NCPA - National Center for Policy Analysis

OUTSOURCING MYTHS

June 20, 2007

America's companies are shutting down factories and offices, and shipping jobs wholesale overseas.  That's how the media have portrayed it.  In reality, outsourcing has created more, better-paying jobs here, says Investor's Business Daily.

Consider:

  • Since 2001, U.S. businesses and entrepreneurs have created a net 9.9 million new jobs; the current jobless rate of 4.5 percent is below the average in any of the last four decades.
  • From 1996 to the third quarter of 2006, the United States lost on average 7.83 million jobs each quarter, but it gained on average 8.17 million new jobs.
  • Assuming that pace of job creation holds, some 302 million new jobs will be created between now and 2015.

In addition:

  • A study by two Princeton University economists last year found that productivity gains from outsourcing boosted the wages for the least-skilled workers by 1 percent a year from 1997 to 2004.
  • Another study by McKinsey & Co. in 2003 showed a return of $1.12 for every dollar of work sent offshore.
  • That money doesn't sit idle; it's redeployed in the economy and reinvested, creating more and better jobs than existed before.

Further, outsourcing cuts both ways, says IBD.  The United States insources jobs from elsewhere, as a report by the Organization for International Investment found.  Over the last 15 years, the 2004 report said, manufacturing insourced jobs grew by 82 percent and manufacturing outsourced jobs grew by 23 percent.  That is, we had a net job gain even on outsourcing.

Source: Editorial, "Outsourcing Myths," Investor's Business Daily, June 20, 2007.

 

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