Outsourcing Impacts Less Than 0.2% of US Employment

Impact of Job Shipping on US Employment Exaggerated

Job shipping often receives much media and political notoriety. One possibility as to why it receives so much attention is because job shipping strikes a negative reaction among the general population. The impact of ‘shipping jobs overseas’ on US employment is however unjustifiably over-exaggerated.

For the jobs that can be sent abroad, if even the most dire-sounding forecasts come true, the impact on the US economy will be negligible. In fact the job loss figure of 3.3 million predicted by Forrester is the total number of jobs lost over a period of 15 years. On a per year basis, this comes out to be 220,000 jobs displaced due to job shipping. More importantly this figure is calculated with the view that jobs sent abroad are lost forever. But the claim that the jobs shipped overseas are lost forever is ludicrous. The creation of new jobs overseas will eventually lead to more jobs in the US and higher incomes in the US. Accordingly, the figure of 0.2% is itself a wild exaggeration because it fails to take into consideration the new jobs that are being created by job shipping, insourcing of foreign firms, US firms’ competitiveness and new innovations in industry and retraining.

If the predicted numbers are accurate, job shipping remains a drop in the ocean of a $14 trillion economy that employs 137 million people and produces and loses millions of jobs every month. In times of economic prosperity 350,000 people still file for unemployment insurance every week. The Labor Department estimates that in the last decade 32.8 million new jobs were created each year, while 31.0 million were lost, resulting in a net gain of 1.8 million.

A considerable greater number of Americans lose jobs to technology or domestic competition than to job shipping. Computers and other technological advances eliminated high volumes of jobs of typists, telephone operators, and bank tellers. Half a million jobs for typists and word processors were lost from 1988 to 2000 not as a consequence of outsourcing but as a result of technical progression. This does not mean that advancement in computer technology is detrimental. With the advent of digital cameras Kodak removed 15,000 workers because of the decrease in film popularity. But the US economy is both resilient and innovative; job loss will be compensated with job created. However, it is only when jobs are sent abroad do the job losses appear to make the news.

While Gartner assumed that around 60% of employees working in the financial-sector would lose their jobs due to offshoring, Professor Nitin Joglekar of Boston University puts this figure around 20%. According to Professor Joglekar, the rest of the financial-sector employees would be repositioned with the companies. Even if one has to go by the most negative projections, the gross loss of jobs would be relatively small.

According to the Bureau of Labor Statistics, the number of IT-related jobs is expected to grow 43% by 2010. The case of IBM reinforces this lesson: although critics highlight the recent offshoring of 3,000 IT jobs, they fail to mention the company’s plans to add 4,500 positions to its US payroll.

Large software companies such as Microsoft and Oracle have simultaneously increased job shipping and domestic payrolls. Delta Airline shipped 1,000 call-center jobs to India in 2003, but the $25 million savings allowed the firm to add 1,200 reservation and sales positions in the US.

Furthermore, it is undoubtedly apparent that most jobs will remain unaffected altogether: close to 90% of jobs in the US require geographic proximity. Such jobs include everything from retail and restaurants to marketing and personal care – services that have to be produced and consumed locally, so sending them overseas is not an option. Lastly there is also little evidence that educated workers, overall, are worse off than they were after the last recession 25 years ago. Sending jobs to India has been happening for almost a decade, the 130 million plus strong US workforce remains intact.

The economy and especially job growth is sluggish at the moment, commentators are accordingly attempting to draw a connection between job shipping and the high rates of unemployment. The conclusion that job shipping causes unemployment may sound intuitively compelling, however it cannot be substantiated.?