Question 8.
Positive and Negative Arguments of Offshoring of Jobs and Potential Costs and Benefits of Offshoring
Offshoring is, without a doubt, emerging to be a trend developed countries such as the USA are adopting to gain low-cost labour advantage form developing countries. Offshoring can be defined as the movement of jobs and tasks from one country to another, meanly from high-cost countries to lower-cost countries. Offshoring has resulted in both negative and positive arguments as different studies show different opinions on the impact of offshoring. In this paper, we will look at several positive and negative arguments as a result of offshoring by assessing jobs that may be affected and the potential costs and benefits of offshoring.
Potential Costs and Benefits of Offshoring
Reduction in the cost of production is the effect of offshoring as companies are outsourcing employees with high skill at a low cost (Jabbour 2010) . Developed countries are outsourcing diverse labour skills, for example, in information technology (IT) in developing countries such as India where highly qualified IT professionals have emerged. Compared to the US, India has more qualified software developers, and they are available at a lower cost (Lo Turco and Maggioni 2012). The ability of India programmers and engineers to speak in English has made the most targeted skilled workers for outsourcing. The Meta Group indicated that in 2003, 80 per cent of companies globally had planned to outsource IT functions (Haried and Dai 2011). In the United States, most companies have turned to offshore to lower delivery costs and at the same time with the target of accessing diverse IT skill sets.
For instance, in the United States, the salary for an accountant is around $63,000 per year, whereas, in India, the same competent accountant with the same skills or even more skilful earns about $5,000 per year (Holland et al 2010). If a company tends to relocate its activities from the US to India will have to pay less to the accountant, who will lead to reduced cost of production. Due to the advanced technology, several duties can be carried out remotely; this has also boosted the companies in developed countries to outsource employees in developing countries to help in providing various services at a lower cost. This has been facilitated due to the low cost of living in developing countries compared to the cost of living in developed countries, and developed countries are taking this advantage to outsourcing employee to work even remotely at a lower cost.
Another benefit of offshoring is the search for new markets that give rise to new opportunities for more employment. Companies that have been relocated to other countries have, at times, realized new markets in the countries they relocate to or in neighbouring countries (Palugod and Palugod 2011). When a company relocates to a new environment, the products or services offered by the company are realized. This may lead to the company achieving new, markets which will lead to an increase in sales of the company as it will have new consumers.
One of the most discussed negative effects of offshoring is the loss of employment. Jobs that could be performed by in-house employees in a country are provided beyond the countries’ borders (Levine 2012). Due to offshoring since 1979, (Atkinson et al 2012), three to five million manufacturing jobs were lost in the USA. When a company is relocated from one country to the other, many jobs are lost for the current workers of the company in the home country. Studies show that most of the jobs that are lost due to offshoring are unskilled jobs (Geishecker et al 2012). This is because when a company is relocated, for example, from the USA to India, the company tends to employ most of the unskilled workers from India to run some activities. This will lead to unskilled employees who worked for the country in the USA to lose their jobs. This has led to criticism of offshoring, as critics say it is increasing the number of unemployment in developed countries.
Positive and Negative Arguments of Offshoring of Jobs
More so, it has been argued that some governments are to blame for the increased import of skilled employees from their nation to move to develop other nations economically (Ashish and Suma 2001). Scientists have argued that countries like India have witnessed many of professionals who should be working in their companies move to countries like the US to offer their services which have helped US companies wining competition over India companies. Many argue that the economy of India has stagnated and they fail to offer adequate salaries for their highly qualified personnel’s (Ashish and Suma 2001). This has led them to be unable to resists offers to work for developed countries where salaries are higher and excellent working conditions provided. However, developed countries are taking this advantage to outsourcing professionals from developing countries to work in their companies which has enabled many companies to succeed in this era of globalization where offshoring is prevailing.
However, the negative argument on the offshoring of jobs is based on poor infrastructures in developing countries as this has affected several manufacturing companies (Ashish and Suma 2001). Manufacturing companies have been forced to relocate to countries where there is a good infrastructure to enhance the smooth operations of the business. This is argued to have affected a huge number of jobs in manufacturing companies as people were losing their jobs when companies relocated to other countries to seek a good working environment. In India, for instance, manufacturing countries find it challenging to efficiently operate as a result of poor infrastructures. This has resulted in people of India losing their job when India manufacturing countries relocate to other nation like China. This has led to many unemployed engineers and unskilled individuals in India due to offshoring. However, this, on the other hand, is an added advantage to china citizens as they will secure jobs in these manufacturing companies relocating to their country, reducing the number of unemployment in china. This has compromised the acceptability of offshoring since it comes with both advantages and disadvantages in the field of employment.
