Final answer:
Outsourcing is hiring external contractors for tasks formerly done internally by a firm, while offshoring is moving operations abroad for cheaper labor, both contributing to job market polarization and structural unemployment.
Step-by-step explanation:
The subcontracting or contracting out of activities to external organizations that were previously carried out internally by the firm is known as outsourcing. This business practice includes hiring outside contractors to perform tasks such as accounting, payroll, human resources, and data processing services.
A similar but distinct concept is offshoring, which involves moving a company's operations overseas to benefit from cheaper labor markets. Outsourcing has been driven by factors such as the high cost of labor in developed countries, globalization, and favorable trade agreements like NAFTA. It has led to shifts in the labor market, with the increased polarization between high-end and low-end job opportunities, and a decrease in middle-level jobs, contributing to structural unemployment.