The increased pace of job globalization, in developing and developed countries, has focused attention on outsourcing as an object of both praise and criticism. The loss of job opportunities (locally), lower quality products and/or services and, not least, further imbalances in income pay are all outcomes critics of outsourcing cite. On upside, job outsourcing, particularly at a global level, is apt to enhance productivity, lower costs and, for one, enhances core efficiencies for outsourcing companies, according to supporters of outsourcing. If anything, cost assumes center stage in a decades-long debate now on outsourcing. There are, however, more in outsourcing in addition to cost-effectiveness. Indeed, outsourcing can be approached from multiple perspectives including, most notably, labor markets, operations and supply chain management, regulatory affairs and human rights. The growing number of abuses increasingly reported in developing countries is probably highlighting practices of cross-border companies beyond more regulated work conditions in developed geographies. For current purposes, main focus is laid on outsourcing practices of cross-border companies operating, directly or not, in developing countries. Amid polarizations of celebrating praise and scaring criticism, outsourcing is examined in a more balanced approach. The position assumed in present paper is against outsourcing practices as adopted by cross-border companies based in developed countries and managing (or contracting) operations in developing countries. This paper aims, hence, to argue against outsourcing practices by cross-border companies in developing countries based on labor balances at different levels.
Outsourcing can be defined as
work done by people other than a corporation’s full-time employees; [one] in which a corporation divests itself of those elements in the process of production which bring in modest or little profit in terms of the capital invested. These less-profitable or peripheral activities can be performed, supposedly more efficiently, by other, usually smaller, corporations, which gain efficiency by concentrating on the activity itself, honing the productive process so that it can create new efficiencies, making profits which the larger corporation would not be attentive enough to generate. (Gutman)
This definition of outsourcing assumes positive, long-range returns to a company's efficiencies (and hence profitability), from a corporate perspective. By focusing more on "core" competences a company has, outsourced jobs should be performed in parallel to core operations at a cheaper cost. The benefits outsourcing brings to business is not limited to companies alone. Indeed, proponents of outsourcing argue for far broader positive impact. Notably, standards of living of workers in developing countries are raised (Casey). By being offered high-paying jobs in struggling, local economies, workers in developing countries find in outsourced jobs a life-changing opportunity for social and economic mobility. For cross-border companies, corporate image is enhanced by creating jobs for local labor force, boosting economic activity by investments and, in some cases, helping create value for local communities by sponsoring social programs.
The case for outsourcing has, probably, focused in recent years on high-skilled, service-oriented jobs, particularly in IT industry. In defending outsourcing, Taylor argues most outsourced jobs are shown, according to U.S. Bureau of Labor Statistics, to be minimal in developing countries (particularly, China and India) compared to services – and, for that matter, commerce activities – exchanged with more developed countries in Europe. The dramatic changes occurring across U.S. economy inform, according to Taylor, current patterns in outsourcing jobs to labor markets in developing countries. Specifically, by re-shifting business operation design from a more conventional model based on fixed workspace, defined working hours and more specific job roles into a more agile model based on multiple competencies across roles and functions – U.S. companies are better able to achieve operation innovation and efficiency locally and creating value – at no cost for U.S. labor – abroad for workers in developing countries. Thus, in defending outsourcing, Taylor adopts a no-harm position to U.S. labor and, paradoxically, drops no line to imbalances and harm caused by outsourcing practices of cross-border companies. Ironically, by discussing high-skilled labor (as not being outsourced harmfully to foreigners in China and India), Taylor drops, intentionally or not, droves of workers in developing countries in jobs far removed from high-skilled ones and are, often, particularly demanding and low-paid.
