that do not practice free trade??

  26. thomas

    On November 9, 2009 at 8:11 am

    I agree with the above statement.
    Looks like EDS is taking over the majority of the hotel industry now. I say tax the heck out of these predatory corporations. Also, do not vote for these clowns in congress that have allowed this to happen on their watch.

Post Comment
Powered by Powered by Triond