Introduction: The ‘Why?’ of Outsourcing.

Outsourcing is an almost inevitable byproduct of a functioning economy. It is rather unlikely that a single country will strike an equal balance in terms of their mix of output (i.e., the mixture of goods and services produced). Therefore, outsourcing becomes a spoke in the wheel that keeps the economy turning. This is due, in part, to the various factors of production that a country has access to.

For example, The United States excels in the production of services and, thus, is a primarily service-based society. This does not mean that the U.S. does not produce its own goods, but rather a more significant portion of our available resources are utilized in the production of services, as opposed to goods. As of 2013, 80 percent of U.S. output consisted of services—not goods.[1] Such a ratio of services and goods would necessarily imply that we have relied on outsourcing to make up for the necessary/desired goods that we do not produce with our available resources.

Counting the Cost: What Factors Play into our Decisions about Outsourcing?

As with any ratio of this sort, there are certain opportunity costs that we must consider. The factoring in of these costs will better help us determine whether or not the outsourcing of a specific good or service is both ethical and profitable. From a Christian worldview, there will almost always be a swing in favor of what is ethical (and thus, God-glorifying), as opposed to what is strictly profitable. On the contrary, in a predominantly market-driven economy, factors of profitability will almost certainly take preeminence over what is ethically responsible. This bias in favor of profit exists because the market will seek to establish what is most beneficial for itself—without considering the negative costs imposed by factors of ethics.  

As Christians living in a fallen world, we must navigate through these factors with wisdom. Obviously, in a perfect world, we would not face such challenges. Unfortunately, that is not the world that we currently inhabit. Therefore, we must heed the words of our Lord and seek to be “wise as serpents and harmless as doves.” (Matt. 10:16). With this in mind, let us take a look at some of the advantages and disadvantages of outsourcing.

Advantages of Outsourcing

As previously stated, there are certain necessary/desired goods within the U.S. that we do not have the resources to produce. Or, if we do currently possess those resources, they have been deemed better suited for another area production. Consequently, outsourcing becomes the logical option for obtaining such resources. Let us then consider some of the advantages of outsourcing.

  1. Scarcity is always going to present difficulties when it comes to the production of goods and services. While entrepreneurship seems to be ever-increasing in the United States, other factors of production may not be so easy to come by. These factors include labor (whether referring to skilled-labor or merely having enough manpower), natural resources, or capital (not just currency, but the “final goods produced for use in the production of other goods”[2]). Thus, outsourcing is an excellent way of acquiring the resources needed for economic growth, while at the same time conserving the limited resources we already possess. For example, the U.S. Small Business Administration identifies IT Management as “one of the largest outsourcing industries around.”[3] When a small business outsources its IT management, “jobs and tasks that would usually be done by…employees, are done by someone else outside the company.”[4] This work, which may cost thousands when factoring in salary or wage costs for employees, can be done for a fraction of the price when outsourced. Such an approach can free up significant factors of production for use in other necessary areas.
  2. Outsourcing, by the consequence of its very nature, benefits the economies of those countries that we outsource to. According to an article published by the National Customs Brokers & Forwarders Association of America (NCBFAA),[5] “Outsourcing by U.S. companies to foreign countries stimulates investment by these foreign countries. This investment helps boost those countries’ economies by improving their standards of living and providing jobs for the unemployed… [In turn,] this allows them to be a part of the global market by enabling them to buy more exports from the U.S.” So while it could be said that it is in the United States’ best interest to outsource to other countries (as it stimulates our own economy), it can be equally said that such outsourcing provides a direct benefit to those countries whose economies are weaker than that of the U.S. The improvement of these countries living standards and employment opportunities is both ethical and profitable.
  3. A third and final benefit of outsourcing is that it frees “companies to devote more resources to what they do well…”[6] This advantage compliments those listed above. A company that produces exceptional quality ice cream is, more than likely, going to outsource its production of milk to a local dairy farmer. In doing so, it allows the ice cream maker to do what he does best—make ice cream. To use a Biblical illustration to make this point, take, for example, an account in Acts chapter six. Here we find that a complaint was brought to the Apostles by the Hellenist Jews against the native Jews. The complaint stated that the latter party was largely neglecting the widows of the former party. In response to this, the Apostles delegated the responsibility of caring for these widows to “seven men of good reputation” (v. 3). This form of “outsourcing” satisfied the needs of all parties and allowed the Apostles to continue doing what they did best—namely, that of “prayer and the ministry of the word.” (v. 4).

Disadvantages of Outsourcing

When considering the disadvantages of outsourcing, as Christians, we cannot separate our beliefs from our practice—even when it comes to making economic decisions. Therefore, in discussing such disadvantages, we may take into consideration certain factors that the world does not and vice versa. Let us look at some of these disadvantages.

