OUTSOURCING TALK IS SERIOUSLY OVERBLOWN
October 13, 2004
What you won't find on the John Kerry web site are any references to serious studies of outsourcing. The reason is that they all find the issue to be seriously overblown, responsible for a trivial amount of job loss at most, and generally a positive thing for the U.S. economy, says Bruce Bartlett.
In July, economist Martin N. Baily, chairman of the Council of Economic Advisers under President Clinton, looked at who benefits from outsourcing:
- He found that for every $1 spent by a U.S. corporation on outsourcing to India, only 33 cents stayed in India; the other 67 cents came back to the United States in the form of cost savings, new exports and repatriated profits.
- However, productivity gains add another 45 cents to 47 cents of value to the U.S. economy; thus, on balance, the U.S. economy gains $1.12 to $1.14 for every $1 invested in outsourcing.
In August, economist Charles Schultze, chairman of the CEA under President Carter, looked at the number of jobs lost to outsourcing:
- He found that between the end of 2000 and the end of 2003, at most 215,000 jobs service sector jobs were lost; this is a minuscule amount in a working population of close to 150 million.
- Moreover, Schultze says, the productivity gains produced by outsourcing raised real incomes and living standards in the United States and concluded that outsourcing cannot be blamed for the "jobless recovery."
Perhaps for these reasons, in his debate with President Bush on Oct. 8, Kerry backed away from some of the more extreme statements he and Edwards have previously made about outsourcing. Kerry said, "You can't stop all outsourcing?. You can't." He added that anyone who says he will stop outsourcing "would be pandering."
Source: Bruce Bartlett, "Outsourcing Talk is Seriously Overblown," National Center for Policy Analysis, October 12, 2004; Martin Bailey, "Exploding the Myths About Offshoring," McKinsey Global Institute, April 2004; and Charles L. Schultze, "Offshoring, Import Competition, and the Jobless Recovery," Brookings Institution, August 2004.
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