The Economic Realities of Outsourcing 

Why is outsourcing so appealing?  Well, in many cases it is a numbers game; particularly, employee supply, and cost.

The population of Canada pales in comparison to some other countries, and therefore has a much smaller pool of employees to fish from. The following is an eye opening article illustrating the appeal of outsourcing overseas.

Click Here to Read the Article.

The State Government of India advertised for 368 entry level positions and received 2.3 million applications.  Let’s review that number again, it is not a typo, 2.3 million applications for 368 entry level jobs; such as, waiters, and night security guards. From a HR supply point of view, it makes perfect sense to outsource to a country that has such a massive supply of employees.

As economic theory predicts, where there is a massive supply of employees, wages will be lower.  Average entry level jobs in some of these vastly populated countries pay approximately $400.00 per month, in Canadian Dollars. In Canada, even at minimum wage, the average salary would be $1800.00/month.

If you have low skilled, entry level, jobs to be filling, and the work required can be done anywhere, why wouldn’t you outsource?  There are many non-monetary factors to consider; such as, quality, employee management, and loss of direct control over the work. Unfortunately, many organizations only look at the numbers.  It is the role of HR to provide an in-depth analysis and look at all the factors, both negative and positive, prior to recommending outsourcing as a viable option.

Discussion Questions:

  1. What are all the factors that a HR Professional should consider before recommending outsourcing a business activity overseas?