Outsourcing results in lowers prices, higher standards of living and more investment in the US

When companies offshore outsource, a cost benefit is in most instances passed onto the consumer, This subsequently results in a higher standard of living. Low prices generally stimulate consumer spending which in turn benefits the economy. With greater cost efficiency from outsourcing, companies can also afford to increase their investment and expand into new sectors; thereby also creating more jobs. Outsourcing is a means of getting more final output with lower cost inputs and this therefore leads to lower prices for all U.S. firms and families. Lower prices leads directly to higher standards of living and more jobs in a growing economy.

If US companies stopped outsourcing, this cost would again be passed onto the consumer. We would most likely witness higher prices and thus a drop in standards of living. Furthermore the amount spent on re-investment and the creation of new industries and new jobs would decrease.

Columbia professor Mr Bhagwati and colleagues acknowledge some temporary dislocation in low-skill jobs because of outsourcing. Nevertheless they assert that the practice offers substantial gains to the US economy through cheaper imports and stronger markets for exports. It is immediately obvious that US shareholders, investors and American consumers derive benefits from outsourcing. BFSI outsourcing has resulted in quality and productivity gains of 15-20% and customer satisfaction of almost 85%.

By outsourcing it is predicted that US banks, financial services and insurance companies saved an estimated $300 billion in the past six years owing to IT outsourcing to India . Helped by these savings, companies have invested in new industry and re-invested in existing ones. Furthermore the save has prevented layoffs and instead added hundreds of thousands more jobs. According to the NASSCOM report, the BFSI sector saved $6 billion in the last few years and due to these savings have added 125,000 new jobs in this period thus preventing layoffs.

The outsourcing of computer-related manufacturing jobs has accounted for 10 to 30 percent of the drop in hardware prices. The resulting increase in productivity encouraged the rapid spread of computer use and thereby added some $230 billion in cumulative additional GDP between 1995 and 2002.

McKinsey Global Institute has estimated that for every dollar spent on outsourcing to India, the United States reaps between $1.12 and $1.14 in benefits. Thanks to outsourcing, U.S. firms save money and become more profitable, benefiting shareholders and increasing returns on investment. Foreign facilities boost demand for U.S. products, such as computers and telecommunications equipment, necessary for their outsourced function. And U.S. labor can be reallocated to more competitive, better-paying jobs; for example, although 70,000 computer programmers lost their jobs between 1999 and 2003, more than 115,000 computer software engineers found higher-paying jobs during that same period. Outsourcing thus enhances the competitiveness of the U.S. service sector.

Catherine Mann of the Institute for International Economics also conservatively estimates that the globalization of IT production has boosted U.S. GDP by $230 billion over the past seven years; the globalization of IT services should lead to a similar increase. As the price of IT services declines, sectors that have yet to exploit them to their fullest such as construction and health care, will begin to do so, thus lowering their cost of production and improving the quality of their output. (For example, cheaper IT could one day save lives by reducing the number of "adverse drug events." Mann estimates that adding bar codes to prescription drugs and instituting an electronic medical record system could reduce the annual number of such events by more than 80,000 in the United States alone.)