India: The Unemployment Black Hole
Outsourcing is one of the business strategies usually incorporated by companies with the aim of cutting costs and also employing expertise that is not available within the company (Bragg, 2006). However, from the perspective of the American and European companies, the strategy has distinct advantages and disadvantages. First, outsourcing is imperative because it enables the foreign companies to acquire labor in India at affordable costs since India produces approximately three million graduates a year. Thus, it creates employment in India. Examples of American companies that have outsourced some of their back-office services to India include HP, Intel, Microsoft, IBM, GE, and Oracle. In addition, outsourcing enhances innovation and also generates the company’s growth. For example; the GE Company established the Welch Technological Center, which employs approximately 1800 well-trained engineers. Consequently, the center has earned 95 patents in the United States thanks to the reliable and efficient workforce from India. Therefore, outsourcing allows a company to explore the country’s skilled human capital (Bragg, 2006). For example; India is endowed with many scientists, researchers and engineers hence has attracted various technical companies involved in IT, chip design, financial services, software development and drug research. Inasmuch as the operating costs associated with outsourcing are lower, however, the training costs are often high hence making outsourcing disadvantageous. Additionally, India does not allow full repatriation of the profits hence outsourcing is not be very profitable to the American companies. Outsourcing might also lead to a lack of managerial control (Bragg, 2006). Also, India has a large budget deficit, and this can negatively affect the outsourced American companies in the long-run.
Recommendations to the Indian Government Officials on Job Creation
The Indian government must put in place various measures that ensure continued job creation. The Indian government should improve the county’s infrastructure and power sourcing. Infrastructure and energy play a significant role in enhancing the country’s productivity hence creating jobs (Ahmed, 2007). The Indian government needs to prioritize the reduction of a large budget deficit so as to prevent an economic crisis. The government also needs to incorporate appropriate policies that will ensure transparency and accountability of government activities thus taming bureaucracy. Less bureaucracy will motivate different investors to invest in various sectors of the economy (Ahmed, 2007). The Indian government needs to employ diplomacy to resolve the issues between it and Pakistan since investors tend to shy away from warring countries. A peaceful country attracts more foreign investors thus creating jobs to the Indian citizens. Research has also established that many Indian citizens are still illiterate yet companies outsourcing some of their services require skilled labor. There is a need for the state to help its citizens to acquire education through providing them with quality and affordable education. Subsequently, the companies requiring skilled labor will be able to tap the market potential thus provide employment opportunities. The Indian government also needs to protect the domestic jobs and also encourage its citizens to use their creativity and innovativeness to create new jobs. Thus, the Indian government needs to facilitate the banks to provide its citizens with loans at low-interest rates. Such loans will be used as start-up business capital hence allowing citizens to create their own business (Ahmed, 2007).
Whether it is fair for Workers of Developed Countries when Work is shifted to other countries
It is not fair for workers of the developed countries when various Companies shift work to the low wage countries. The foreign workers typically take up the jobs and destroy the country’s technical, competitive advantage (Bragg, 2006). Additionally, the workers from the developed countries are usually denied the opportunity to explore their potential and build their skills. When companies are shifted, the unemployment level of workers in the developed countries increases. Therefore, companies should not be entirely shifted from the developed countries but rather branches can be developed in the low-wage countries.
Ahmed, S. (2007). Job Creation and Poverty Reduction in India: Towards Rapid and Sustained Growth. New Delhi: SAGE India.
Bragg, S. M. (2006). Outsourcing: A Guide to Selecting the Correct Business Unit Negotiating the Contract Maintaining Control of the Process. Hoboken: John Wiley & Sons.