Offshoring is the relocation of a business process from one
country to another, typically a business that deals with operational and supporting
processes.
This article focuses on offshoring of the U.S. economy in
2014. The practice of moving production to
foreign areas while selling goods to the U.S. market is a pervasive feature of
the economy today. The manufacturing
industry when offshored for example, imports for capital-intensive industries
such as machinery made U.S. companies who were labor-intensive manufacturing
industries less likely to engage in production relocation. This indicated that the global businesses see
the U.S. market more as a place for sales rather than a place to invest in
production.
A federal reserve bank of New York stated the more a U.S. industry
is exposed to offshoring pressures, the more wages would be decreased within
each share made. How to fix this was to
increase economic competition by moving production to offshore locales, then
selling the goods back to the U.S. market.
Tim,
ReplyDeleteI find offshoring to be an interesting topic. When reading your summary I asked the question of why is offshoring becoming so popular and what are the effects on the American people. I looked at the article you posted and was surprised. The reason offshoring is becoming so popular is due to the increase competition in prices of final goods. To lower prices and raise profits, companies are looking to take advantage of others countries lower wages to drop the prices of their goods. One area of the article you posted that I found very interesting was about the tax code and how the current tax code favors offshoring. I found this to be very interesting because you mentioned that this offshoring is putting downward pressure on American wages. I find it interesting that the government has developed a tax code that in the end is encouraging lower wages for the American people. It would be interesting to see a well thought out article about how tax code effects the wages in this way.
The effect of offshoring is very interesting and especially how the world views the US as a place for sales than a place for production. This therefore suggests that they will not be used as an offshore location and businesses in the US are better off going elsewhere for production and selling inside the US. The article is relevant and is an interesting read with good connections to your blog post.
ReplyDeleteTim,
ReplyDeleteIt may be interesting to look at what the wage effect was and why it decreased with the offshoring pressures. There are many cases that offshoring may not be the best option although wages are low in other countries for production. Why may the U.S. be a place for "sales" and not production? Could trade policies be affecting where countries sell if the U.S. imposes tariffs and quotas on these offshored products?