Many job opportunities are created when MNCs set up factories in the host country as a large pool of labour workers are required for its manufacturing process. This will help its unemployment rates go down. When the people have jobs, they can earn money to support themselves and will be able to afford basic necessities. This will in turn increase their standard of living and quality of life. As more MNCs are also attracted to the host country, it will help boost the economy, as well as attract foreign investments. With an improving economy, the country can then invest more on their domestic infrastructure, thereby also improving the standard of living and quality of life of its people.
Outsourcing by MNCs means that internal company functions are shifted to external firms, usually in developing countries. The positive economic growth contributed by outsourcing of MNCs to developing countries is undeniable; MNCs contribute to diversifying the developing countries' economies, shifting the economy from primary to secondary sectors, where products produced are higher up the value chain. Therefore, economic growth results. Also, via outsourcing of manufacture in developing countries, large numbers of jobs are created, which generates income for the people, allowing them to afford basic necessities and luxuries that can improve their standard of living and quality of living. Overall, outsourcing will result in economic growth, increase of standard of living and quality of living, i.e. development for developing countries.
Outsourcing creates more opportunities. Not only does outsourcing result in the increase in employment in developing countries, the employing companies also enjoy lower production and labour cost from hiring these workers. Thus, they can maintain the competitive edge over rival companies, and this also leads to cheaper products for consumers (i.E. ME!!!)
NIEs will experience greater economic growth and increase in GDP. The inflow of FDI will result in an increase in the manufacturing plants, increasing the production, resulting in higher GNP
This is possible due to the diversification / broadening of the economy. The economic activities that the NIEs engage in become increasingly higher up the value chain and they can venture into quaternary industries due to increased capital flow into educational institutions to produce more skilled labour in IT industry [India]. This is also enabled by the agglomeration economic effect which allows for an exchange of ideas and innovations. This is further enhanced by the establishment of industrial parks and infrastructure including an extensive and well-developed transport network. This resulted in India’s GDP grew by 9% in the last two fiscal years, compared to 6% growth in the 1990s and 5% growth in the 1980s. In addition, in Hanoi, the government has approved $13.8 billion of new foreign projects this year, 73% increase on a year earlier. Vietnam’s GDP grew by 5.3% as a result.
Through outsourcing, more jobs are being generated in the home country and thus improving the employment rates and the economies in the developing countries. In Vietnam, MNCs employ more than 100,000 people in the outsourcing and offshore services sector. This sector could employ an additional 600,000 to 700,000 people by 2020 and contributing 3 to 5 percent to Vietnam’s GDP growth. Hence, as MNCs set up their manufacturing and services industry in Vietnam, it generates jobs which improve the country's economy as the government is able to collect more taxes from its people and the people are also able to afford better products or even luxuries, boosting the purchasing power in the country.
Outsourcing has provided more job opportunities for the people in the developing countries. When the number of job opportunities increase, the unemployment rate in the country will decrease which means that there will be lesser people in the poverty range. Hence, outsourcing has a positive impact on the developing countries.
This is because it provides external jobs, skills, knowledge for everyone to share and learn. India export their services and earn about 25 billion a year and projected to increase to 60 billion in 2010. CISCO provides 6000 employment. This shows economic growth and development. The disadvantages of outsourcing such as abuse of human rights can be overcome with good governance that is concerned about the quality of life and standard of living of the civilians, narrowing the development gap.
Since we started outsourcing low end manufacturing jobs to developing nations, the global poverty rating has gone down considerably. The literacy rate has gone up and the child mortality rate has been going down. It is not completely beneficial to developing nations (child labor, sweat shops, etc.) but the pros outweigh the cons.
The decision of the MNCs to relocate their business operations to developing countries has fuelled positive economic growth in these outsourced destinations like China and India. China, for example, has enjoyed doubled digit growth of more than 10%. In addition, outsourcing has created more job opportunities when these MNCs invested in their countries. For example CISCO Systems has created 6000 jobs when they invested $1.1bn investment in Bangalore, India.
Outsourcing refers to the subcontracting of parts of the production process to other countries, mainly developing countries. This causes job creation in developing countries and lower unemployment rate, increasing competitiveness of the economy. As a result, this generates revenue for the developing countries as well as economic diversification as more of the jobs in the country shift from primary to secondary and tertiary sectors. Foreign investment is also encouraged as more MNCs shift their production parts to the same few countries, further enhancing the economy of these developing countries.
