I have another question about trade isnt it the case

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Unformatted text preview: as we can, we will simply be shipping jobs out of the country? For example, although it might be costly to produce bananas in the United States, some Americans would be working in the banana industry in the United States if we produced bananas. Now no one works in the banana industry in the United States, but people in Honduras are working in the banana industry. Isn’t it better for Americans to keep the jobs at home? QUESTION: Section 1 International Trade 401 15 (390-427) EMC Chap 15 11/18/05 9:12 AM Page 402 ANSWER: First, you shouldn’t assume outsourcing The term used to describe work done for a company by another company or by people other than the original company’s employees. that if Americans are not working in the banana industry that they are not working at all. Americans not working in the banana industry might be working in some other industry. Second, it is not so much a matter of “keeping the jobs at home,” as it is making sure Americans are doing the jobs they are best at doing. It may be relatively costly for Americans to work at producing bananas, but relatively cheap—in opportunity cost terms—for Americans to work at producing computer software, cars, or movies. Even without international trade, the composition of jobs in the United States changes. For example, in 1929, 22 percent of the workforce was made up of farmers. That percentage was down to 16.2 percent in 1945, and today it is about 2.4 percent. No doubt someone in the 1940s, complaining about the declining employment of farmers in the United States, said something like, “We can’t have people leaving the ranks of the farmers; it will be the end of America.” But it wasn’t the end of America. Agricultural production in the United States boomed at the same time as the number of farmers decreased (in both absolute and relative terms) in America. Many of the people who would have been farmers turned out instead to be teachers, doctors, accountants, engineers, plumbers, construction workers, taxi drivers, and so on. Our point is a simple one: even without any international trade, the composition of the labor force will change over time. At one time in the United States, no one was working in the computer software industry because there were no computers. Today, thousands are employed in this industry. At one time in the United States, no one was employed in the auto industry because there were no cars. Today thousands are employed in this industry. 402 Chapter 15 International Trade and Economic Development Outsourcing and Offshoring A controversial issue has come to America: outsourcing and offshoring. Before examining this issue, let’s make sure you know the difference between these two terms. Understanding the Difference Suppose a company called “Adams Software” is located in Greensboro, North Carolina. Let’s say the company has 100 employees. One day the president of the company decides to hire some people in, say, Seattle, Washington, to do some work for the company. Because the president is hiring some workers who are not formal employees of the company in Greensboro, he is said to be outsourcing jobs. In short, outsourcing is the term used to describe work done for a company by either another company or by people other than the original company’s employees. Recall from Chapter 2 that when a company outsources certain work to individuals in another country, it is said to be engaged in offshore outsourcing or offshoring. For example, if Dell, Inc., in Texas, hires people in India to answer customers’ calls, then Dell is offshoring. Sometimes people use the word outsourcing when the correct word to use is offshoring. For example, it is not uncommon to hear a person say,“Yes, many U.S. companies are outsourcing jobs to India and China.” Once again, if we are talking about individuals being hired in another country (a country other than the United States), the correct word is offshoring. Jobs Are Lost It is not uncommon for Americans to be concerned about offshoring. Think of an extreme case. A person in Montana goes to college to learn software engineering. After having studied four or five years in college, she gets her degree and is ready to work. Then, just as she goes into the job market, she finds out that many of the companies she is seeking employment with are hiring software engineers in, say, India. Why? Because software engineers in India earn 15 (390-427) EMC Chap 15 11/18/05 9:12 AM Page 403 Indian employees at a call center in Bangalore, India, provide service support to international customers. Why would a company in Germany, Russia, or the United States, for example, hire Indian workers, rather than workers in their own country, to handle these calls? lower salaries than software engineers in the United States. It is easy to see why our software engineer from Montana might be disheartened by what has happened. Here she went to college, thinking that a job would be awaiting her when she graduated, b...
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This document was uploaded on 01/16/2014.

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