4.9 Outsourcing and Off-shoring



Outsourcing or off-shoring occurs when a transnational corporation sets up operations or subcontracts operations outside their country of origin. Generally, this is done to make a profit for the corporation, either by the use of cheaper labour, fewer labour or environmental laws, or lower taxation.

Business process outsourcing takes place when the business processes of a corporation are done outside the country. This includes work like accounting, call centers, and other jobs that can be done with information and communication technology.

Outsourcing provides employment to workers who might have limited opportunities and provides profits for corporations. Aspects of globalization such as transportation and communication technology make this all possible.


Case Study: Sweatshops




A maquila or maquiladora is a factory where imported parts are assembled and the finished product is then re-exported. Maquilas were first built along the Mexican-United States border, and now can be found in many countries in Latin America. Maquilas are often a more cost-effective solution than a factory in the United States or Canada, since wages, taxes, and environmental and labour regulations are typically lower in Latin America. At the same time, the maquilas provide better wages than many other jobs in these countries, so the workers earn more money than they would elsewhere. In the past, maquilas produced primarily textiles and clothing, but more recently, these industries have moved to Asia, since wages and environmental standards are now higher in Mexico than in Asia. Maquilas are moving into other industries, such as electronics and auto parts.

A sweatshop is a factory or workplace, frequently in the developing world, in which people work long hours for low pay in often unsafe working conditions. Many sweatshops are not part of a global network. That is, they are not connected with larger corporations in other countries. Many of these factories produce goods for the local market. For example, a man in India producing gold jewelry in a crowded and unsafe room to sell to the Indian market is not part of the global sweatshop issue, while an Indonesian woman working in similar conditions making sneakers for sale worldwide is.

Today's sweatshops often produce goods for transnational corporations such as Wal-Mart and Nike. Governments in developing countries such as India, China, Vietnam, and Honduras encourage outsourced work to factories in their countries to provide employment for workers, profits to employers, and tax revenues to government.

Sweatshops connect the developed and developing world. Sweatshops are a global issue because the goods produced in sweatshops for multinational companies are sold to consumers in the developed world. Sweatshops are a controversial issue, because consumers in Canada pay relatively little for clothing, shoes, and other products, partly because the third world workers who make them are paid very little for their labor. The imbalance between what multinationals earn in profits and what they pay their outsourced workers is another issue. To formulate a position on whether sweatshops are good may be difficult. If they provide people with new opportunities to rise out of poverty, they are good. If they violate human rights and provide workers with less money than they need to live while the corporation makes a profit, that is not good. Sweatshops are one very obvious way people in the developed and developing world are connected to each other.

Not all factories in the developing world are alike. Although it is true that many underpay and exploit workers and pollute the environment, others are safe, and profitable places to work.