Entry 9: The Myth of Outsourcing's Effect

Globalization is tied strongly with outsourcing. The reason for globalization and trade is for the consumers to have a greater variety and quantity of goods and services that are otherwise not available or too expensive to produce in the original country. This means that the corporations needs to find the easiest way and most efficient way to produce the product and supply it to the consumer. Globalization made it so that the price of production of other countries are also taken into consideration by firms and so if another country has a comparative advantage, the ability to produce something at a lower opportunity cost, than the firm would look for that country for production and supply. If firms can get the supply at a lower opportunity cost then it can sell it for cheaper and it could actually benefit the consumer. However the problem lies with outsourcing. Out sourcing is firms creating factories and moving their production lines to another country for cheaper labor or other factors of production and this result in the loosing of jobs of the people in the original country. This is inevitable because as globalization and the ease of transporting and communicating around the glob increases, firms would have less cost in having production elsewhere and more benefit. Outsourcing is essentially the product of globalization and an open economy and it is inevitable that firms would look for the lowest cost and with globalization reducing the cost of transportation and time, the incentive skyrockets. Because of the high minimum wage of America, American labor has no comparative advantage in the labor market because they are the same unskilled labor elsewhere but has to be paid sometimes 10 times the wage.If without outsourcing and all products sold in United States are produced with the expensive labor in United States, everything would be a lot more expensive because the price reflects the cost and there would be another objection. There is really no win win situation in economy and the people don't understand that outsourcing makes the price of everything cheaper.