Ethical outsourcing

Ethical Outsourcing: Is there such thing?

Ethical Outsourcing

The concept of ethical outsourcing is quite debatable because ethics itself can be very subjective to one’s feelings, status and nationality. This article is an attempt to present the two sides of outsourcing in hope to give light to readers all over the world.

Outsourcing, for many years now, is one of the top revenue earning industries around the globe. India and the Philippines are one of the most well-known countries to outsource to. Using their perspective, outsourcing is one of the best thing that happened to their economy, their government and the majority of the citizens’ life. It has established a once third-world country that’s drowning in poverty and unemployment into a hopeful one giving opportunities to their talented countrymen.

Many third-world countries excel in outsourcing. These countries are the main outsourcing providers because quality and efficient labor is relatively expensive rather than local employment. On the other hand, this may mean loss of employment especially American jobs.

The dilemma

Despite the many advantages of outsourcing, the word itself can sometimes stir up arguments. For many Americans, outsourcing could be bad news. Critics of outsourcing believe that companies especially in the US have a moral obligation to prioritize providing employment for Americans. But to cut cost and as part of the “competitive strategy”, outsourcing labor wins.

In outsourcing to other parts of the world, American jobs are lost. One might question if this is an ethical practice. The two sides of the coin might need a little more pondering to answer that crucial question.

According to a paper published by Robert McGee, this dilemma can be mirrored to Bastiat’s “Broken Window Fallacy”. Here are excerpts from the paper.

In this essay Bastiat presents the following situation. Some young boy breaks a store window. A crowd gathers around to view the destruction and begins to chat among themselves. There emerges a consensus that the breaking of the window had a good result because it provided work for the glazier. Such accidents keep industry going. Without broken windows, glaziers would go out of business.  That is what is seen – providing work for a glazier. What is not seen is what the store owner would have done with his money if he had not had to pay to replace the broken window. Had the window not been broken, he could have used his money to replace his worn out shoes or to buy some books to add to his library. But because he had to replace the broken window, he cannot afford to buy new shoes or books. What the glazier has gained the shoemaker or book seller has lost.  But the story does not end there. There is not just one winner and one loser. It is not what economists call a zero-sum game. There are two losers to the transaction, the store owner and either the shoe maker or book seller. Before the window was broken, the store owner had both a window and the money to buy either new shoes or books. After the window was broken, the store owner has only a new window.

So, is it ethical?

Ethical outsourcing exists. Based from Bastiat’s theory, it is what is unseen that makes it acceptable. In outsourcing, the loss of jobs is what is seen yet the unseen reveals that employment is doubled or tripled in some other industries.

According to McGee, commentators, politicians and labor union leaders raise concerns with outsourcing because they only see the domestic job losses in United States. What is not seen are the 2 or 3 new jobs that are permitted to come into existence for every job that is lost due to outsourcing.

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