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Impact Of Outsourcing On American Workers Morale

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In the present era organizations can hire skilled and qualified individuals from anywhere in the world because of effective exposure to the technological advancements. Today outsourcing is a very common phenomenon followed by the organizations whether private or public. Outsourcing is adopted with an objective of selecting and recruiting people from any part of the world that can play a very important role in the growth and success of the company (Lim, 2010).

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Outsourcing has introduced a new method of communication among the countries. It is adopted with the objective of cost savings by the firms. It influences the morale of the workforce which could have negative impact on the profitability and productivity of the company. The main objective of this paper is to develop an effective understanding of the effects of outsourcing on employees of organizations in United States of America (SikulaSr and, 2010). The study will focus on analyzing the factors of outsourcing that would affect the personal morale of the employees in the country. It will also take into account the issues that cause decrease in employee’s morale. Reducing morale in the workers can result in low productivity for the company ultimately increasing the turnover rate of them. Issue of outsourcing has raised the rate of unemployment among the domestic employees in USA. Developing countries offers their college students or educated employees to USA at fairly low salaries. They can get access to the new technologies and advances and can also derive the experience of working with well established companies (Kalleberg, 2009).
Outsourcing can be described as the international form of free trade. In the present conditions many commodities could be outsourced which has both positive and negative impact. American economy is getting affected because jobs in America are being taken by the employees and workers from other nations. People fear of losing jobs and it has shattered the motivation of employees (Reaser, 2004). Even the individuals who are highly skilled and talented have also not been able to get rid of this fear. Most of the outsourcing takes place in the call centers, pharmaceutical, manufacturing, research & development industries in USA. Presently the economy is encountering cut throat competition in the technological sector. Therefore many numbers of employees in the country are not in the favor of outsourcing (Xie, 2009).

Due to the intense competition in the markets firms are forced to create value for their products and services to maintain a steady position in the market. Outsourcing is major factor that drives competition in the global market. Less salaried workers in the overseas have make the local employees in USA to struggle for the retention of their jobs. It has resulted in stressful working environment for the workforce. With the changing policies in the democracy of the America it is required to put stop on the outsourcing. It will have a strong impact on the firms which are totally dependent on outsourcing (Baily and Farrell, 2004). This type of scenario can build issues for the managers to rely on the local workforce to remain in the competition. Many USA organizations are placing their offices in other nations to recruit individuals from these countries. Cost reduction is the short term advantage of the outsourcing on the other hand it has negative cons in the long run (Roberts, 2013). Selection of bad employees may be a negative component of outsourcing because it could lead to wastage of employee’s skills and will also the impact the morale of the local employees. The responsibility places on the managers to motivate the workers and at the same time outsourcing the talented and proficient employees to sustain the intense level of competition (Quinn, 2000).

Aims and Objectives


This research paper is aimed at identifying how outsourcing impacts the morale of American employees. As evident the focus will be on American companies that have been outsourcing their work to the workforce of other countries.


To achieve the above aim, firstly the below mentioned objectives need to be fulfilled:

  1. To determine the benefits of offshore outsourcing.
  2. To evaluate the risks and pitfalls of outsourcing work.
  3. To analyze the impact of outsourcing on HR and Labor relations.
  4. To identify the influence of offshore outsourcing on morale of employees and eventually on the turnover of companies.
  5. To examine the areas which need to be taken into account because of their tendency to fluctuate during an outsourcing process and resulting in fall in employee morale.

Literature review

Outsourcing is related to human as well as the financial aspects. As per the view of the professionals the cost of outsourcing could be overstated to risk. Outsourcing has resulted in loss of fix employment opportunities for the local individuals. Because of this the rate of contract and part time jobs in USA has also raised. It enhances the level of dissatisfaction in the on job workers and this scenario develops minimal job security for the individuals who are newly outsourced (Crolius, 2006). It declines the opportunities for promotions and there is a loss of productivity which is a major limitation of outsourcing. High level of stress and pressure among the workers decreases the level of participation of the persons in the business. Dissatisfied people leave their jobs and that is the reason the unemployment rate is very high in the country (Kahai, Sara and Kahai, 2011).

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It is important that feeling of the outsourced employees should also be taken into consideration. Survivor syndrome is concerned with the management of human resources. It refers to decrease in engagement, motivation in the job of the workers in the organization. It will lead to downsizing and reduction in the rate of employees (Elmuti, Grunewald and Abebe, 2010). Survival syndrome is about the feeling of fear, guilt and anger. Inequality, un-biasness, insecurity reduces the thinking of the workers. Therefore it can be said that survival syndrome will lead to high turnover rate among the individuals in America (Walsh and Deery, 2006).

The legal authorities and policy makers are still against the outsourcing and they are underlining the negative impacts on every forum of outsourcing. A study conducted in America states that 14 million white collar persons in the country are being internationally outsourced (Xie, 2009). It is resulting in causing firms in the country to be deprived of their best human capital and forced them to do less paid jobs which are apparent from the low consumer market of USA. Outsourcing has also decreased the tax revenues in the nation. Prior to the movement of outsourcing employees were safeguarded against the low wage foreign labor. It is totally a unfavorable situation for the employees in USA (Crolius, 2006).

