Do What You Do Best, Outsource the Rest?
2 Pages Posted: 23 Dec 2003
International trade generates higher overall output by redirecting jobs to those who create the most added value, that is, to those who maximize their productive abilities. Put simply, the benefits of free trade can be summarized as: "Do what you do best. Trade for the rest." But times are changing, and so are many traded commodities.
The newest U.S. trade commodity is skilled white-collar work, with an estimated 60 percent of these outsourced jobs going to India. As with most traded commodities, outsourcing work abroad is the product of lower foreign labor costs and potential higher future profits. And like free trade, outsourcing has become controversial.
Outsourcing's critics see only the elimination of work previously done in the United States and view outsourcing as exporting white-collar jobs to other countries. What they fail to recognize is that attempting to protect these jobs would mean higher prices for consumers and the unrealized potential for more productive jobs in newly created industries.
What is outsourcing? Why is India the leading country in attracting outsourced work? And what are the economic and political implications as firms do what they do best and outsource the rest?
Keywords: outsourcing, free trade, globalization, technology, India
JEL Classification: A10, A20, D21, F10, L20
Suggested Citation: Suggested Citation