Q5

Recently, computer programmers in developing countries such as India have begun doing work
formerly done in the USA. This shift has led to substantial pay cuts for some programmers in
the united states.
a. How is this possible, when the wages of skilled labor are rising in the USA as a whole?
b. What argument would trade economists make against seeing these wage cuts as a reason for
the block outsourcing of computer programming
Answer:
a. When the US start outsourcing people in country like India for computer programs, which is
formerly done by the US employed. This is the method used by companies to reduce their cost
of hiring expensive workers from the domestic nation and replace them with foreign workers at
less wage rate.
Wages of the skilled workers are high in US. But the US is creating a reserve army to bargain with the
domestic employees at less wage rate. Thus this reduces the wage and cost of the company. But due to
competition, the worker becomes more efficient. This is also the process of improving focus on core
business activities and shifting the extra work to outside employees. This reduces the burden and time
of work. This is also the method of creating competition and improving efficiency at less cost. However,
in the long run, the efficiency of the programmers in the USA increases, which leads to a rise in
the wage, and therefore the overall wage of the labors in the industry increases.
Thus the US business enterprise by outsourcing reduces their cost and increases their efficiency
by creating competition and a reserve army.
b. Against the Block outsourcing of computer programs, it increases the wage cut that induces
the employees to work with less efficiency and less interest. The delivery of service on time is
not expected and falls below the quality level. Also Including employees that are out of the
company take confidentiality and security at risk.
The contract between the employees and the organization is rigid. if any employee is not
completing the target the contract does not allow the company to fire him on time. Or it is also
not in favor of employees. The management of work and working employees is difficult
because these employees are not easily accessible and they may misuse the company's
securities. The outsourcing company has instability in their work they can easily go out of
business.
Trade economists may suggest that outsourcing can benefit those who profit from it and,
therefore, compensate those who lose. Also, the country's total production increases from
outsourcing, making USA advantageous. Trade economists can also argue that the
wage cuts in the USA programmers can also occur if the competition within the programmers of
the country increases even if there is no outsourcing.