Is offshoring detrimental to domestic hiring?
Let’s face it: using this as a business strategy will definitely have some impact on both the local and offshore locations. The question now is does it negatively impact local employment?
The answer is it depends on the strategy implemented at the local level.
Freeing Up Time Or Eliminating Opportunities?
The most common fear is that offshoring can strip local of their jobs; that by building offshore teams abroad will result in unemployment for the local professionals.
But contrary to most fears, businesses that utlilise this business model are actually supplementing their local teams by freeing up time and making sure they only work on tasks that can generate more revenue.
Accountants, in particular, are buried with too much work. There is a big gap in the amount of time accounting firms want to spend with clients compared to how much they are actually spending.
Time-consuming tasks—managing emails, meetings and reports—keep accountants from focusing on tasks that have higher impact, like business advisory. The problem is they need to accomplish these low-impact tasks.
Offshoring solves this conundrum by freeing up their time.
Since an offshore team takes care of the low-impact tasks like bookkeeping, tax preparation, and other administrative tasks, the local staff can now focus on analysing data so they can provide sound financial advice to clients. They can now spend more time for face-to-face meetings.
If you look at it closely, offshoring actually augments local efforts instead of negatively impacting them. Again, that will also depend on the company’s strategy.
The popularity of offshoring should not come as a surprise. Experts have known that it’s only a matter of time before this business strategy becomes the way of the future. In a 2012 article, former Treasury boss Ken Henry said that “offshoring would be a key source of productivity growth” and that companies need to stop their aggression towards offshoring.
The article foresaw the jobs that will be most impacted by offshoring. During that time, also, whatever negative effects offshoring had have been more than offset by job creation.
Is It Good For The Australian Economy?
It’s a common misconception that offshoring is bad for the Australian economy because it takes away jobs from locals and hands them over to people in another country. It’s pointed as one of the factors that agitate unemployment.
Businesses outsource because they want to increase profits. Offshoring saves companies overhead because of cheaper labour costs. This increases their profit margins and helps drive success.
But instead of negatively affecting local employment, offshoring can actually make things better for the local team. When firms generate more profits through offshoring, they grow. This is usually manifested through creation of new jobs.
Now, there will be certain jobs that cannot be outsourced. So these roles will definitely be filled up by local professionals.
Companies that experience growth with help from offshoring will invest on upgrading their tools. They will spend on expanding their offices and producing more jobs. More local jobs mean more taxes for the Australian government.
Economists Think Otherwise
In the US, discussions on offshoring’s negative effects on domestic employment have been going on for years. Economists disagree that it worsens domestic employment mainly because the decision to offshore is a choice made by individual companies.
A recent study by Brian K. Kovak, Lindsay Oldenski and Nicholas Sly showed that “offshore activity may have modest positive effects on domestic employment.”
Results of the research showed that increased offshore activity actually increased net domestic employment. But it also showed that employees were either transferred to a different department in the company or hired by another employer.
Offshoring provides firms opportunities to improve productivity, enhance efficiency and ultimately drive success. By scaling up, companies are also able to improve their local teams.
Contrary to popular fears, offshoring doesn’t strip local professionals of jobs. In fact, offshoring has been known to yield positive effects on the economy, and there’s data to back it up.
The bottom line is, as firms expand through offshoring, they hire more people both onshore and offshore, which means it’s a win-win situation for everyone.
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