Economics Question

Post ID: 2958941

Overview

Over several decades, some industries, such as textile and clothing, which were once a significant part of the U.S. economy, have shifted manufacturing abroad. Using the idea of opportunity cost, provide an explanation of the reasoning behind this shift. How has this shift affected economic well-being locally? How do the gains compare to the losses?

Submitted on:

Sep 29, 2023, 7:19 PM

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Summer Riddle

Oct 2, 2023, 10:16 AM

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Prof. Kahn and Classmates,

Comparative advantage is the idea that all countries can raise their standards of living through specialisation and trade. A country needs to focus on the goods in which its relative advantage is the greatest. What on earth does this mean?

Absolute advantage is when one can produce many goods and services at a better quality then their competitors. A comparative advantage means that one company can make shirts for 4 dollars a unit compared to another country's company making them at 10 dollars a unit. Saudi-Arabia for instance can produce oil at a cheap price so they have a comparative advantage using oil production as a primary source to finance their own imports by exporting oil (The Economist, 2004).

Does offshoring and buying labor or certain products such as semi-conductors hurt America's economy or our jobs? I don't think so. This may be so far above my head that I have no grasp of it but being in nursing, management and having to deal with staffing issues. There is always a shortage which would suggest that their are plenty of jobs in the workforce if someone wants to work irrelevant if companies outsource.

The opportunity cost of outsourcing to many American companies is that in the long run they will get labor and resources at more affordable prices so the opportunity cost of setting up international relations with foreign countries must be worth it in the long run because many companies are doing it. Many companies feel that by not taking advantage of foreign labor or resources they cannot be as competitive and profitable in their industry.

Covid-19 catapulted us all into the remote work industry where many people work from home. A survey of 500 American firms in 2022 found that 18% were using more independent contracting than in previous years and 13% relied more on leased workers. Self-employment is on the rise by 1 million more people since 2020 enabled by advances in technology. Outsourcing is not going away it has doubled since 2005 from 11% to 22%. It seems that technology is driving this outsourcing. As firms grow in size such as Microsoft, Apple, and Disney, they begin to need and gain the ability to seek out workers abroad (The Economist, 2023).

Outsourcing is defined as obtaining resources or services from a third party domestic, or foreign. For the small business outsourcing is needed for efficiency, expertise, speed, risk sharing, targeted efforts, peace of mind, stay competitive, and operational flow and cost management. The disadvantages or losses of outsourcing is hidden costs, loss of control, security risks, quality control reduction, public criticism, loss of focus, communication breakdown, moral dilemmas and lack of team cohesiveness (Riggins, 2023).

Summer

Reference

Riggins, N. (2023). 26 advantages and disadvantages of outsourcing from your small business. smallbiztrends.com. Retrieved on October 2nd, 2023 from https://smallbiztrends.com/2023/07/advantages-and-disadvantages-of-outsourcing.html

The Economist (2004). Trade disputes: Nagging doubts about the benefits of globalisation, and a look at the evidence.economist.com. Retrieved on October 1, 2023 from https://www.economist.com/finance-and-economics/2004/09/16/trade-disputes

The Economist (2023). How technology is redrawing the boundaries of the firm: Companies are reorganising themselves in the wake of digital upheaval. economist.com. Retrieved on October 1st, 2023 from https://www.economist.com/business/2023/01/08/how-technology-is-redrawing-the-boundaries-of-the-firm