Why Outsourcing/Offshoring Is Actually Good For The Economy
Moving jobs overseas has received a lot of bad publicity over the years, however in recent years, it has now become a necessity for business success and more importantly, business survival.
Reports by the Australian Services Union (ASU) and Finance Sector Union (FSU) claim that outsourcing staff overseas has lead to a net loss of jobs in Australia. However recent research suggests otherwise, indicating that outsourcing of staff overseas has actually been a stimulant for business growth in Australia - and could even lead to an expansion in the Australian workforce.
Research shows that more than 50% of small to medium enterprises in Australia that choose to outsource work overseas, said that their reason to outsource was based on their desire to expand their team, with only 25% stating the reason for outsourcing was to replace existing staff.
What's more interesting, of the company's that did outsource, more than 40 per cent saw an increase in their workforce. A further 36% saw their team size maintained, with only a little over 20% saying their original workforce size contracted.
The ASU and FSU, however state that Australian's should be weary of the global trends, with the US economy having severely suffered as a result of the introduction of overseas outsourcing. However research also shows that US companies that outsourced overseas, increased their US workforce by 44%, with 36% maintaining original staffing levels.
So the research shows that overseas outsourcing is in fact good for the economy and is helping small to medium size businesses expand, leading to a better Australian economy.
So why has overseas outsourcing received such a bad rapt? This is due the reputation it has received from many big businesses in Australia, outsourcing their call centres to India. However in Australia, the businesses that benefit the most from overseas outsourcing is small to medium sized businesses. This is due to the fact they get access to affordable, skilled and talented individuals to expand their business.
In fact, overseas outsourcing is sometimes the only viable option for start-up companies that simply cannot afford or attract the right people to join their business. However, once their businesses kick-start and begin to grow, through overseas outsourcing, they usually hire skilled workers in Australia too.
There will be of course some companies that will move jobs overseas, however there will be others that will outsource overseas to complement their Australian staff which will ultimately lead to helping their business grow.
This is further evidenced by the jobs data from the Bureau of Statistics. The ASU and FSU claim that 20,000 jobs a year are being ''lost'' to overseas outsourcing. However this ignores the fact that more than 65,000 jobs were created in the Australian economy over the past 12 months with unemployment rates remaining low.
With innovation in technology and an increase in globalisation, there is no doubt that there will be structural changes in the Australian workforce. However there is little evidence to suggest that this will lead to a loss of Australian jobs. In fact, outsourcing, if anything will lead to greater and higher paid jobs for Australians.
This is because with advances in technology and increases in globalisation, finance professionals in Australia, can be contracted for companies in the US and other developed countries. This type of overseas exchange is rightly applauded as an example of great globalisation working in our favour. Australians must be aware that this kind of innovation works both ways.
This is why former Treasury secretary Ken Henry encouraged Aussie companies to embrace outsourcing overseas, with a strong emphasis on outsourcing to our neighboring countries in Asia.
This is because Henry knows that Australia's long-term economic viability is based on expanding Australia's exports into Asia. To do this effectively, Australian's must embrace new technologies and efficiencies available - including overseas outsourcing.
The 80's saw Australia transform itself from a highly protected economy into a exceptionally open one. This was because the Governments at the time saw the benefits that free trade brought to the Australian economy and it neighouring countries, and saw the benefits far outweighed the benefits that trade barriers and tariffs brought.
These principles apply to overseas outsourcing today, with unions demanding the Government to intervene to help save the service industry, not realising it will lead to an overall reduction in efficiency.
However like any other form of hiring, overseas outsourcing, has its risks. When hiring employees, all business owners know, not everything works out right all the time. However when outsourcing, doing your research and choosing the right outsourcing provider for your business, can go a long way to reducing the risk of overseas outsourcing. However ruling out overseas outsourcing all together or having Governments impose regulation on it will only lead to a reduction in productivity and innovation.
With the advances in technology and the increases in globalisation, if Australia chooses to ignore the benefits of overseas outsourcing, Australia will definitely fall behind the rest of the world.