Type: Economics
Pages: 2 | Words: 337
Reading Time: 2 Minutes

Outsourcing is the process whereby a company contracts another company to perform certain services on its behalf, whereas these services could have been performed in the owner’s house. Examples of jobs outsourced are human resource, IT etc. Outsourcing jobs from America to India has affected the economy of America in a negative way by stripping most of the citizen jobs especially the skilled and semi-skilled workers. A suitable example would be the manufacturing job losses conducted by the University of California-Santa Cruz. In this study, they found out that in 20 years, the labor intensive industries such that textile and leather industries would have one third of displaced workers who could not get employment with a 3 years period. Speaking about those who got jobs, half of them received heavy salary/wage reduction. Outsourcing has also affected state and federal governments in the sense that there are lesser payroll tax receipt, contribution to social security and medicare.

The outsourcing of jobs to India has helped this country by providing job opportunity to the poorest people. According to New York Times, outsourcing has reached rural India and is providing employment to people who have never been employed. This has helped India’s growth rate go beyond 40% and its outsourcing sector is now approaching revenues of $30 billion. This proves that outsourcing is helping India’s economy. Most of the European and the US companies who have outsourced there businesses to India are taking advantage of people by paying them less than they would have been paid elsewhere.


The world economy is growing rapidly with countries like India and China registering high growth rates of 8% and 11% respectively, and developing countries following in that manner. This is because most countries have changed focus from depending on agricultural sector to manufacturing and ultimately to service sector. In 5 years to come, the world’s economy is expected to record a tremendous growth, with India expected to surpass Japan to third place while the United States is expected to dominate as the world’s largest economy.

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