Offshore outsourcing reduces living standards and limits social mobility.

Reliance on offshoring and offshore outsourcing is likely to lead to increases in inequality and reductions in social mobility within developed western liberal democracies. Trade with developing economies typically results in a price premium becoming attached to specialised, skilled labourers and service providers in western economies. Poorer countries- even rapidly growing states such as India- produce smaller quantities of highly educated, highly skilled workers, such as vehicle designers, microchip fabricators and architects. In view of this, developing states concentrate on creating semi-skilled jobs that can be assigned to workers lacking- for example- university degrees. A larger proportion of Indian citizens are educated to a lower standard, so the creation of jobs accessible to them will generally be seen as politically astute. Opportunities for employment as a call centre operative or a pay roll clerk will rise in a developing state in response to an increased interest in offshoring by first world businesses. Concurrently, as some of the money businesses save by offshoring is reinvested in advanced training, consultation exercises and research and development, demand for the services of specialists and highly skilled professionals will rise. Less skilled workers in a developed economy will see a decline in both employment opportunities[i] and pay. Professionals and those who can afford postgraduate education are likely to see their salaries increase. The gap between the rich and poor strata of society within developed economies will grow. In short, while professionals, executives and decision makers will benefit from offshoring, seeing demand for their services rise, foreign competition is likely to undermine the domestic market for less skilled labour[ii]. A reduction in demand for white-collar clerical workers, bookkeepers and assembly line workers will increase the burden placed on state social support schemes such as public housing, jobseekers’ payments and subsidised medical care[iii]. Although businesses may benefit from cheap overseas labour, the state will be left to contend with increasing expenditure in the short term and impaired educational and welfare standards in the long term. Children and communities within developed states that lose jobs to offshore operations will be less able to access further and higher education and are more likely to suffer The social costs engendered by outsourcing do not balance against the financial benefits that accrue to businesses and professionals. Attempts to tax profits generated as a result of offshoring practices may fill a state’s coffers, but will not provide and effective solution to job losses and an increasing dependence on state assistance within less economically mobile communities within the developing world. Finally, it should be noted that companies encountering financial difficulty or attempting to adapt to recessions come under intense pressure to cut costs. Increasingly, large businesses achieve these savings by engaging in outsourcing[iv]. For the reasons described above, such a practice may exclude a large number of individuals from the labour market. Outsourcing may therefore entrench and prolong a recession. [i] Fig 3, “Labour-market trends. Winners and losers.” The Economist, 10 September 2011. http://www.economist.com/node/21528434 [ii] “Free Trade’s great, but offshoring rattles me.” Blinder, A S. The Washington Post, 06 May 2007. http://www.washingtonpost.com/wp-dyn/content/article/2007/05/04/AR2007050402555_pf.html [iii] “Idea. Offshoring.” The Economist, 28 October 2009. http://www.economist.com/node/14301171 [iv] “Passage to India.” The Economist, 24 June 2010. http://www.economist.com/node/16439006