It is believed that outsourcing cannot always go wrong as it help in downsizing, rightsizing and restructuring of the workers. USA does half portion of their manufacturing from more than 30 firms located in different parts of the world. According to a general indication, about 4 million people from other countries are getting jobs in the companies of America. After the initial outsourcing moment the working conditions are affected which in turn impacts the morale of the people (Weidenbaum, 2004). Morale of the workers is interrelated with their working conditions and their job. As per the model of the job characteristic working conditions are has a very vital impact on the morale and confidence of the individuals. Modern theories of organization have created a mindset among the people that they can achieve anything. This perception will lead to productivity of the employees as well as the companies. Employee empowerment has many positive impacts on the organization (Trevor and Anthony, 2008).

Trust can be explained as the phenomenon which tells that workers will remain committed towards their roles and responsibilities & will not take any undue advantages of the opportunities. Trust of the employees on their companies will be broken because of uninformed outsourcing. It will have huge impact on the belief and goodwill of the employees and their morale will be breached through a breach of trust. It becomes very difficult for the firms to regain this kind of trust (Wood, 2009).

Consequences of Overseas Outsourcing

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As per Som Mittal, former MD of Compaq India, all those things which can be outsourced can also be offshored. Organizations can decrease or increase the number of employees rapidly to reflect valleys and peaks in demand or production, as well as mitigate their investments in infrastructure of equipment. A relatively more thorough analysis of outsourcing reveals that ordinary back-office operations turn out to be the most viable candidates for outsourcing, as long as they are unrelated with the core-competencies of the organization (Elmuti, Grunewald and Abebe, 2010). Automated and repeatable “rule-based” functions are the most efficiently outsources tasks going overseas. Nonetheless, it must be kept in mind that practical expectations of profits resulting from overseas outsourcing mainly pertain to long-term investment having enduring paybacks. A fascinating corollary advantage seldom stated is the benefit to the US economy (Kalleberg, 2009). Indian National Association of Software and Services Companies published a report by Evaluserve which mentioned that for every $100 work outsourced by American companies around $130-$145 is ploughed back in its national economy. Cost savings tend to create value for the American economy and it is seldom claimed that overseas outsourcing makes the American corporations more internationally competitive (SikulaSr and, 2010).
The trust of employees is immensely impacted subsequent to the announcement of an offshore outsourcing movement. In USA, a primary problem most of the employers face relates to the immediate breakdown of employee trust. This damage to trust of employees is of significant influence on the employers’ goodwill which is quickly shattered due to the breach of trust and is relatively difficult to regain once it is lost. As a result of the organizational restructuring, workers are subjected to additional stress (Kahai, Sara and Kahai, 2011). New demands and expectations are placed on employees unexpectedly and this can hit their morale hard. Such demands and changes are frequently met with resistance. This stress with the additional resistance arising from the apprehension that outsourcing might next hit their position can rapidly lead to a downturn in their morale. Rumors which are normally present during the outsourcing movements only work as a fuel to the flames (Lim, 2010). 

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It seems that more and more American organizations are trying their hands with offshoring and outsourcing their services and labor with the impression that they are mitigating their operating costs. Such type of experimentation has converted USA into a service oriented nation having a trade deficit which continues to increase resulting in higher number of jobs being lost rather than being created. The morale of American employees has been damaged and a sense of fright has been injected into them, including the highly skilled professionals as well. Though quite impractical at this point of time, several think that the growing use of outsourcing can add to USA tuning into a third world country (Kalleberg, 2009).

The most noteworthy outsourced functions in an organization have been accounting, call centers/customer support, manufacturing and human resources. In present day’s society a higher threat has been impinged upon the technology sector of USA, such as engineers and information technology. Besides this, other highly skilled employees in R&D, financial positions and pharmaceutical have been affected as well (Levine, 2012). The skilled professionals are losing their jobs to organizations offshore due to the low cost of labor. As can be easily told, most of the American employees do not take the idea of outsourcing very sportingly. For instance, a software engineer in Microsoft is possibly unlikely to jump with fervor at the thought of losing his job to an unknown and possible less qualified employee in India who is ready to do job for half the amount (Roberts, 2013).

Disrupting education in USA

USA tends to have a relative advantage in industries with highly qualified and skilled workforce and capital requirements. These people have a firm base of knowledge which adds to the country’s leading edge in the global economy. A number of companies have taken the advantage of mitigating their costs by outsourcing such jobs to companies in distant countries allowing themselves to solely concentrate on their core competencies. However, the fear related to outsourcing is having an effect on the future employees of America as well (Gellings and Wullenweber, 2006). Off late, shifts have been witnessed in education system during college enrollment, as students are shunning high-tech fields such as engineering and even computer science. Due to an absence of stability in such areas, scholars are worried that their jobs could ultimately be outsourced to other nations and are hence deciding to shift their focus on their business skills. The war of talent has gone highly fierce in high tech sectors which pose a threat on the future of American economy (Roberts, 2005).

