October 13, 2004

Outsourcing Myths

Since 2000, of all the job losses in the U.S., the percentage that is attributable to outsourcing is about 1%. In other words, it's a non-issue. The Kerry camp's standard line has been one of ridicule, that "the Bush administration thinks that the outsourcing of U.S. jobs is a good thing for our economy". Can you imagine that?

Only if you look at the subject honestly, and consider the studies that have been done on its effects. Bruce Bartlett does some of that here:

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 U.S. in the form of cost savings, new exports, and repatriated profits. However, productivity gains add another 45 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...

Contrary to popular belief, the U.S. is a large recipient of outsourcing from other countries — i.e., insourcing. In 2002, the U.S. ran a healthy trade surplus in this area — receiving $22 billion more in outsourcing from other countries than it paid in outsourcing to other countries.

The number of jobs gained from outsourcing approximately equals the number of jobs lost.

Much more if you read it all, and in the event you haven't seen it before, check out the fine essay by University of Chicago professor Daniel Drezner, The Outsourcing Bogeyman.

Posted by dan at October 13, 2004 2:33 PM