Journal Topic 9: The Myth of Outsourcing's Effect

Journal Topic 9: The Myth of Outsourcing's Effect

Globalization is when the world becomes connected together by trade and communications. When a country has a comparative advantage, it can produce a good or service at a cheaper cost than others. Outsourcing is when a country ships jobs to other countries because their labor is cheaper, so they can lower costs and be more efficient. With Globalization, countries are communicating more with each other and they know which countries will have a comparative advantage over others. With this knowledge, countries can outsource jobs to increase efficiency. An open economy is when a country is open to international trade. Outsourcing allows efficiency to increase because of lower production costs, or better quality production. Costs and prices are higher without outsourcing because the labor costs more, however with outsourcing, the labor is cheaper and costs and prices are lowered. With jobs outsourced, the opportunity cost changes, now the old workers have the opportunity to get better quality jobs, and the workers who got the outsourced jobs might have a better job. The Marginal Product of Labor could be that when outsourcing, they earn enough profits compared to not outsourcing that they can afford to expand and create more jobs.