Outsourcing and Economy

What has outsourcing done to our economy?  One of the intentions to outsource the productions or services to other countries is cost cutting.  But the unfavorite consequences is that the original production labors or service labors are unemployed.  The unemployment could be temporary or permanent, it depends on how the worker's effort to get back to the job market.

As the worker is unemployed, it comes the unemployment benefits for a certain period of time.  After that if the worker still cannot find an employment, he might apply for some kind of welfare if he is in trouble of surviving.

So what's the macro economic view of the outsourcing?  As we know, money cannot come from nowhere and go nowhere.  The original payment to the worker is decomposed to: 1. the payment to the new worker(outsourcee) 2. the social benefits to the unemployed worker 3. the new extra profit to the outsourcer.  As item 1 and 3 are quite straight forward, where does the item 2 come from?  Don't forget that our society is a humane society.  We don't let our people die in hunger.

Wait a second, who pays the item 2 after all?  The benefit is paid and shared by all the tax payers, not just from the outsourcer.  So when a worker loses his job due to the outsourcing, not only his income is compromised, the other employed workers also have to share the pain.  The outsourcer share some pain too, but he also gets his extra profit.

Well, the other workers might get some benefits from the outsourcing due to the goods might be cheaper, or he gets hired to do the outsourcing work.  Really?  How do you verify this?  An easy way to check is that just asking yourself if you can buy more goods with your income.  If yes, it means outsourcing is making you richer and living better, because you get benefits from it.  If no, it means outsourcing is making you poorer, and you actually pay for it.

If outsourcing is actually making average people poorer in a developed society, how to fix it?  A simple idea might come from the concept of self sustainable society.  In a self sustainable society, they try to make their goods by themselves.

For example, if the company Xpple sells N Xphones in our society, Xpple should at least make N Xphones in our society.  Xpple is free to make money on the other M Xphones that are sold to other societies by making those M Xphones anywhere Xpple wants.  That's fair, isn't it.

Well, people might argue this approach does not work, is not good, or what so ever.  The key concept is to make our society sustainable.   A society with high inequality will not sustain quite well after all.