Final answer:
Outsourcing is the practice of contracting external organizations to perform work previously done internally, often to leverage lower labor costs in other countries. It can lead to accounting, human resources, and manufacturing jobs, among others, being moved from developed to developing nations causing polarization and structural unemployment in the original country.
Step-by-step explanation:
Contracting with another company, usually in a low-cost country abroad, to have it perform a work activity the organization previously performed itself is known as outsourcing. This practice involves hiring external contractors, sometimes in another nation, to execute tasks that a company's own employees used to undertake internally. The underlying reasons for outsourcing can include accessing lower labor costs, focusing on core business activities, or tapping into the skills that are not available in-house.
Outsourcing has been a significant aspect of globalization, especially with trade agreements such as NAFTA facilitating the movement of operations. This practice can lead to polarization in job markets, where there is an increase in high- and low-end jobs, but a decrease in middle-level jobs. Moreover, outsourcing can contribute to structural unemployment due to a mismatch between the jobs people are seeking and those that are available.
Challenges arise with outsourcing when multinational corporations (MNCs) try implementing fair working conditions and wages across the globe. However, due to the complexity of subcontracting networks, it often becomes difficult to ensure such standards are maintained. This scenario illustrates one of the many complexities encompassed in the global outsourcing trend.