Outsourcing Still Taking American Jobs

by Dustin Ensinger on January 28, 2010 - 11:01am

As the world’s economies begin to regain their footing, outsourcing is

expected to increase substantially, according to a new report released by

PriceWaterhouseCoopers.

According to a survey of 541 outsourcing providers in 50 countries, 62

percent plan to expand their businesses in the next three years.

While India is still the world’s leading destination for those companies

looking to outsource production, competition for market share is getting

more intense as new players continue to emerge.

"Growing competition has transformed the outsourcing industry into a

global race for market share," said PwC Managing Director Dr. Charles

Aird. “India's success as the world's back office has motivated other

developing countries with well educated and under-employed populations to

seek to duplicate their experience."

Increasingly Latin American and Eastern European companies are challenging

their Indian counterparts for business. China has also made an effort to

become a major player in the outsourcing industry, recently designating 20

cities as outsourcing hubs. Meanwhile, the Philippines is making a

concerted effort to become a force in the outsourcing market by providing

business with huge tax incentives to locate their outsourcing operations

there.

One of the fastest growing forms of outsourcing is legal service

outsourcing, of which India is the leader in, followed closely by the

Philippines and Sri Lanka. Just last year, India saw its legal service

outsourcing sector grow by 40 percent, with over 110 providers.

The top reason companies outsource production remains cost-savings,

according to the survey. However, another recent study contradicts those

finding.

According to a report released last April by Compass Management

Consulting, more often than not companies overestimate the savings that

will come from outsourcing production by failing to account for the loss

of productivity that comes with moving production out of house.

The report found that while a company may pay approximately 40 percent

less in payroll costs by moving production to a low-wage country, that

move also comes with a 60 percent drop in production, on average.

Legislation currently tied up in a Senate committee could help to end the

epidemic of outsourcing in American. The Patriot Employers Act would

provide financial and tax incentives for American companies to keep jobs

in America.

"Americans have had enough with a corporate culture that rewards bad

behavior and ignores the average worker. While some companies look for

ways to avoid their responsibility to employees, others stand out for how

they treat their workforce. It is time for Patriot Employers to be

recognized for doing right by their workers, customers and shareholders,"

The bill’s sponsor Sen. Dick Durbin (D-IL) said in the statement at the

time the legislation was introduced.