May 14, 2004

May 14, 2004 | News Releases on Jobs, Jobs and Labor Policy

Outsourcing No Threat To Economy, Analysts Say

WASHINGTON, MAY 14, 2004 - The much-vilified process of outsourcing - where American companies employ workers overseas - actually has helped boost the U.S. economy and create millions of other jobs here at home, according to a new paper from The Heritage Foundation.

Timothy Kane, Brett Schaefer and Alison Fraser debunk several "myths" about outsourcing, including the claim that America is losing jobs, the idea that outsourcing is a one-way street, and the belief that government can protect American workers from outsourcing.

The facts show our economy is getting stronger, the Heritage experts note. The unemployment rate is low, jobless claims are down and more Americans are working than ever before. Plus, there are currently 6.4 million "insourced" jobs in the United States - jobs where foreign firms are employing Americans here. And attempts at protectionism, such as the recently lifted steel tariffs that increased prices and cost American jobs, usually fail.

The analysts stipulate that some Americans lost their jobs to outsourcing, and we can expect more losses in the future. Forrester Research, a technology research firm based in Cambridge, Mass., estimates that some 3.3 million service jobs will be outsourced between 2000 and 2015.

Still, "according to these numbers," the analysts write, "at worst, jobs lost to outsourcing represent 0.71 percent of all jobs lost per quarter as part of normal turnover in the economy." And in any event, they write, "the gains of trade have been shown to vastly outweigh the costs, even when job dislocations are factored into account."

Nevertheless, the Heritage experts say, the government can take some steps to make the climate more conducive to job creation. For example, they recommend:

  • Ending lawsuit abuse. Frivolous suits cost the U.S. economy more than $180 billion last year alone.
  • Eliminating over-burdensome regulations. Excessive regulation cost the U.S. economy almost $850 billion each year.
  • Simplifying the tax code. Corporations and individuals spend at least $194 billion each year just to comply with an ever-changing tax code.
  • Ensuring reliable energy sources. Congress could increase domestic supplies by opening access to reserves that are currently off-limits or restricted.
" Outsourcing is a politically charged trigger word," the authors write, but it "is not a credible threat to the U.S. economy."

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