Offshoring occurs when a company chooses to have their production outsourced to a country outside the United States.
This is due to the hope that their labor costs will be lower.
However, there’s something these companies don’t realize.
Their actions will have a negative effect on the country as a whole.
Offshoring Effects the Economy
There is an effect on the economy when production moves out of the United States.
However, it is not noticeable right away.
This is due to the manner in which a company outsources their business.
In some cases, a company does this in stages.
However, when a company begins to offshore, even just a single production line, it can affect the local economy by:
- Decreasing Jobs
- Reducing Consumer Spending
- Negatively Impacting Local Business
When companies all over the U.S. begin moving their businesses offshore, there are consequences.
Consequences such as:
- A decrease in American jobs in favor of an overseas workforce that is cheaper.
- Additionally, companies terminating some or all of the positions in America.
- An increase to the unemployment rates for the U.S.
- Furthermore, a decrease in the amount of monetary flow which will eventually affect the entire country.
Production Effects Consumer Spending
Offshoring production heightens the economy in other countries. Meanwhile, the economy in our own country will decrease.
This is due to employees spending less caused by reduced income.
Therefore, those funds are no longer circulating throughout the U.S.
However, this lack of circulated money doesn’t just affect the larger companies.
It makes it more difficult for small and local businesses to thrive as well.
Furthermore, individuals are less likely to spend their money on U.S. based products.
Especially, if there is less money to go around.
Eventually, money goes toward products that are lower in quality from cheap labor countries.
Furthermore, this will increase unemployment.
Offshoring and It’s Impact on Local Businesses
Offshoring does not just affect larger businesses who move out.
When companies and jobs leave a community, it also negatively affects the businesses that are still here.
Fewer jobs lowers consumer spending.
The flow of money connects all businesses.
The American economy is dependent on keeping businesses here as well as their employees.
Every lost manufacturing job impacts local service providers, retailers and restaurants.
In conclusion, the entire country suffers when companies move to other countries.
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Wrapping It Up
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