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Filter - Cynthia L. Webb
What Outsourcing Problem?


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By Cynthia L. Webb Staff Writer
Friday, June 11, 2004; 10:00 AM

The gist of a new layoff study by the Labor Department is that very few U.S. job losses can be blamed on "offshoring" -- a finding that is already being slammed by critics who say the government dramatically undercounted the number of jobs heading overseas to cheaper labor markets.

At the same time, the findings are expected to buttress the arguments of various industry groups and economists who say sending technology, manufacturing and other jobs to India and China and other cheaper labor markets is in the long-term best interests of the economy at large. As the Knight Ridder news service put it, "While certain industries, manufacturing and software among them, were found to have been hit harder than others, the report implies that public anxiety about jobs moving overseas, called offshoring, may be overblown."
Knight Ridder via The Miami Herald: Labor Report Pooh-Poohs The Impact of Offshoring (Registration required)

Here's what the Labor Dept. found, as detailed in The Wall Street Journal's write-up: "[O]nly 4,633 jobs were moved overseas in the first three months of this year. The number represents less than 2% of the total 239,361 layoffs for the quarter, the report said. The industrial Midwest and South bore the brunt of the jobs lost overseas, particularly in manufacturing, the survey found. The small number of jobs lost through layoffs likely will be used to bolster the argument that the overall loss of U.S. jobs to foreign countries isn't a threat to the economy. That argument has gained strength with the addition of almost one million new U.S. jobs since the first of the year."
The Wall Street Journal: U.S. Survey Finds Few Jobs Moving to Offshore Homes (Subscription required)

Reuters said the new report suggests "concerns over American workers losing jobs to cheaper foreign labor may be exaggerated. Nine percent of non-seasonal U.S. layoffs in the first quarter were due to outsourcing, but less than a third of the work was sent overseas, the U.S. Labor Department said in releasing new figures on mass layoffs and outsourcing. 'In more than seven out of 10 cases, the work activities were reassigned to places elsewhere in the U.S.,' the Bureau of Labor Statistics said in its report on mass layoffs for the January-to-March period."
Reuters: Outsourcing Causes 9 Pct. of U.S. Layoffs Govt.

Missing Data?

Plenty of experts and groups started taking pot shots at the government report yesterday. The Wall Street Journal offered up this quote: "'It doesn't seem like [the survey] was picking up much of a signal from the amount of offshoring we believe is going on,' said Jared Bernstein, a senior economist at the Economic Policy Institute, a progressive Washington think tank." The newspaper noted that the "survey doesn't intend to present a comprehensive number of jobs relocated abroad. The survey tallies only larger companies that have had layoffs of 50 workers or more. Smaller companies and those that have fewer layoffs are left out of the mix."

Likewise, The Washington Post pointed out that "the figures were based on a survey of a limited sample of companies, and because of other statistical flaws it is unlikely to quell the concern that erupted last year over widely publicized cases of Americans losing their jobs to people in India and China earning a fraction of typical U.S. wages." AFL-CIO economist Thea M. Lee "called the report 'pretty lame,' arguing that the main problem with it was the way the companies were queried. 'This is a company checking a box on a survey, and having little incentive to be completely forthcoming' about why it laid off a large number of employees, Lee said."
The Washington Post: Survey Finds Little 'Offshoring' Impact (Registration required)

The New York Times noted the discrepancy in the types of companies that were asked for offshoring statistics: "Officials acknowledged that the numbers clearly undercount the total number of jobs lost offshore. For one thing, the new data covers layoffs only at companies employing at least 50 workers where at least 50 filed for unemployment insurance and the layoffs lasted more than 30 days. Even more important, the report does not account for jobs created by American companies overseas that did not involve a direct layoff in the United States." The Times also cites Goldman Sachs estimates that "point to more outsourced jobs by American corporations: 250,000 to 350,000 a year. But even those are quite small numbers in the context of a labor market that employs more than 130 million people."

But to be fair, the Times also said that the "new data ... does seem to fortify those experts who have long argued that outsourcing plays a relatively small role compared with other more important factors affecting American job gains and losses." The newspaper quoted former Labor Secretary Robert Reich as saying, "Offshoring is not at the heart of the matter. I don't think it is a major part of the job picture." The Times continued: "Instead, many experts say, the job market is driven more by rapid productivity growth, allowing companies to accomplish more work with fewer workers; the introduction of new technologies, which destroy many jobs while creating many others; and the overall level of demand in the domestic economy. Indeed, while nearly three million jobs were lost from March 2001 through August 2003, the recent recovery of the economy has added 1.4 million jobs since then. And despite the job losses the Labor Department found during the first quarter, over all the economy added an estimated 595,000 jobs during that period."
The New York Times: Not Many Jobs Are Sent Abroad, U.S. Report Says (Registration required)

The San Francisco Chronicle offered an assessment from UCLA economist Ruth Milkman, who "said that even if the figure in the government report is relatively small, it is not trivial when repeated quarter after quarter. Secondly, she said, 'When a company is expanding and creating jobs in Singapore rather than San Jose, that's also outsourcing.'"
San Francisco Chronicle: Job-Loss Report Issued

Two Views Inside the Tech Sector

CNET's has one of the better headlines on the outsourcing report: "Lost Your Job? Don't Look Overseas." The new service concludes that the "study will likely add fuel to the debate over sending technology jobs and other work abroad, which critics blast as threatening the nation's economic future and defenders call a healthy development. Until now, much of the debate over offshoring has been based on projections. These include an estimate from Forrester Research that 3.4 million jobs will move overseas in the next 11 years."

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