Fear of Offshoring/Global Outsourcing

This entry is a selection from a current event log created in the spring semester of 2016. The log was an assignment for an international business class and discusses a recent article (or articles) concerning international business practices as well as tying it into what we were currently covering in class. With this information, keep in mind this analysis is dated.

March 19, 2016 – The New York Times – Nelson D. Schwarts – Internet

Good Jobs, Goodbye: A Factory’s Closure Sows Seeds of Anger                

In an article published by The New York Times on Saturday, March 19, 2016, by Nelson D. Schwarts, Carrier’s plans to outsource Indianapolis manufacturing jobs to Mexico, workers’ reactions, political agendas concerning Free Trade, and company executive reactions are covered. Carrier is a company that manufactures furnaces and heating equipment and is under the parent company United Technologies, which is also outsourcing manufacturing jobs to Mexico from Indiana. Carrier is set to relocate 1,400 jobs from a factory in Indianapolis, and United Technologies is relocating 700 from Huntington, Indiana in attempts to cut costs and increase profits. Although the companies have no current issues with profit or stocks, they are worried about their place in the global market and want to increase earnings per share (EPS) for their stocks, something that Wall Street is heavily pushing with specific numbers in mind.

Workers are angry and upset, identifying personally with politicians Donald Trump and Bernie Sanders, who both have anti-free trade views, and the former of which has taken the Carrier concern and added it to his campaign stump speeches. Trump is threatening to impose a 35% tax on Carrier goods from Mexico with the combined hope from the company’s workers that this cost will bring back their American manufacturing jobs. However, Carrier factories have been operating in Mexico since 1960, before the implementation of the North American Free Trade Agreement (NAFTA). Local politicians are also upset with the company since they had provided tax breaks and other incentives to the company for keeping manufacturing and jobs in America, which soon will be decreasing. United Technologies has agreed to pay back the public money that is appropriate for where they have fallen short and will offer compensation to those losing jobs in the future, being funding for four years of additional schooling. This, however, is not beneficial to a portion of Carrier employees, including older aged persons for whom a career change is not feasible and including workers who cannot afford to be without a full time job to go to school. The manufacturing jobs provided by Carrier and United Technologies have been good, well-paying opportunities for people without college degrees, and this is another reason their decisions to outsource for cheaper labor have caused so much upset.

This event is bringing offshoring fear into America’s eyes again. The drive for hyper-efficiency and cost cuts typically may bring up the question of global manufacturing, and in this case, it has been perceived as the answer. Americans want decent pay and cannot stand much of a competitive edge when other countries offer their labor for a cheaper price. Outsourcing manufacturing jobs leaves many people without jobs and without degrees, which now is more of a disadvantage than ever because less low-skill jobs available in a country equates to more competition for higher-skilled jobs, and with that, an increased push for higher education. Degrees are expensive, and it most often puts the pursuers in debt, creating a vicious cycle. Trump and Sanders seem to be pushing for Mercantilist ideals, which strike favor with people in these desperate positions. Sanders wants to fund college education, which is a nice thought, but will push competition even harder, making a necessity of Masters Degrees and PhDs. Trump wants to blast Carrier as a threat to other American companies thinking about doing the same thing. His global relations do not seem to be predictably successful, as the Mexican president is already rightly infuriated by Trump’s statement, and even political rally chant, about building a wall on the Mexican-American border and making Mexico fund it. Of course, with global outsourcing being an understandable fear of American citizens, it is extremely unsurprising that Trump is capitalizing on what is happening right now with Carrier.

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