Question

f the assumption is that job loss in the United States is a result of moving...

f the assumption is that job loss in the United States is a result of moving certain production offshore, what ethical and regulatory difficulties might emerge as a company globalizes its labor force?

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Answer #1

There are two parts to look into the above case. The first is the outsourcing aspect wherein in spite of the Corporation being situated in the US, it does away with part of its work with the labor force outside the nation and the second being, offshoring the entire production process to lessen the manufacturing and investment costs. The simple logic of outsourcing is to concentrate on the core activities while delegating the non-critical activities to a third-party so that efficiency in the system is maintained at a lower input cost for the same. Hence, if the labor costs at overseas are low, it is natural for the Companies to consider outsource their manufacturing activities in order to avail the cost-advantage and offer goods at a more competitive price to the consumers.

However, although a good strategy, in terms of ethical and regulatory difficulties ,such a Company has an ethical obligation to try to preserve jobs for workers in their home country markets as well. With the view to maximize profits, the Multinational companies outsource their activities to other countries employing cheaper labor source. As a result, there is an impact over the potential employment in the home market. Even the talented work force get failed to be absorbed by these Companies as the outsourcing serves them with better revenues. Hence, at a state where a home country would itself be facing with the issues of unemployment, the behavior of Companies to outsource the job activities results into dearth of employment opportunities for their home country workers.

Hence the following could be advised to such Multinational Companies that consider to outsource or offshore:

  • If the Corporate cannot offer jobs to the workers of the home country due to the application of ‘Globalization’ concept that resorts to cheaper cost of production, then such Multinational Corporations should also be discouraged from playing any role in the times of Global recession impact the home country where the outsourced employees from other countries resort to emerging markets to work in rather than in a saturated market with no potentialities of growth and income.
  • Few policies could also be so designed that it should be mandatory for the Parent company of the Multinationals to hire a certain portion of local workers from the home markets before outsourcing the same entirely, to some other country.
  • Application of Rights theory in ethics could help dealing with this issue better. The Multinationals should be asked to explained if they are comfortable closing down their entire operations in the home country to operate in the place where they actually outsource their activities. The resultant conclusion would itself be able to guide the Multinationals in the scenario of this ethical dilemma.
  • The theory or Utilitarianism could also be applied in this perspective to make the Multinationals realize as to how in the long run, outsourcing of the activities could influence negatively the overall economic state of the home country thereby affecting their operations in the home markets in the days ahead.
  • The impact of transfer pricing techniques on the Treasury deficit by way of loss on earning by way of international taxes, upon the country could hit it hard in the future to the Multinationals, making them difficult to run their business in a given scenario. The economic and financial scenario may prove to be adverse if the Multinational companies resort to lower tax rates nations for undertaking various businesses with them. When the end impact is resting upon the Multinationals, the latter would be forced to balance their activities by employing more of the local workers than relying upon the external ones.
  • Ideally, the profits earned in the abroad cannot be taxed in the home nation unless it is repatriated to the home country. This gives an opportunity to the Multinationals to earn and utilize the profits in the host country itself thereby helping to contribute in their economy than in its home market. Hence if possible, there could be change done in the taxation law that can at least charge a nominal margin of the income accrued abroad but not brought back to the home country so that it discourages the multinationals from hiring the workers from other countries and relying more upon the home ones.

In this manner, the ethical issues could be at least curbed to a certin extent.

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