At first glance, offshoring seems like a boon for any company that chooses to do this because they can hire individuals that live in areas with a lower cost of living. Those workers expect lower pay, saving the company money in the immediacy. However, as more companies make such a move, it has potentially damaging effects on the income of local individuals.
It is not surprising that companies are drawn to the practice of offshoring labor. The average IT worker in the United States makes over $70,000 each year, while a worker with the same education and skill level in India makes only $8,000 per year. Where is info from?
For the local economy, however, this can have far-reaching implications that result in lower pay for individuals locally …show more content…
According to their research.(comma)U.S. companies received a total of approximately 67 cents in benefits for every dollar that they offshored. Local workers were expected to earn 47 cents for every dollar offshored when they are hired in the United States. Overall, it results in a net benefit of $1.14 in benefits for the overall U.S. economy, but it is the individual American worker who suffers.
(Where does McKinsey Global reference end)
Because companies save approximately 58 cents for every dollar they offshore, and U.S. workers end up making only 47 cents per dollar, the implication is that U.S. workers lose 11 cents in earnings from labor for every dollar offshored. This takes money away from U.S. workers and redistributes that money globally.
Although there are no available studies that specifically focus on how much of this corporate savings goes toward decreasing prices and how much just enhances corporate profits, corporate profits vs. labor compensation had shifted drastically after 2001. Before 2001, the average distribution was 30.6% capital incomes to 69.4% labor compensation. After this period, it had nearly reversed, with 64.8% as capital incomes vs. just 35.2% in labor compensation. (where are statistics coming
It is not surprising that companies are drawn to the practice of offshoring labor. The average IT worker in the United States makes over $70,000 each year, while a worker with the same education and skill level in India makes only $8,000 per year. Where is info from?
For the local economy, however, this can have far-reaching implications that result in lower pay for individuals locally …show more content…
According to their research.(comma)U.S. companies received a total of approximately 67 cents in benefits for every dollar that they offshored. Local workers were expected to earn 47 cents for every dollar offshored when they are hired in the United States. Overall, it results in a net benefit of $1.14 in benefits for the overall U.S. economy, but it is the individual American worker who suffers.
(Where does McKinsey Global reference end)
Because companies save approximately 58 cents for every dollar they offshore, and U.S. workers end up making only 47 cents per dollar, the implication is that U.S. workers lose 11 cents in earnings from labor for every dollar offshored. This takes money away from U.S. workers and redistributes that money globally.
Although there are no available studies that specifically focus on how much of this corporate savings goes toward decreasing prices and how much just enhances corporate profits, corporate profits vs. labor compensation had shifted drastically after 2001. Before 2001, the average distribution was 30.6% capital incomes to 69.4% labor compensation. After this period, it had nearly reversed, with 64.8% as capital incomes vs. just 35.2% in labor compensation. (where are statistics coming