How Outsourcing Has Created Unemployment

Outsourcing of work has been ongoing since World War 2. However, recently the introduction of efficient container shipping allowed manufacturing jobs to be moved to areas with cheaper labor. This shift of manufacturing allowed those who remained employed the ability to buy more goods at a lower, often significantly cheaper, rate.

As clothes, electronics, and many other items became much cheaper, consumers shifted spending to more services. When one had more disposable income after buying imported food, clothes, and even cars, eating out, going to the amusement park, and paying others to do work one did not want to do kept employment up. Thus many individuals who no longer manufactured could go to work in the services industry: delivering pizza, cleaning pools, walking dogs, and doing work others used to do for themselves.

The boom in telecommunications in the 1990s allowed service-based jobs to move overseas. This started with programming, hiring individuals in India to write code, Israelis to design microchips, and Chinese to design consumer electronics. To handle the international logistics, management employment within the United States boomed. With a more heavily-indebted economy, as both the population as a whole and the government in particular, financed their material and increasingly service-based imports, new jobs in finance also kept employment from collapsing.

Outsourcing then began to move to the top levels of the food chain, with previously impervious jobs being shifted to remote work. From debt collectors calling from India, to note takers for civic meetings based in any nation, to tutors available online for a fraction of the in-person price, services that had employed those whose prior jobs were shifted overseas found their opportunities drying up. Even contract reviews previously done by lawyers and tax returns done by CPAs could be done by someone qualified overseas.

What work did remain was increasingly handled by visa workers, such as nurses brought in from South Africa or the Philippines. Managers in other countries attended school here, reducing the need for Americans to serve at this top level.

The financial bubble destroyed the financial sector, which until now had been able to absorb a large number of knowledge workers. As the outsourcing moved up the employment food chain, we have now seen where those who could afford others to do their work no longer could do so.

The unemployment crisis today is the result of several factors; a decades-long shifting of work to ever-cheaper locales, a more recent shift of high-tech and knowledge work overseas, the loss of high-level employment due to the burst of the financial bubble, and the sudden and drastic cut in service employment as these top income producers can no longer pay others to perform services.