The harsh and unacceptable conditions workers in developing countries operate in can best be highlighted by a collapse of a Bangladesh-based factory complex affiliated to Primark, a low-cost, international retailer ("Bangladesh factory disaster"). At an average of £24 per month ("Bangladesh factory disaster"), Primark workers in Bangladesh are paid based on local labor standards in spite of doing a similar job for one employer, same customers (but for longer working hours). This incident highlights, if anything, concept of "cheap" used widely in cross-border corporate literature. The cheapness (as is shown in more detail shortly) is, moreover, not limited to pay but also, as is in Primark's example, to broad working conditions including safety, labor rights and (lax) regulatory frameworks.
For one, pay is one most notable and recurring component in criticizing outsourcing. The pay gap between workers in developing and developed countries uncovers a set of disconcerting patters. First, workers in developing countries – whether manufacturing motherboards or footwear – are consistently assigned most non-innovative, repetitive processes (or part of processes) to deliver products and/or services consumed at much higher prices in world markets, particularly in developed (high-spending) ones. In contrast, "co-workers" in company based in a developed market perform more "sophisticated" jobs (for reasons having to do with broad macroeconomic factors) at much higher pay. This pay and job profile gap is informed by regulatory frameworks limiting (in developing countries) or expanding (in developed countries) labor rights. (The recent protests in U.S. for higher hourly pay for fast food workers attest to, if anything, power of labor rights, at least partially, and pressure workers can exercise on corporations in democracies compared to workers in developing countries ruled by less democratic practices.) Having differential labor rights, albeit working for one company, workers in developing countries are subject to stark inequalities at workplace.
Second, by being offered non-negotiated contracts, workers in developing countries are subject to whims of local contractors / employers who, having a long waiting list of would-be workers in comparatively high-paying jobs, can simply layoff any number of workers in any given situation. This absolute power local contractors have on local workers is supported by lax regulations, if not outright corruption practices most rampant in developing countries. Indeed, one questionable area in a cross-border company's entry into a developing country's labor market is political, economic and legal situation in given country. The political cronyism, economic inequalities and loose legal frameworks – all collude to create a business environment in which most vulnerable stakeholders are most hurt. Consequently, "cheap" labor in developing countries – usually falling into lowest echelons of society – become subject to abuses not only by local government (by, for example, not being offered proper labor rights) but also by whoever comes in to invest and offer up job opportunities.
Third, industrial safety – critical as is in economic activities involving large numbers of workers and hazardous materials – appears to be relegated to a much lower order in corporate priorities, if existent at all. The collapse of Primark's factory in Bangladesh remains insightful. If anything, industrial safety has become an integral component at workplace. A business or an organization can be disqualified based on absence of proper industrial measures. Then again, industrial safety is part of broader labor rights in political, economic and social contexts not necessarily available in developing countries. The further humanization of labor practices by employers in developed countries is not, however, part of business culture in most developing countries.
The contribution a cross-border company can make for a developing country should not, in fact, be limited to brand image enhancement practices such as sponsoring economic and social enterprises. Charity begins at home. If cross-border companies need to make a long-range difference, consistency in applying labor rights across geographies should be enforced.
"Bangladesh factory disaster: Primark to extend aid." BBC. BBC, 24 October 2013. Web. 13 April 2016.
Butler, Patrick. "Outsourcing: same job, same hours, same clients, less pay." The Guardian. Guardian News and Media Limited, 22 September 2014. Web. 13 April 2016.
Diana, M. Casey. "Overseas Outsourcing: Business in United States Of America." Business in United States. Business in United States, n.d. Web. 13 April 2016.
Gutman, Huck. "Outsourcing in the Developingand Developed World." Counter Currents. Counter Currents, 26 March 2004. Web. 13 April 2016.
"Outsourcing Public Jobs 'Spells Long Hours and Poor Terms'." The Morning Star. The Morning Star, 3 March 2015. Web. 13 April 2016.
Taylor, Timothy." In Defense of Outsourcing." Cato Journal 25.2 (2005): 367-377. PDF file. Cato Institute. Web. 13 April 2016.
The Smith Institute. Outsourcing the Cuts: Pay and Employment Effects of Contracting Out. The Smith Institute, 2014. PDF file. Unison. Web. 13 April 2016.