Due to the poor enforcement of regulations in developing countries, sweatshops often occur. Workers in sweatshops work long hours for small amounts of wages. For example, in Dongguan, China, which is an industrial city, factory workers earn around 50 to 80 dollars a month, and work hours frequently stretch beyong the legal limit of forty-nine hours a week.
Large MNCs outcompete the local SMEs, which lack the capital and technology. As a result, SMEs are not able to compete in terms of price, variety and quality of products. This decreases the opportunities and market shares for the SMEs. In the long run, SMEs eventually go bankrupt and close down. In addition, with too many MNCs in the country, they dominate the economy, hence corruption can occur easily, with them influencing the government.
When companies outsource, they provide jobs for the people there. As more people in developing countries take on jobs in industries such as manufacturing, they move away from primary industries such as agriculture. The diversification of economy leads to competitive industrialisation which accelerates economic growth. For example, the shift from an agrarian society to an industrial society in Vietnam has contributed to Vietnam's rapid economic expansion due to the difference in productivity.
When companies outsource, responsibility shifts away from the company management as a result of distance and a lack of stringent regulations in the host country, resulting in a lack of accountability for worker conditions. This allows for the existence of sweatshops. One example: in 2010, it was revealed that a factory in Bangladesh supplying to Swedish-based clothing retailer H&M had caught fire – with the fire exits blocked and with inefficient equipment to stop the fire – and killed 21 workers. Therefore, outsourcing leads to sweatshops, and workers in less developed countries face poor working conditions, leading to social problems in the developing countries and their people.
Normally, companies from the developed countries outsource the developing countries, reducing cost and increasing profits. However, outsourcing do not increase the host country's level of development but increases the development of home country tremendously. US gdp per capita increased from around $24,000 to $44,000 from 1990 to 2005, which underwent a 83% growth. India's gdp per capita only increased from $375 to $486, which was only a 29% growth.
The very idea of outsourcing is to reduce labour costs. The concept requires that we exploit the benefits provided to us by developing countries, often being an overly large, poorly-educated population. It is undeniable that, in the exploitation of the low tax rates that the developing countries have set up in order to attract MNCs, it is a win-win situation in that these companies are able to provide technological advances and provide people with skills in the workforce. However, the essence of the MNCs as a cold-hearted and detached company is similar to how for-profit colleges seek brain-dead veterans to sign them on and make them pay a large sum, capitalizing on the animalistic survival instincts of the developing countries' population to maximise profit. To evade taxes and save on having to look out for the welfare and safety of its employees, MNCs outsource to countries like China, where 13% of the world's poorest (living on less than USD$1 a day) live. It is also the home to thousands of high-productivity high-intensity factories which employ people to work 13-hour shifts without overtime pay. In Foxconn, the company Apple has outsourced production of its iconic products to, they have set up suicide nets, provided to do exactly that, reduce suicide. The thought that they would rather use suicide nets to reduce suicide rates rather than look for the root of the problem - torturous and inhumane labour, is one that exemplifies how low MNCs are willing to go. The endless agonies faced by the many replaceable workers is simply for the benefit of the elite minority looking down on them from afar. Hence, the benefits of outsourcing that MNCs have provided for developing countries lag far behind the questionable ethics of the situation and the lack of humanity in the treatment of our peers.
Outsourcing does indeed create jobs for locals in the host country, however, the working conditions are often not ideal for workers. Sweatshops emerge in developing countries, where workers work long hours in unsafe, cramped, or unhygienic working conditions, and are often not paid sufficiently for their work. In addition, companies often work to prevent the formation of labour unions, making it harder for workers to fight for the rights they deserve. For example, garment workers in Bangladesh earn an average of 3000 taka a month, which is below the 5000 taka calculated to be the minimum wage required to adequately support a family.
Since 1990, more than 400 workers have died and thousands have been injured in factory fires. Thus, despite providing jobs for the locals in developing countries, outsourcing also allows sweatshops to emerge and operate unchecked, harming many people in developing countries.
In the less developed countries, the people are exploited by the MNCs. They work long hours with extremely low pay, which is insufficient to support their families. A software programmer in Vietnam is employed for less than 60 percent of what it costs to hire one in China while data processing and voice processing agents in Vietnam cost 50 percent less than their counterparts in China. This does not improve the quality of life or the standard of living of the labourers, therefore the country does not develop well, and income gap will increase within the country.
In most developing countries, there is a lack of governance to ensure the well-being of population as they become employed in these firms. Without the enforcement of regulations such as minimum wage or basic labour rights, sweatshops might emerge. For example, the outsourcing in the garment industry has created sweatshops in countries such as China and Vietnam. The people working there were worked long hours with little remuneration.