[ OUR OPINION ]
DonŐt blame outsourcing
for lost jobsNEW U.S. Labor Department figures disprove the contention by economic protectionists that American jobs are being allotted in frightening numbers to cheaper workers in underdeveloped countries, to the detriment of the U.S. economy. Data collected from this year's first quarter show that jobs outsourced overseas accounted for only 2.5 percent of the nonseasonal job losses -- not exactly a debilitating job drain.
THE ISSUE
The government has attributed only 2.5 percent of the non-seasonal job losses in this year's first quarter to international outsourcing.
When N. Gregory Mankiew, head of President Bush's Council of Economic Advisers, observed in February that offshore outsourcing was "a good thing" and "just a new way of doing international trade," Senate Democratic Leader Tom Daschle declared that the administration owed "an apology to every worker in America." House Speaker Dennis Hastert called outsourcing "a problem for American workers and the American economy." Presumptive Democratic presidential nominee John Kerry referred to outsourcing company officials as "Benedict Arnold CEOs."
The Labor Department reports that 9 percent of the non-seasonal U.S. layoffs by companies with at least 50 workers in the first quarter were outsourced. However, in 70 percent of those cases the work was reassigned to places elsewhere in the United States
A sluggish economy is a much greater cause of job loss than outsourcing. In a healthy economy, technological innovation is the most important factor. Outsourcing is vital to the survival of many American companies and therefore a savior of some jobs and creator of others in a growing economy, especially for information technology companies.
"It's the small to medium-sized companies like us that really need this," Kevin Horio, of Honolulu software services firm Dimensia Inc., told the Star-Bulletin's Dan Martin. "Big Fortune 500 companies can easily set up their own overseas operations to improve their bottom line a little. But to us, the cost savings are major."
Sending programming work to coders in Asia allows Dimensia's dozen full-time employees in Hawaii to focus on creative and design work.
Daniel W. Drezner, a political science professor at the University of Chicago, says outsourcing has been minimal compared with the U.S. economy, but stories about U.S. workers being put out of work have caused the issue to be overblown. Using such anecdotal evidence to reach the conclusion that outsourcing creates unemployment "is the economic equivalent of believing that the sun revolves around the earth: intuitively compelling but clearly wrong," Drezner wrote in the current issue of Foreign Affairs.
Of greater concern than outsourcing is the alarmist reaction by protectionists who would rather that the United States become isolated from the global economy.
"The protectionist cures being advanced to address these hardships will make matters worse rather than better," Federal Reserve Chairman Alan Greenspan warned in a February speech. "Protectionism will do little to create jobs and, if foreigners retaliate, we will surely lose jobs."