In conclusion, offshoring has attracted both positive and negative arguments. In a positive debate, it has been argued that offshoring increases job opportunities to the countries where the businesses are relocated to. The companies make profits by reducing the cost of production while the countries the business relocates to get their citizens employed, reducing the number of unemployment in those countries. On the other hand, the negative arguments suggest that offshoring leads to loss to citizens of the country where the companies offshore. Manufacturing and software companies are seen to be the most affected filed by offshoring. In my view, I would recommend offshoring as it ensures companies experience diverse technology skills at a low cost, which is essential in the modern era we live in.
References
Ashish, A, and Suma, A., 2001. The Software Industry and India’s Economy Development.
Atkinson, R.D., Stewart, L.A., Andes, S.M., and Ezell, S., 2012. Worse than the great depression: What experts are missing about American manufacturing decline. Washington, DC: Information Technology and Innovation Foundation, pp.327-339.
Geishecker, I., Riedl, M., and Frijters, P., 2012. Offshoring and job loss fears An econometric analysis of individual perceptions. Labour Economics, 19(5), pp.738-747.
Haired, P., and Dai, H., 2011. The evolution of information systems offshoring research: A past, present, and future meta-analysis review. Journal of International Technology and Information Management, 20(1), p.5.
Holland, D., Kirby, S., and Whitworth, R., 2010. A comparison of labour market responses to the global downturn. National Institute Economic Review, 211(1), pp.F38-F42.
Jabbour, L., 2010. Offshoring and firm performance: evidence from the French manufacturing industry. World Economy, 33(3), pp.507-524.
Levine, L., 2012. Offshoring (or offshore outsourcing) and job loss among US workers.
Lo Turco, A., and Maggioni, D., 2012. Offshoring to high and low-income countries and the labour demand. Evidence from Italian firms. Review of International Economics, 20(3), pp.636-653.
Plugged, N. and Palugod, P.A., 2011. Global trends in offshoring and outsourcing. International Journal of Business and Social Science, 2(16).
Question 9.
International Labor organization has been hit by globalization as it has struggled in practising its mandate of improving global working conditions due to globalization. This has been due to several challenges ILO faces in its attempt to deliver its mandate. Some of the challenges the ILO faces are due to lack of efficient strategy or a progressive agenda in its standards declarations, ILO has also neglected economic rights and concentrated on civil rights. Lastly, ILO standards in declarations are inconsistent with the establishment principle. In this paper, we are going to find out how each of these challenges has affected ILO’s ability to improve global working conditions and whether alternative strategies can support better working conditions.
The first challenge ILO faces are a lack of efficient strategies or progressive agenda to achieve its standard declarations. ILO faces a significant challenge in enforcing the application of the declaration even though the government has committed itself to the declarations. This is a result of the weak current structure of the ILO. Since 1969 when ILO was accorded Nobel prize, the Organization has since received criticism has it is thought to have forgotten its mission (Standing 2008). This is because ILO has failed to come up with strategies that will ensure its declarations are applied in the countries they operate due to a lack of proper strategies to achieve its mission, which is to protect human and labour rights globally.
Due to this failure of ILO coming up with clear and fruitful strategies in ensuring its declarations are followed, as resulted in ILO to lose its credibility and its conventions are being ratified by few countries (Standing 2008). For example, the homework convention that targeted extending labour standards to home workers was ratified by four countries, only (Prügl and Elisabeth 1999). If ILO had better strategies, the convention could have been endorsed by more countries since it could have a wiser way of convincing the countries to approve it. ILO management structure is what is behind all the lack of credible strategies. ILO lacks professionalism. This is because the ILO management positions have been distributed politically (Baccaro, and Mele 2012). Individuals with no idea of how ILO works are given critical positions. USA, Russia, and other political big weights have dominated the high-level positions in ILO, and the strategies and decisions made are toward favouring some countries and discriminating against others. This has led ILO to be unable to come up with strategies or progressive agenda that can lead to the implementation of its declarations, posing a significant challenge in its ability to improve global working conditions, especially within this globalization era.
