Globalisation is a growing phenomenon that is the result of various developments in the global environment, each of which merits an individual analysis of its social impacts. For the purpose of this analysis, the focus will be placed upon arguably its most controversial aspect, offshore outsourcing. Offshore outsourcing, or offshoring, is becoming an increasingly common business practice as a result of a combination of the recent technological advancements in the areas of transportation and communication, and the increased competitiveness of the business world. From the perspective of firms, tapping into cheap labor from less developed countries is a very logical business decision to reduce costs and maximize profits. This has not only motivated businesses to engage in offshoring, it has sometimes been critical to their survival in fiercely competitive environments. Before making judgments regarding the righteousness of offshoring from different perspectives, its impact on stakeholders must first be evaluated.
Stakeholders and why it is an issue
The very existence of offshoring is in and of itself evidence that, at least in most cases, it is advantageous for firms to engage in offshoring. However, as is the case with most business activities, its externalities can affect various stakeholder groups in both positive and negative ways. In society’s view, stakeholders to consider are Canadian workers, Canadian consumers, competitors, shareholders and executives, citizens of other countries, and future generations.
A primary stakeholder, and perhaps the most vocal of all stakeholder groups, is the Canadian labor force. Offshoring affects Canadian workers in two major ways. First, when businesses decide to offshore certain functions, jobs are essentially transferred to other countries. Layoffs, and in some cases mass layoffs, occur due to the elimination of local jobs, causing discontentment among the local community. The resulting increase in domestic unemployment also has a significant ripple effect which will be later discussed. A second less direct negative consequence is that “offshoring to low income affiliate locations is associated with domestic wage declines, particularly for low-income earners.” Ebenstein, A., Harrison, A., McMillan, M., & Phillips, S. (2009). Why are Workers getting Poorer? Estimating the Impact of Trade and Offshoring Using the CPS (No. w15107). National Bureau of Economic Research. This is true because blue collar work is most commonly offshored, likely due to the fact that unskilled labor does not require knowledge of Canadian culture and can more easily be done abroad regardless of language barriers. Therefore, as more of these low-wage jobs are offshored, domestic blue-collar workers are in a worse position to demand higher pay, and their standard of living is consequently lowered.
Consumers, also a primary stakeholder group, are most commonly benefactors of offshoring. Businesses that reduce overhead costs through...