Fall in productivity

Morale can win wars, solve crisis situations, is a crucial condition of a strong national life and equally important for the maximum accomplishment in the life of an individual. Though these lines were used by Pope to directly refer to war time propaganda conditions, the broader point in these lines was that high morale is helpful to people in achieving greater things (Baily, and Farrell, 2004). This has time and again been proven in various scientific fields of study. Once the morale of an employee is lost, his/her even small pains get exaggerated, fewer efforts are put in to fight them and ultimately the job satisfaction suffers. Decrease in the morale because of outsourcing has been directly connected with an increased impact on ill-health and absenteeism that can be correlated directly to a fall in work performance and productivity (Roberts, 2013).

Morale and Turnover

Turnover amounts to a significant cost factor for companies and must be avoided as far as possible. Turnover costs ought to be seen as a wide notional set which entails acquisition costs of new employees, future separation costs and learning costs of new employees. In addition to this, some intangible can be added in this list which covers the decline/loss of company information and knowledge (Quinn, 2000). Thus, the outsourcing movement ought to be thought over twice as too many unexpected and future costs can be brought along with it. Morale can easily get hurt and once the initial decrease in morale starts taking shape then the openness of employees to other jobs starts. The reduction in level of trust results in further decline of organizational commitment. Once a person starts to not see himself as a component of the company any longer, the step to turnover is almost taken (Reaser, 2004).

Effects of outsourcing on HR and Labor Relations

There are both indirect and direct implication of overseas outsourcing on labor relations and HR. These are as follows:

Direct Effects:

The first and foremost direct impact of outsourcing on Labor relations and HR pertains to management of transition costs due to personnel changes, downsizing issues, management of layoffs plus the dynamics and costs of actually managing an overseas contract. Another direct impact for certain American companies is their necessity to concentrate on the effects of offshore outsourcing on their US employees, the impact on the productivity and morale of their workers together with the costs of retention, retraining, bonuses and severance (Gellings and Wullenweber, 2006).

Indirect Effects:

There is a rather subtle impact which might take place as a consequence of overseas outsourcing. This effect is on the long term influence on the different type of jobs which individuals train for, in addition to the transfer of knowledge pertaining to various job structures in the company. As far as the impact on the kinds of jobs people train for is concerned, there can be a domino effect for the whole tech industry (Levine, 2012).


Several conclusions can be made at the end of this chapter. Firstly, only a handful of individuals have actually looked at this issue objectively. These few people as well as the large number of American people whose professional careers have been rampaged because of outsourcing have a disparate perception on impact of outsourcing. However, so far, no debate has been there, only a shouting down of cynics as “protectionists”. It has been identified that outsourcing has changed the methods in which countries interact. Though some short term advantages like cost savings and etc. have been determined, but numerous intangible implications as well as hidden costs were also identified which will have severe effects on the American economy and the morale of US employees in the years to come. The sudden surge in outsourcing of highly skilled and professional jobs can suspend the country’s position in the whole world of that of a leading economic power in addition to bringing resentment from the employees.


Competent and proficient individuals are the requirement of almost all the organizations in the world. Outsourcing is concerned with selecting talented people from other countries. It has increased the rate of unemployment in the local people of America which is confirmed by the decreasing consumer capacity of the market.

Outsourcing results in declining morale of the employees and develops a sense of disrespect, disparity and feeling of breach among them. Productivity of the companies will be decreased because of decrease in the morale of the individuals. Morale is at the base of human willpower once that base shattered the person could not regain his productivity. It will lead to feeling of disrespect and lack of satisfaction among him. The small pains become overstated when morale of the workers is down. He is not motivated to struggle with the day to day issues of the work. Most of the employees in USA are in disagreement with the outsourcing factor in the companies. It will develop unhealthy working conditions that will affect the physical health and mental health of the people. It will also lead to absenteeism and also affects their personal productivity. Decreasing morale of the employees will also result in their turnover which is very unfavorable for the business of the firm. Low morale will decrease will lead to searching of new and better opportunities by the employees because trust of them is affected. It also leads to disregards of the commitments of the organization towards the workers. It can be concluded that outsourcing has increased the rate unemployment at huge level in USA.

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  • Crolius, R. W., 2006. America's workforce crisis. American Ceramic Society. 2(8).
  • Elmuti, D., Grunewald, J. and Abebe, D., 2010. Consequences of outsourcing strategies on employee quality of work life, attitudes, and performance. Journal of Business Strategies. 27(2).
  • Gellings, C. and Wullenweber, K., 2006. Successfully implementing It Outsourcing strategy in german banks: the role of contract design and risk analysis.
  • Herzberg, F., Mausner, B. and Bloch, B. S., 2005. The motivation to work. New Jersey: Transaction Publishers.
  • Hinkel, E., 2005. Handbook of Research in Second Language Teaching and Learning. Routledge.
  • Jogulu, U.D. and Pansiri, J., 2011. Mixed methods: a research design for management doctoral dissertations. Management Research Review. 34(6). pp.687 – 701.
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