This kind of outsourcing is often beneficial for both companies and consumers. In theory, it should lower prices, improve quality, take advantage of market efficiencies, and free up resources for other investments. Of course, outsourcing can also have more sinister ends. Sometimes companies are accused of outsourcing because they don't want to pay for staff benefits, or because they want to avoid unionized workers. In other cases, quality may suffer. In the past several years, some companies that used manufacturers in China later had reason to regret their decision.
Yet the biggest economic effect of outsourcing may be to encourage specialization. Why should you do your taxes when an employee of a professional accounting firm can? Who better to take care of your lawn than a professional gardener? One consequence of this specialization, however, is that the world may need fewer accountants and gardeners. In the accounting industry, for instance, a smaller number of highly efficient accountants would do all the work that is currently spread across in-house staff of varying abilities in all the world's companies.
Does that mean outsourcing destroys jobs? If you're a lousy, expensive, or under-utilized accountant, then yes, your job might disappear. But this is just the economy's way of telling you that your labor might be used more efficiently in another occupation. Unfortunately, it takes time to retrain and start over in a new job, and that's where the political problems begin. In the United States, there is no broadly effective mechanism for helping people make this transition. Not surprisingly, then, the kind of outsourcing that draws the harshest criticism is when companies lay off staff in their home countries and transfer their functions to foreign workers. But even this is somewhat misleading. Transferring jobs overseas is a form of "off-shoring," but it isn't necessarily outsourcing; the new foreign workers may still be part of the same company's overseas operations.