  1.  In a March 26, 2019 article released by The Epoch Times,[7] it was reported that the “crashes of two Boeing 737 MAX jetliners” could have been due to the use of “substandard parts made in China.”. It is reported that Boeing, an American Multinational Corporation, outsourced parts for its aircraft from Moog Aircraft Inc. (based out of Elma, NY), who, in turn, outsourced to an additional third party (Suzhou New Hongji Precision Parts Co.—or NHJ) based out of the Jiangsu Province of China. The report states that NHJ used “cheap and substandard materials” when constructing spoiler system parts for Boeing, which allegedly led to the crash of these two jetliners. While much of this report relies, in part, on “he said, she said” rhetoric, it does highlight an important disadvantage of outsourcing in a general sense. Namely, when a company chooses to outsource (whether out of necessity or convenience), they, in many ways, forfeit the benefit of quality control. In the U.S., this can mean that specific laws or standards put into place by the government, which are meant to protect the environment and/or consumer, may not be strictly followed in other countries. If such laws or standards imposed by the government are indeed efficacious for the environment and the consumer, then the removal of them through outsourcing to areas that do not have the same laws can create negative externalities that do more harm than good.
  2. A second disadvantage could be linked to the unethical treatment of employees, or the usage of slave labor, in foreign countries. While in the U.S., we have strict regulations on “how labor resources are used in the production process,”[8] other countries may not share these values. An example of this is highlighted in two separate articles published by The New York Post[9] and The Washington Examiner[10] in which the hypocrisy of Nike is highlighted for its stance on social justice in the United States, while at the same time allowing for the use of “slave labor” in its Chinese run factories. Outsourcing to countries/companies that have documented usage of slave labor (or any form of unjust labor) for the production of goods is one of those issues that would stand in stark opposition to both the laws of the United States and the Law of God. This is an issue that both the Christian businessman (who is considering outsourcing some aspects of his business) and the Christian consumer (who is purchasing products from companies who may utilize such outsourcing practices) should remain well-informed.
  3. A third and final disadvantage of outsourcing is that it inevitably takes away jobs from capable U.S. citizens and gives them to citizens of other countries. A 2014 report by U.S. News and World Report claims that “Outsourcing to China Cost U.S. 3.2 Million Jobs Since 2001.”[11] Certainly, this poses a significant disadvantage to the 3.2 million Americans (and their families) who have found themselves unemployed due to the outsourcing of their job. This problem takes on an additional cost when we consider the potential increase in unemployment insurance, food stamp benefits, and other government assistance programs that may be utilized to offset the losses of individual workers.

Conclusion: Doing All for the Glory of God

In sum, there are undoubtedly both advantages and disadvantages to outsourcing specific factors of production. I have by no means set out to make an exhaustive list, but hopefully, this will stimulate further thinking on the subject. Furthermore, as Christians living in an imperfect world driven by consumerism and profit-driven markets, it is our responsibility to weigh such matters carefully and use wisdom in making decisions in areas of business and consumption. 1 Corinthians 10:31 tells us that we are to seek God’s glory in all areas of life—economics included. Therefore, it is our responsibility to place our Christian ethics above the worldly “get rich quick” mantra. Living with these convictions may mean, at times, a loss of profit. It may mean that we miss out on many of the opportunities that the world so easily receives. It may even mean that we lose our businesses, our homes, our possessions, and even our lives. In light of this, let the words of Christ speak comfort to us as we weigh the cost of discipleship. “Everyone who has left houses or brothers or sisters or father or mother or children or farms for My name’s sake, will receive many times as much, and will inherit eternal life.” (Matt. 19:29). In this way, we will find ourselves truly blessed!

                [1] Schiller, Bradley R., Cynthia Hill, and Sherri Wall. “The Macro Economy Today.” (New York, NY: McGraw-Hill/Irwin, 2013), 34.

[2] Schiller, “The Macro Economy Today”, 5.

[3] Campbell, Anita. “10 Small Business Functions That Can Be Easily Outsourced,” November 19, 2019. https://www.sba.gov/blog/10-small-business-functions-can-be-easily-outsourced.

[4] Gilmanov, Alexander. “Pros and Cons of Outsourcing to India and Other ‘Low Cost’ Destinations.” TMS, February 27, 2020. https://tms-outsource.com/blog/posts/outsourcing-to-india/.

[5] Correnti, Madison. “‘Outsourcing Overseas and Its Effect on the US. Economy.’” ncbfaa.org, n.d. https://www.ncbfaa.org/Scripts/4Disapi.dll/4DCGI/cms/review.html?Action=CMS_Document.

[6] Bucki, James. “‘What Is Outsourcing and Why Do Companies Do It?”.” The Balance Small Business, September 27, 2018. https://www.thebalancesmb.com/what-is-outsourcing-2533662.

[7] Zeng, Jennifer. “Some Boeing Jets Have Substandard Parts, Whistleblower Claims.” http://www.theepochtimes.com, March 27, 2019. https://www.theepochtimes.com/a-whistleblower-charges-boeing-jets-have-substandard-parts_2854171.html.

[8] Schiller, “The Macro Economy Today”, 38.

[9] Mosher, Steven W. “Nike Should Quit Lecturing on Social Justice – and Atone for Using Slave Labor in China.” New York Post, July 25, 2020. https://nypost.com/2020/07/25/nike-should-quit-lecturing-on-social-justice-and-atone-for-using-slave-labor-in-china/.

[10] Shines, Aubrey. “Nike Anti-Racism Crusade Turns a Blind Eye to Slave Labor in China.” Washington Examiner, August 11, 2020. https://www.washingtonexaminer.com/opinion/op-eds/nikes-anti-racism-crusade-turns-a-blind-eye-to-slave-labor-in-china.

[11] Peralta, Katherine. “Outsourcing to China Cost U.S. 3.2 Million Jobs Since 2001.” U.S. News & World Report, December 11, 2014. https://www.usnews.com/news/blogs/data-mine/2014/12/11/outsourcing-to-china-cost-us-32-million-jobs-since-2001.