Negative effects of Outsourcing

Tommy Wu

Why Outsource?

Labour costs are the biggest expense in business.

In the 21st century, we began to reduce labour costs.

Offshore outsourcing has become the most common way.

However, negative

effects of outsourcing

have been discovered.

Job losses

Labour abuses

Quality control issues

Environment problems

Negative effects on the balance of trade

Job losses Production department is usually being

outsourced

The problem is that jobs are being lost

Skilled and semi skilled jobs are the biggest losses

Purchasing power disappears

Fewer people will train for such jobs

And valuable skill sets will be lost to the society because demand is reduced

Labour abuses Labour abuses are very common in many

poor countries

Outsourcing company can’t control “double outsourcing” is happening

Workers often have low wages and bad working environment

Child labour is also a problem

Quality control

Developing countries don’t have a good quality control system

Investors don’t care because they are focused on reducing expense

Workers are not educated and well equipped

Products may contain harmful materials

Environment problems

Host countries are too eager to accept the contract

This caused that they failed to enforce environment practices

Workers in the factories may often be working in a toxic environment

Local communities are also suffer from the environment hazards

Loss in the balance of trade

In past 15 years, the trade deficit has increased by 400 % in US

In Canada, the deficit of trade has touched the bottom in the previous 20 years.

North America, is increasingly not making product anymore.

We send the raw material to others and then buy well goods back.

In conclusion

In conclusion, offshore outsourcing is bad for both parties: investors and the developing countries.

Thanks for your time

Tommy Wu