NCPA - National Center for Policy Analysis

FOREIGN OUTSOURCING BENEFITS U.S. ECONOMY

October 1, 2004

Politicians continue to target outsourcing as a threat to U.S. employment and prosperity, but studies show that turning to foreign suppliers for lower-cost goods and services benefits the U.S. economy in the short run as well as the long run, say researchers Daniel T. Griswold and Dale D. Buss.

For example:

  • The McKinsey Global Institute says outsourcing reduces costs for information technology (IT) and other services by as much as 60 percent, keeping U.S. companies competitive in global markets; in fact, McKinsey calculates that every $1.00 spent on foreign outsourcing creates $1.12 to $1.14 of additional economic activity here.
  • The Institute for International Economics says global sourcing for information technology (IT) hardware cut the final costs to businesses and consumers by 10 to 30 percent and a cumulative $230 billion to U.S. gross domestic product (GDP).
  • Global Insights estimates the U.S. economy will be $124 billion larger in 2008 if outsourcing continues, compared to no outsourcing.

The changes brought about by offshoring are just the most recent manifestation of a process that has always been an integral part of our market-based economy. If the United States, its companies and its workers are to remain leaders in the global economy, offshoring must remain a tool available to our corporations, say Griswold and Buss.

Source: Daniel T. Griswold and Dale D. Buss, "Outsourcing Benefits Michigan Economy and Taxpayers," Mackinac Center for Public Policy, September 16, 2004.

For Institute for International Economics study http://www.iie.com/publications/pb/pb03-11.pdf

For Global Insight http://www.globalinsight.com/

 

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