The Hypocrisy of American Companies

“The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.” -Milton Friedman (Brainyquote). Like the Great Depression, the current period of economic unrest id greatly influenced by the issue of the current unemployment rates. Unemployment is a major issue which is hurting everyone in our economy, and we need to do everything that we can to create more jobs, as well as to bring jobs back to America. An increase in the job market could do wonders for the state of the economy in the United States. What we need the most are political groups and lawmakers that make this issue their number one priority and fight to get our country back on track both within our own economy and in the global market. However, rather than fighting to create jobs for the middle and lower class, and to create tax breaks for small businesses, and increase the amount of exportable materials the United States creates, many in the political arena along with a vast number of lawmakers continue to fight for and to protect unfair tax breaks for big special interest groups and for large companies that continue to send American jobs overseas. 

Many lawmakers and American businesses are angered that businesses closing U.S. operations are being allowed to deduct the closing costs as standard business expenses on their taxes. This only continues to encourage businesses to take their companies outside of the U.S, which decreases the availability of jobs, as well as the products that we export to other countries. These businesses take advantage of current tax loopholes which permit companies that close down American factories and offices and move those jobs overseas, to take a tax deduction for the costs associated with moving the jobs to China, India or other countries that we are currently outsourcing to. “Why are we outsourcing millions of high-paying jobs to China and India? … These are important questions on the mind of middle class voters all over America.” -George Noory (BrainyQuote) These are indeed very important questions, questions that politicians should be forced to answer to. This should by no means be something that the average American continues to condone by endorsing candidates who support these types of tax breaks and company policies. American’s should take a stand against outsourcing and use their votes to stop allowing these things to happen in our country. (Lair) If we refuse to vote for candidates who are not avidly against the continuance of outsourcing in our country, companies will be forced to comply with the wishes of the American people. In order to make this happen, people need to be better educated about outsourcing and its true effects on the economy.

Outsourcing is the act of one company contracting with another company to provide services that might otherwise be performed by internal employees. This often involves moving the company overseas and hiring non-American workers for the majority of the general positions. Often the tasks that are outsourced could easily be performed by the company itself, but in many cases there are financial and more importantly, big tax advantages that come from outsourcing. Many large companies now outsource jobs such as call center services, e-mail services, and payroll and many, many more services of all kinds. On top of this, many large companies either already have or are seriously contemplating moving their corporate offices out of the country. These jobs are handled by separate companies that specialize in each service, hire their own workers for the vast majority of the positions, and are often located overseas. This takes the jobs away from those who had previously held them and then gives them away to other people, usually outside of the American workforce. There are many reasons that companies outsource various jobs, but the most prominent advantage seems to be the fact that it often saves the company a considerable amount of money. 

The vast majority of these foreign companies make it very simple and make it seem a very attractive idea to these American companies to move or outsource their facilities or services to their individual countries. For most companies, the cheaper that they are able to acquire goods, services, and workers, the better off they believe that they will be, and most companies do not turn down the offer of these things very easily. Outsourcing companies offer the companies that they take over cheap facilities, workers who will work hard for them for very little pay, tax breaks, and any other help that they may need. This can provide the financial boost that many companies are in need of, and others just desperately want. (Lawrence, n.d)  Many of the companies that provide outsourcing services are able to do the work for considerably less money, as they don't have to provide benefits to their workers and have fewer overhead expenses like insurance and taxes to worry about. Depending on both the original location of the company and the location that they plan to move to, it may also be more affordable to outsource to companies located in different countries due to cheaper costs of living, lower taxes, etc. (Freytag, 2012) If we continue to allow these other countries to best us in their prices, and do not make laws against outsourcing, this trend will continue to grow because most companies will always search for a better price. The government needs to start offering benefits to companies that keep their profits on our shores instead of continuing to drive them away with higher taxes and other higher costs.

There are many drawbacks to outsourcing that will be discussed. While each of these drawbacks can be and usually are argued by the companies who profit from outsourcing, their arguments to not make the very real disadvantages to outsourcing go away, and the few benefits that they do bring up certainly do not outweigh the issues that inevitably arise. One of these very serious drawbacks is that it often eliminates direct communication between a company and its clients. In order to reach a support line, customers must call in or mail complaints to staff that are often in another country, who often speak poor English, and are somewhat difficult to understand over the phone. (Ribi, n.d)  This may prevent a company from building solid relationships with their customers, and often leads to dissatisfaction on one or both sides. If customers feel that it is difficult or impossible to reach people who care to help them with their problems, they may begin to contemplate taking their business elsewhere, which could really hurt the company in the long run. There is also the danger of not being able to control some aspects of the company, as outsourcing may lead to delayed communications and project implementation. The longer it takes information to get from one branch to another, or from the company branches to the corporate office, the longer potential problems could endure, and the longer dissatisfied customers will continue to be dissatisfied. (Lawrence)  Any sensitive information is more vulnerable because it needs to travel further to reach its intended recipient, and a company may become very dependent upon its outsource providers, which could lead to problems should the outsource provider back out on their contract suddenly. If the outsourcing company suddenly decides that it no longer wants to deal with the company then that company will suddenly need to hire an entirely new workforce, and new facilities, which could cost the company an enormous amount of time and money, and potentially cause the company to go out of business. If this happens, all of the branches will close down and thousands of jobs could be lost. (Feenstra, 2010) This will cause even further damage to our already struggling economy.

