Question

how does outsourcing affect wages and employment in the short run and the long run?

Answer 1

Answer :- Outsourcing increases productivity and wages in the long-run, however, the total level of employment will remain unaffected i.e., Outsourcing will have no effect on the total level of employment in an economy.

In the short-run, Outsourcing affect wages and employment in the following way :-

1). When outsourcing is done by domestic firm then wages and employment in the domestic nation will decrease.

2). When outsourcing is done by foreign firm then wages and employment in the domestic nation will increase.