Outsourcing Jobs Causes Negative Economic Effect

2,060 words/9 pages

Outsourcing Jobs Causes a Negative Economic and Social Effect on American Workers

Do you work at the same company your father does? Does your father work at the same company your Grandfather did? Few companies employ multiple generations these days. Have you wondered what happened to all the jobs? One reason for the decrease in jobs could be attributed to outsourcing. Merriam-Webster's Third New International Dictionary defines outsourcing as the procurement by a corporation from outside and especially foreign or nonunion suppliers of parts it formerly manufactured. To American workers, the definition means, you are unemployed. This paper will look at some economic and social effects that job outsourcing have on American workers. For American workers to continue to be viable members of society, outsourcing jobs to foreign countries must end.

Jobless rates caused by outsourcing affect the economy on a sizeable level. The United States, Canada and Mexico created the North American Free Trade Agreement (NAFTA) in January 1994. NAFTA formed the largest free trade area in the world. NAFTA started the onslaught of manufacturing jobs flowing to Canada and Mexico. The Federal Department of Labor has estimated that since NAFTA took effect, more than 500,000 jobs have left the United States (Federal Department of Labor, 2004). The U.S Department of Commerce shows an economic loss of $78 billion in manufacturing wages from January 2001 to January 2003 (Department of Commerce, 2004). Disappearing wages result in decreased local and state tax revenue. Reduced income equate to fewer consumer goods and service purchases. Fewer consumer goods and service purchases amount to lost corporate profits could cause a domino effect that may result in the inability to employ workers. Losing unemployment benefits is more worrisome.

The Social Security Act of 1935 created unemployment insurance. Each state must fund insurance from state and federal taxes paid by employers. Unemployment insurance pays temporary income to eligible employees who have lost their jobs. Unemployment insurance is regulated by the federal government, but each state can create their own rules as long as it is in compliance with federal guidelines. Unemployment benefits only average 26 weeks for most states. Extended periods of joblessness are significant: long-term unemployed face financial, personal, and health care problems as well as loss of unemployment insurance benefits.

The inability to meet financial obligations can lead to loss of the home. Record numbers of Americans are losing homes to foreclosure due to job loss. Some families are forced to combine households to survive. When financial strains become too much, bankruptcy is a road many travel.

In 2004, the U.S. Bankruptcy Court received 1,654,847 bankruptcy applications (U.S. Bankruptcy Court, 2004). The number of applications received in 2004 was 43,579 more than in 2003; an increase of 2.7 percent. Bankruptcy can make it difficult to obtain credit, buy a house, car, or get other financing in the future. Future financing could come with a higher interest rate