Q13. What is the offshoring of white-... [FREE SOLUTION]

Chapter 20: Q13. (page 430)

What is the offshoring of white-collar service jobs, and how does it relate to international trade? Why has offshoring increased over the past few decades? Give an example (other than that in the text) of how offshoring can eliminate some U.S. jobs while creating other U.S. jobs.

Short Answer

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Offshoring white-collar jobs mean outsourcing business activity like managerial or administrative work which require less physical labor to work in foreign countries.

International trade and offshoring are closely related as they contribute to the creation of complementary jobs, and due to comparative advantage, they eliminate the existing jobs that are close substitutes.

NASA鈥檚 collaboration with the world market for space research programs is one such example.

Step by step solution

Step 1. Offshoring in the United States

Offshoring is the practice of shifting work previously done in one nation from that with workers of another nation.

The ongoing globalization of the resource market has eliminated many white-collar jobs in the U.S. labor market. It can be attributed to international trade in services because the U.S. firms gain more profits by outsourcing work abroad.

Over the past few decades, the increased offshoring can be accounted for due to various reasons. One was the lower production cost because, as with the trade in goods, the trade in services too reflected comparative advantages and proved beneficial to both trading partners.

Besides expanding sales, offshoring created other complementary job opportunities while eliminating the existing ones.

Step 2. Example from the U.S.

Apart from the examples from software, medical services, and manufacturing industries, offshoring practices are prominent in space research also.

Since the creation of NASA in 1958, the U.S. space organization has aimed to collaborate with the international community to bring multiple societal benefits to it and its partners. NASA has had over 1000 agreements with over 100 nations; eight of its partners account for 50% of its agreement to collaborate to design, fabricate, and prepare for the projects related to space research.

Such collaborations reduce the production and execution cost of the United States and keep them competitive worldwide.