He
also points out that, “U.S. companies are doing what they need to do to be
globally competitive.” U.S. companies are indeed doing this to be globally
competitive, but from an economics standpoint offshoring can actually help
improve a country's terms of trade as well. Keeping in mind long-term models
such as the Heckscher-Ohlin model, offshoring is beneficial to a country as long
as the low-skilled jobs are being offshored and the high-skilled jobs are
remaining in that country (offshoring seizes being beneficial when the high-skilled
jobs are leaving the borders; it deteriorates the comparative advantage held by
the country in these respective areas). An increase in offshoring will raise the
relative demand and the relative wage for jobs in both the country engaging in
offshoring and the country in which the offshoring is being engaged in. This is
because each country will be specializing in the jobs in which its labor is
relatively cheaper. Greater productivity and comparative advantage translates
into increases in a country’s terms of trade. Therefore, not only is offshoring
beneficial for a company, but it is also beneficial for a country (once again
assuming the offshoring is of low-skilled labor).
Wednesday, November 6, 2013
Offshoring Condemned by Biased Sources
Is
offshoring a bad thing? Well, for those in the jobs and industries that are
being negatively affected, yes. People who are invested in these areas are not afraid to voice their opinions on the matter. They have a rational reason to be upset; they are the losers in this
situation! Nonetheless, offshoring is not as horrible as it is made out to be.
Although there are losers in certain jobs and industries, there are winners in other
places. One article written by Patrick Thibodeau is a great example of a biased opinion regarding offshoring. Looking at the name of the website (Computer World), it is not hard to see why. The IT sector is one sector that has been subject to many hardships due to offshoring. In the article, Thibodeau talks about the losses and gains of offshoring, but tries to make this situation
seem like a negative thing (as it is for the IT sector, but not necessarily for other areas), writing that, “ the 1.8 million IT jobs in North
America and Europe at... large companies today will have declined to about
1.5 million [by 2016], despite the fact that many of the companies will grow. The
decline is almost completely attributable to offshoring… because the number of
jobs lost to productivity improvements tends to be roughly offset by the number
of new jobs created through growth.”
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Doesn't this also cause a loss for workers in the home country and then force them to switch industries or be force to embark in educational pursuits to get a new job and these pursuits will come at a price with determine the new field to be studied and wheathet or not that job could not be offshored one day. But going back to your I believe that it would eventually go to be a place where business will remain fix in certain regions and benefit all
ReplyDeleteI think that you made good points. I think what Alex had to say made sense because it would cause the other workers to switch because of their educational. So would that not in turn hurt which ever industry is getting those workers. And then they might eventually offshore as well.
ReplyDeleteI agree with author’s opinion that the skilled labor in both countries (Home and Foreign) can gain because the demand of skilled labor increases. However, the Term of Trade may not increase. When these two countries specialize in their high-skilled sectors, the productivity in these sectors increases. So the prices of them will go down, which means that price of exports and price of imports decrease at the same time in Home and Foreign. And we learned from the book that the gains are not enough to compensate the losses due to falling in the price of skilled products in Home. Therefore, I think it may not be beneficial to countries to some extent.
ReplyDeleteI found it a little interesting that the author thinks that IT jobs will decrease at that rate. As we looked at in class the low-skilled jobs tend to be the ones that are offshored and the high-skill jobs tend to stay in the developed country. I know that there are certain low-skilled jobs in the IT sector that can be offshored, but I feel that IT is mainly a high-skilled intensive sector. I just think overall it is somewhat odd that that many jobs would be lost to offshoring. This makes me wonder then if education is increasing on an average globally, and because of this the high-skilled/low-skilled gap, in the IT sector at least, is becoming decreasingly smaller.
ReplyDeleteWith your last paragraph discussing that the offshoring of low-skilled workers being beneficial for the company and the countries, brings to my mind a question of what workers are being offshored in the case of the IT sector, and what that would do to the company and countries.
I agree with you. And what Alex said also makes sense. Absolutely, low-skilled workers in the countries which engage in offshoring may loss from the trade. But the totally gains of the countries engaging in offshoring is larger than the losses. I think that is the reason why many companies in industried countries moved their low-skilled labor industries to Hong Kong, Singapore, South Korea, and Taiwan at the end of 20th century, and to China at the beginning of 21st century, and to other relatively lower wage countries like India and Vietnam now.
ReplyDeleteI agree with you. And what Alex said also makes sense. Absolutely, low-skilled workers in the countries which engage in offshoring may loss from the trade. But the totally gains of the countries engaging in offshoring is larger than the losses. I think that is the reason why many companies in industried countries moved their low-skilled labor industries to Hong Kong, Singapore, South Korea, and Taiwan at the end of 20th century, and to China at the beginning of 21st century, and to other relatively lower wage countries like India and Vietnam now.
ReplyDelete