On the other hand, many claim that there are many reasons to be in favor of outsourcing. “Outsourcing and globalization of manufacturing allows companies to reduce costs, benefits consumers with lower cost goods and services, causes economic expansion that reduces unemployment, and increases productivity and job creation.” -Larry Elder (Brainyquote)  Outsourcing does play a part in allowing goods and services to be cheap enough to allow those in the lower and middle classes to easily afford them, and in some ways has improved the standard of living for those below the poverty line. If more people can afford the goods and services provided by outsourced companies then they will be able to live more comfortably. It is also argued that it becomes very difficult for companies not to outsource because the likelihood of going out of business greatly increases if your company is the only one paying to stay in America, and your prices cannot compete in the market with those that have been outsourced. Since so many companies are now making use of outsourcing, it is becoming incredibly hard for those who do not to stay afloat, with higher prices that drive away customers, more taxes to pay, and a higher wage requirement for their workers. ( Parente et al.) However, if these jobs stayed in our country, many of those considered below the poverty line would be able to help themselves out of this situation by taking the jobs which would be flooding back into the United States. This would decrease the unemployment rates, and allow more companies to export goods and services outside of the United States, creating more revenue for the economy. Also, if none of our companies were outsourced, then the only competition companies would have to deal with would be that of those also competing within the United States market. This would, in turn, create more business, more jobs, and more revenue. (Freytag, 2012) The increase of these things would improve the overall economic outlook on the United States greatly.

The understanding of the tax loopholes is a fairly complicated matter. Basically, the United States government taxes companies on foreign profits, which not all countries do. But companies don't have to pay taxes on foreign profits until they bring the profits back to the U.S. So companies tend to keep the money with their foreign subsidiaries as long as possible. But companies also get U.S. tax credits for taxes they pay to foreign governments.  So not only do these companies get away with not paying taxes, but the United States government gives them taxes credits for what very little taxes they pay. In the long run, because the US credits are worth so much more, the company winds up making money off of this system. (Lawrence, n.d)  Some companies figured out how to take advantage of the system by keeping their profits overseas and completely untaxable while still claiming a tax credit for taxes paid to foreign governments. The new guidelines say companies can't claim the foreign tax credit until they bring the profits back to the United States. (Ribi) Outsourcing is one of the worst ideas that greedy corporate heads use to line their already fattened wallets. They want to make more money, so their reasoning is why not pay someone in another country to do the job for a fraction of the cost as compared to hiring an American worker? Well due to this new “economic” way of thinking by some large corporations, many have lost their jobs and many of these jobs are not always for just telemarketers. Some are big positions that were filled by someone who had impressive degrees. American jobs need to remain in America to keep the economy strong in this country. If the jobs are in a different country, then how would those jobs benefit Americans? If trickle-down economics really works, then our economy would be good right now, but it isn't. Keep jobs here, and the economy should and will respond. (Lair, 2012) When it does begin to respond, we will see a decrease in families below the poverty level, a decrease in unemployment rates, and a much better economy overall.

Outsourcing has become one of the biggest reasons for our economic decline and is incredibly negative to our economy. The desire of corporations to seek the cheapest labor possible has led to less work for Americans and a larger disparity between the rich and the poor. (Lawrence, n.d) Those who fall into poverty are finding it increasingly hard to dig themselves back out because of the lack of work, and the rising costs of living. Over the last twenty years this gap has grown tremendously and is fueled further by the fact that Americans now take lower wages in an attempt to remain employed. This also causes an alarmingly increasing number of American exports to be moved to other countries, meaning that we no longer profit from them, and need to import all of our goods from other places. Almost nothing is made in the United States anymore. Many Americans are out of work, struggling, and living in poverty and our economy is in the toilet. If these trends continue our economy will continue to decline into capitalism and exploitation until we find ourselves in the midst of another Great Depression, which we may not have the resources to dig ourselves out of. The country could suffer an intense economic collapse from which it may never really recover. All of these things are a very real possibility because we don't produce here and buy here. Looking at our economy on a state by state basis shows that buying and selling locally makes for the strongest economy. We as voters need to continue to encourage our lawmakers and politicians to make policies that encourage and even demand that American companies keep their business inside of the United States. This could give our economy the boost that it needs to begin to function properly once again. (Feenstra) Once we are back on the road to economic success, the quality of life will begin to go back up in the United States, and we will be well on our way to becoming the world superpower that we once were.

Works Cited

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Feenstra, Robert C. "Globalization, Outsourcing, and Wage Inequality." NBER. N.p., n.d. Web. 25 Apr. 2013.

Freytag, Per V., Ann H. Clarke, and Majbritt R. Evald. "Reconsidering Outsourcing Solutions." European Management Journal 30.2 (2012): 99-110. PsycINFO. Web. 25 Apr. 2013.

Lair, Craig D. "Outsourcing And The Contracting Of Responsibility." Sociological Inquiry 82.4 (2012): 557-577. PsycINFO. Web. 25 Apr. 2013.

Lawrence S.4, l Welch, et al.Offshore Outsourcing: A Dynamic, Operation Mode Perspective." Industrial Marketing Management 42.2 (2013): 211-222. Business Abstracts with Full Text (H.W. Wilson). Web. 25 Apr. 2013.

Ribi, Evelyn. "Outsourcing, Unemployment and Welfare Policy ☆." ScienceDirect.com. N.p., n.d. Web. 25 Apr. 2013.

Ronaldo Parente, et al. "Outsourcing And Its Implications For Market Success: Negative Curvilinearity, Firm Resources, And Competition." Journal Of The Academy Of Marketing Science 40.2 (2012): 329-346. PsycINFO. Web. 25 Apr. 2013.