Question

Explain what labor outsourcing is and how it affects U.S. wages and employment.

Short answer

An increase in employment in Total, Retail Trade, Services, or Government should result in the same year-to-year relative change in wages. Americans work in higher-skilled occupations. Outsourcing, it is argued, eliminates immediate employment opportunities for unskilled US labour.

Step-by-step solution

Introduction.

From the standpoint of enterprise management, labour outsourcing refers to the type of work in which enterprises have certain tasks completed by the labour force provided by an external service provider in order to reduce costs, promote efficiency, and increase competitiveness.

Relation between Wages and Employment.

The stronger the relationship between employment and wages, the closer the correlation number is to one. Because the correlation number for these industries is close to one, an increase in employment in Total, Retail Trade, Services, or Government should result in the same relative change in wages from year to year.

Reason for labor outsourcing affects U.S. wages and employment. 

When manufacturing products does not necessitate a high level of skill, companies that outsource to foreign countries usually hire less skilled workers. As a result, Americans hold higher-skilled jobs. It is argued that outsourcing eliminates immediate job opportunities for unskilled US labour.