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Light At The End Of The Offshoring Tunnel

It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy...What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.
- Adam Smith
The Wealth of Nations, Book IV Chapter II
Offshoring, which will be used interchangeably with outsourcing for the purposes of this paper, has become a hotly debated topic over the last couple of decades, and rightfully so. Millions of Americans have lost their jobs due to workers in other countries who are willing to work for lower wages, and management in companies who are willing to exploit that opportunity (Williams, 2005). Many choose to use this as their battle cry during the debate, while some see offshoring as a way for companies to sustain their competitiveness in a dynamic global marketplace. The problem is, outsourcing/offshoring presents far more advantages and disadvantages than the obvious ones just listed, and it may take decades to eventually figure out who was right. One thing, however, is true, and that is that preventing jobs from going overseas interferes with the free market. As Sowell (2004) states, history teaches that when government tries quick fixes and interferes with the market, the market reacts unfavorably in the end.

Why Companies Outsource
The decision to outsource is a strategic level decision made by a company that should ultimately increase shareholder value in the end. It is no secret that people in other, under-developed countries as compared to the United States, will work for considerably lower wages. As everyone almost always points out, one of the main reasons why a company would outsource some of its operations to another country is the cheap labor that...