Myths about Jobs and Outsourcing
The American economy never rests. At this moment, in fact, economic
growth is vigorous. Yet every time there is a slight dip in the
acceleration of output, jobs or incomes, the undying myths of a
sputtering, backfiring economy rise again. Today, many of those
myths concern the ills of outsourcing.
The plain facts, however, lay all of today's myths about
outsourcing to rest. But there is still a real danger that
politicians working with incomplete or incorrect information will
hobble American competitiveness. Scapegoating poor Third World
countries, "Benedict Arnold CEOs" and free trade will not improve
the U.S. economy or labor market, but would likely cause great
: America is losing jobs.
: More Americans are employed than ever
The household employment survey of Americans shows that there are
1.9 million more Americans employed since the recession ended in
November 2001. There are 138.3 million workers in the U.S. economy
today -- more than ever before.
: The low jobless rate excludes many
: Unemployment is dropping, despite a surging
Not only is the unemployment rate low in historical terms at 5.6
percent, but the work force has been growing: There are now 2.03
million more people in the labor force than in late 2001. Without a
higher rate of unemployment or a shrinking work force, there is no
evidence of growing discouragement.
: Outsourcing will cause a net loss of 3.3
: Outsourcing has little net impact, and
represents less than 1 percent of gross job turnover.
Over the past decade, America has lost an average of 7.71 million
jobs every quarter. The most alarmist prediction of jobs lost to
outsourcing, by Forrester Research, estimates that 3.3 million
service jobs will be outsourced between 2000 and 2015 -- an average
of 55,000 jobs outsourced per quarter, or only 0.71 percent of all
: Free trade, free labor and free capital
harm the U.S. economy.
: Economic freedom is necessary for economic
growth, new jobs and higher living standards. A study conducted for
the 2004 Index of Economic Freedom confirms a strong, positive
relationship between economic freedom and per capita gross domestic
product. Countries with policies antithetical to economic freedom,
including trying to protect jobs of a few from outsourcing, tend to
retard economic growth.
: A job outsourced is a job lost.
: Outsourcing is a means of getting more final
output with lower cost inputs, which leads to lower prices for all
U.S. firms and families. Lower prices lead directly to higher
standards of living and more jobs in a growing economy.
: Outsourcing is a one-way street.
: Outsourcing works both ways. The number of
jobs coming from other countries to the United States (jobs
"insourced") is growing at a faster rate than jobs lost overseas.
According to the Organization for International Investment, the
numbers of manufacturing jobs insourced to the United States grew
by 82 percent, while the number outsourced overseas grew by only 23
percent. Moreover, these insourced jobs are often higher paying
than those outsourced.
: American manufacturing jobs are moving to
poor nations, especially China.
: Nations are losing manufacturing jobs
worldwide, even China.
America is not alone in experiencing declines in manufacturing
jobs. U.S. manufacturing employment declined 11 percent between
1995 and 2002, which is identical to the average world decline.
China has seen a sharper decline, losing 15 percent of its
industrial jobs over the same period.
: Only greedy corporations benefit from
: Everyone benefits from outsourcing.
Outsourcing is about efficiency. As costs decline, every consumer
benefits, including those who lose their jobs to outsourcing. A
2003 study by Michael W. Klein, Scott Schuh and Robert K. Triest,
which includes dislocation costs in its calculations, shows the
benefits of trade outweighing its costs by 100 percent.
: The government can protect American
workers from outsourcing.
: Protectionism is isolationism and has a
history of failure.
Proposals to punish businesses that outsource jobs, institute
tariffs or change tax rules will carry unintended consequences if
enacted. Such measures would injure U.S. firms that export goods
and services and erode U.S. competitiveness, often in unexpected
America's workers deserve a more informative, less partisan debate
on outsourcing. The negative impact of outsourcing on the economy
and American employment has been greatly exaggerated, and the
benefits of outsourcing almost entirely ignored.
Kane is research fellow at the Center for Data Analysis;
Schaefer is Jay Kingham Fellow at the Center for International
Trade and Economics; and Alison Acosta Fraser is director of the
Thomas A. Roe Institute for Economic Policy Studies at The Heritage
First appeared in IndyStar.com