Personal Essay, 3 pages (650 words)

American government

The outsourcing policy of the United s Government Outsourcing in the United s began in 1980 because of slow economic growth and high unemployment rate. It was encouraged by excessive U. S. debts, Free Trade Agreements, globalization and the intense desire for profitability. In effect, NAFTA and the World Trade Agreement made outsourcing easier for transnational American companies to operate in Mexico and Canada. Globalization that started in 1970 made IT operations inexpensive for these companies, and soon enough US transnational companies began to transfer its manufacturing operations offshore (Thomas Heffner, 2010). In the United States, according to PLU (n. d.), President Bush has been an advocate of pro-outsourcing policies and supporter of free trade. The President believes that the country benefits from outsourcing in the long run although there are short-run disadvantages in the system. Bush’s administration calls the system as a new way of doing international business. Crisis created by outsourcing. The Heffner’s (2010) study said that over the past years, 3. 7 million manufacturing job in the U. S. have been lost because the workers cannot compete with the rate of third world’s wages. For example, he cited the salary of an engineer in US is $100, 000, while this amount is already equivalent of 3 engineers in the third world. Hemphil (n. d.) calculated the cost of IT and telecommunication work in US as $100 per hour while same work could be done in India or China at $20 per hour. Rees, 2004, an author of labor policies, said that the effect of outsourcing was felt by employees who lost their jobs, and to others who were forced to accept low paying jobs because of changes. There are also social costs and disadvantages caused by painful dislocations and separation of families. On the government side, the government tends to lose income taxes for jobs outsourced in other countries plus the investment and capital transferred elsewhere. Has the policy been effective? On the part of the government, the policy of outsourcing has not been effective for tax purposes because under the US Law, “ firms do not pay taxes on income earned abroad until they bring back the money to the United States” (Caves, 2010). According to Jennings, 2004, about 500, 000 thousand jobs out of 10. 3 million IT jobs are being created, but none of these occurred in the U. S, thus further extending the “ jobless recovery” (Jennings, 2004). If I were in the shoes of the President, alternative solutions that I could modify are policies pertaining to taxes that would require US companies that maintain outsourced manufacturing and business abroad to remit taxes on income earned abroad as soon as it is earned. An economic cycle effect will be created by offshore income tax remittances because it will generate revenues for the government that could be used for federal spending. Perhaps, I will allot a budget for R & D that will upgrade IT technology so that costs will be competitive with that of other countries. In this manner, US companies need not go to offshore sourcing and will have to put in their business and investment in US. The spiral effect of this solution will bring in new job employment, upgrading of skills and added revenue for the government. References Caves, Khajuraho, 2010. Obama raises pitch against outsourcing. The Economic Times. Retrieved 18 January 2011 from http://economictimes. indiatimes. com/infotech/ites/Obama-raises-pitch-against- outsourcing/articleshow/6527765. cms Heffner, Thomas, 2010. History of Outsourcing in America. Economy in Crisis. America’s Economic Report Daily. Retrieved 18 January 2011 from http://economyincrisis. org/content/history-outsourcing-america History of Outsourcing in America. Economy in Crisis. America’s Economic Report Daily. Retrieved 18 January 2011 from http://economyincrisis. org/content/history-outsourcing- america Hemphil, (n. d.) . U. S. offshore outsourcing of R & D: Accommodating firm and national competitiveness perspectives. Retrieved 18 January, 2011 from < http://www. innovation- enterprise. com/archives/vol/7/issue/4/article/1625/us-offshore-outsourcing-of-randd#header> Jennings, 2004. Domestic alternative to offshore outsourcing. Squidoo. com. Retrieved 18 January 2011 from http://www. squidoo. com/AlternativeToOffshoreOutsourcing PLU. Economics of Outsourcing. Pacific Lutheran University. Retrieved 18 January 2011 from Rees, Jonathan , 2004. The Real Problem with Outsourcing. History News Network, George Mason University. Retrieved 18 January 2011 from http://hnn. us/articles/4573. html

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