NCPA - National Center for Policy Analysis

Unseen Benefits of Job Outsourcing

April 16, 2004

Despite the demagoguery over job losses in the presidential campaign, outsourcing is good for Americans and would be better embraced if only its many benefits were more visible, say some observers.

Part of the problem is government does not keep count of jobs leaving the country. Many economists estimate that roughly 100,000 white-collar jobs migrate overseas each year, while others suggest this figure is about 300,000 annually. Also, it remains unknown how much outsourcing will accelerate in the years ahead. To devise effective policy, one must first know the extent of the alleged problem.

Still, whatever the predictions may be, they must also be put in perspective. The highest estimates of job outsourcing are small compared to the total size of the job market -- about 0.2 percent. Further, these figures pale in comparison to the 15 million jobs that are eliminated every year through the churning of the market economy. By contrast, the benefits of outsourcing are significant, say observers:

  • Outsourcing reduces prices for consumers, increasing their standard of living.
  • Lower prices reduce costs of production, promoting employment growth in domestic businesses.
  • Exports to fast-growing countries are increased through outsourcing - U.S. educational institutions collected $1.2 billion from Indian nationals in 2002, six times received from British students.

Unfortunately, these benefits tend to be less tangible than the costs publicized in the press. After all, losing one's job is obvious; gaining another job or enjoying lower prices through a more vital and efficient domestic market are harder to identify. Legislators are well advised to avoid this mistake in perception, say observers.

Source: Jon E. Hilsenrath, "Behind Outsourcing Debate: Surprisingly Few Hard Numbers," Wall Street Journal, April 12, 2004.

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