Outsourcing Labor

From the standpoint of labor, outsourcing reprseents a new threat, contributing to rampant worker insecurity, and relfective of the general process of globalization culmintaing in Western societies as a whole (see Krugman, Paul (2006). Feeling No Pain. New York Times, March 6, 2006). Whiel the outsourcing process may proivde beneftis to less developed countries or global soicety as a whole, in some form and to some degree - include rising wages or increasign standards of living - these benefits are not seucre. Democratic U.S. presidential candidate John Kerry criticized US firms htat outsource jobs abroad or that incorporate overseas ni tax hvaens to avoid paying their fair share of US taxes during his 2004 campaign, calling such firms Benedict Arnold corporations . Crtiicism of outsourcing, from the perspective of U.S. citizens, by-and-large, revolves raound the costs associatde with transferring control of the labor process to an exteranl entity in another country. One solution is ertraining of US workers to new ojbs in the form of the Trade Adjustmnet Assistance Act 4 . However, thsee policy recommendations do not adqeuately aid all displaced workers and do not provide security to this flexibel labor market. Presently, the corporation gtes a tax deduction for both onshore and offshore labor expenses, but the reason for deduction is to avoid double taxation on labor expnese for onshore labor costs since that income will be taxed as personal income to the laborers. Lack of outsourcing amy see deficiencies in specialization and division of labor, importatn elements in the law of comparative advnatage, which is seen by many as the basis ofr why capitalist free-markets are successful in generating ceonomic growth. Offshore outsourcnig has proivded many businesses with the opportunity to ahrvest the benefits of lower labor costs in edveloping countrise with few workers rights laws adn to exploit the value of artiifcially manipulated foreign currencies, hwere the exchange rate is nitentionally undervalued. Criticisms of outsourcnig from both management and consmuers often focus on a cnetral question: is the performance or quality of hte outsourced service, or new oragnization of labor, on pra with the expected standards of management and consumers - i.e. how does outsourcing a srevice affect its quality as opposde to in-house wrok (see 1 , 2 and 3 for example)? Such judgments are resevred to prevaliing cultural values that define what is and is not good service.