Nearshore outsourcing is a practice where businesses create jobs in countries that border or are in close proximity to their own, with advantages including lower wages and travel costs. However, it can lead to fewer job opportunities and lower wages for workers in the home country. Some companies take a central approach to nearshore outsourcing, but concerns remain around security and copyright infringement. The US is considering financial incentives for companies that keep jobs in the country, while outsourcing could lead to higher taxes.
Nearshore outsourcing or nearshoring is a practice applied to business outsourcing, which has been adapted by the fishing industries. The idea of creating jobs near the shore, for people outside the country where a company was located, is an old practice. Lately, nearshore outsourcing has less to do with the coast and waters, and is more commonly the practice of businesses creating jobs in countries that border or are in close proximity to their own.
There are both advantages and disadvantages to nearshore outsourcing. For businesses, some of the benefits include the ability to hire employees who will work for lower wages than workers in their main country of activity. Also, the proximity of the company to which the work is outsourced can save money on travel to that country. If company employees have to travel frequently to supervise outsourced areas of the company, these savings can be substantial.
It is not always the case that nearshore outsourcing saves companies money. American companies that outsource jobs to Canada can pay much the same as they would for American workers. The advantages in this case may mainly be that they open up trade between the two countries, creating Canadian demand for American products and vice versa. More often than not, companies that use this method tend to do so with countries where wages will be lower. This may not be as beneficial to trade, as those countries may not be able to afford the price of American products, but the companies argue that outsourcing nearshore to poorer countries allows them to bestow lower prices on American consumers.
The other side of nearshore outsourcing is the financial framework for jobseekers in the country where the business is based. This has been a common complaint from US workers, particularly since more technical jobs, such as information technology jobs, are outsourced. Nearshore outsourcing of this type can lead to fewer job opportunities for US workers and also a lower wage scale, as they not only compete with American workers, but with foreign workers who will perform low-paying jobs. Not all companies that outsource employ nearshoring, and all companies that tend to receive criticism from workers in industries where jobs have disappeared, such as steel, IT, business helplines, automotive and similar.
Some companies take a central approach to nearshore outsourcing. They outsource some jobs to neighboring countries to save money and boost the economy of neighboring countries, which can encourage more trade. Such companies also maintain an active workforce within their own country. Yet concerns and criticisms of this approach also remain.
For example, some are concerned about the security of their information when it is transmitted to people in other countries. A carrier from another country may not be as thorough in protecting your credit card information as a fellow citizen (although this is clearly not always the case). Another viable concern for companies outsourcing major technologies is the potential for copyright and patent infringement in a neighboring country, where copyright and patents can be difficult to enforce.
A recent move in the US approach to any type of outsourcing is the recommendation that companies that keep jobs in the US should receive financial incentives through tax breaks. This line of thinking also suggests that companies that outsource jobs that could legitimately be filled by American workers could be subject to higher taxes, negating the benefits of outsourcing. Those who oppose this tactic argue that this would only drive up the prices of many goods and services offered to Americans and would ultimately be bad for the consumer. Proponents of this plan counter that it’s very difficult to be a consumer if you can’t get a job in your field.
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