However, neglecting economic rights such as economic security, work safety, and health, disability benefits, and pensions has also threatened ILO’s ability to improve global working conditions. ILO ignored economic rights and concentrated more on civil rights (Vandemoortele 2009). This lead to the violation of the economic rights as employers was concerned about fulfilling civil rights to employees but ignored economic rights since ILO paid less attention to them. This resulted in a violation of economic rights, which are essential to employees. For example, many employees were employed informally as part-timers, but in the real sense, they were full-timers (Spence 2011). This was maybe to deny them some of the benefits which they would claim if they were full-timers.
More so, when the new globalization era replaced the Cold War, a lot changed from the perspective of economic rights (Chen et al 2013). Economic rights were misinterpreted and ignored by various institutions. Since ILO had neglected economic rights, workers in some institutions had difficult times in getting their economic rights. Disabled persons could not get their benefits due to their disability as they had no one to fight for their rights since ILO had ignored these economic rights. Pensions and maternity provisions also could not be accessed due to the failure of a strict follow-up and standard-setting by the ILO to achieve economic rights to workers. These challenges of neglecting economic rights by ILO are a significant threat for the organization from achieving its mission of improving global working conditions.
In addition, ILO standards in declarations are inconsistent with the establishment principle, which is a challenge to ILO achieving improved global working conditions. Consistency of declarations with the established principle has been affected by various issues like politics and financial support. Some of the member countries have been receiving different enforcement of declaration against the established principles. This has been due to political issues or even in case the country appears to be the highest donor to the ILO. This unequal enforcement of standards in declarations has led to inconsistency with the established principle and poses a threat to ILO achieving its goal of improving global working conditions.
Nevertheless, alternative strategies can be put in place to support better working conditions for employees globally. ILO should ensure it performs its duties without being compromised. ILO is an independent institution and should be firm when making decisions (Evans 2014). This will ensure ILO enforces ratified conventions without being diverted by outside obstacles such as political powerhouse nations. ILO also needs to change the way it chooses its representatives to monitor the application of ratified conventions in its member countries. The organization should choose competent and professional representatives with clear knowledge of how the organization works. This will ensure the representatives closely monitor the implementation of the ILO set standards which will enable the organization to achieve its goal. The representatives should also prepare a comprehensive report on the implementation of the ratified conventions, which should be presented to the ILO general manager. If a representative lacks competence, he or she should be replaced. This will ensure the standards are enforced and implemented.
More so, the ILO Committee of experts should be involved in analyzing and giving advice on the trend of adherence to the set standards from the reports collected from various country members. This will ensure that those countries found not following the ratified conventions are dealt with according to the sanctions set by the ILO. If these strategies are imposed, they will be of great help as they will ensure better working conditions compared to the current situation where the working condition is worsening due to poor strategies of implementation of set standards.
ILO is facing several challenges as it attempts to achieve improved global working conditions. The transitional to globalization era has resulted in ILO having difficulties in realizing its objectives (Munck 2010). This is because of challenges like lack of proper strategy to achieve the application of the set standards as troubled ILO. Neglect to the economic rights and focusing on civil rights was also a big challenge as it hinders ILO from achieving its goals as the violation of economic rights affects global working conditions negatively. Inconsistency of standards in declarations is also a big challenge as political impacts, for example, alters the consistency of these declarations in some countries. Acquiring alternative strategies such as having a competitive representative in various countries will be of great advantage as it would better-working conditions.
References
Baccaro, L., and Mele, V., 2012. Pathology of path dependency? The ILO and the challenge of new governance. ILR Review, 65(2), pp.195-224.
Chen, Z., Ge, Y., Lai, H., and Wan, C., 2013. Globalization and gender wage inequality in China. World Development, 44, pp.256-266.
Evans, P., 2014. National labour movements and transnational connections: global labour’s evolving architecture under neoliberalism.
Munck, R., 2010. Globalization and the labour movement: challenges and responses. Globalization, 5, pp.31-2010.
Prügl, Elisabeth. “What is a worker? Gender, global restructuring, and the ILO convention on homework.” Gender Politics in Global Governance (1999): 197-209.
Spence, M., 2011. The impact of globalization on income and employment: The downside of integrating markets. Foreign Aff., 90, p.28.
Standing, G., 2008. The ILO: An agency for globalization?. Development and Change, 39(3), pp.355-384.
Vandemoortele, J., 2009. The MDG conundrum: meeting the targets without missing the point. Development Policy Review, 27(4), pp.355-371.