Wednesday, December 9, 2009

Outsourced - Part II

It's a frigid day here in the Twin Cities consisting of snow, wind, single-digit temperatures, and wind chills in the negative double digits with more of the same forecast for tomorrow.

On that wonderful note, let's pick up where we left off yesterday.

Outsourcing U.S. jobs, and the dark path it's leading this country down.

Despite numerous efforts, both public and private sector agencies have yet to determine a clear, accurate measure of how many U.S. jobs are being lost to outsourcing, or how many might be lost in the future.

Isolating the white-collar jobs that have specifically been lost to outsourcing versus the normal business cycle or other factors is very difficult.

A just-released report to a bipartisan Congressional commission documented 48,417 U.S. jobs outsourced to other countries or publicly announced as being scheduled for outsourcing, from January through March. The U.S. Bureau of Labor Statistics had reported that only 4,633 private-sector jobs in companies with more than 50 employees were lost during that time period, a gross underestimation, warn the report's authors.

The new report is from two labor experts at Cornell University and the University of Massachusetts-Amherst, who obtained their information through online tracking of media reports, corporate research and the creation of a database of information on all production shifts announced or confirmed in the media. Their report was commissioned by the U.S.-China Economic and Security Review Commission, which sought the information because there is no government-mandated reporting system to track production shifts from the United States to other countries.

The authors believe their methodology only captures one-third of all production shifts in most cases, which, if true, would bring the actual number of jobs lost to outsourcing to 516,000 by year's end, compared with 204,000 in 2001. "We know we're not capturing all the numbers because companies are wary about the negative publicity and often don't share it fully with reporters," said Kate Bronfenbrenner, director of Labor Education Research at Cornell's School of Industrial and Labor Relations and co-author of the study, along with Stephanie Luce, research director and assistant professor at U.Mass.-Amherst.

The researchers, who also studied U.S. job outsourcing from Oct. 2000 through April 2001 for a predecessor commission of the bipartisan Congressional group, saw these important differences in their new study:

Unlike in 2001, when the majority of job shifts were to single destinations, this year the shifts are to multiple destinations simultaneously, some from the United States to "near shore" or close to home, such as Mexico and Latin America, and some to "off shore" or far away, such as China and other countries in Asia. This trend is global, with companies in European countries also simultaneously shifting jobs to Eastern Europe and Asia, and high-wage Asian countries shifting jobs to low-wage neighboring countries and to China.

Also unlike 2001, white-collar service jobs, particularly ones involving information technology and call centers, are being shifted from the United States and Great Britain to India. That change is especially tough for U.S. service workers because the U.S. Department of Labor's Trade Adjustment Assistance (TAA) program only offers compensation (income support, relocation and job search allowances, and a health coverage tax credit) to workers who lost jobs that produced a "product," as defined by TAA rules, state Bronfenbrenner and Luce.

Other key findings included in their executive summary are as follows:

* Of the documented jobs that left the United States for other countries in January through March 2004, 23,396 went to India, 8,283 to China, 3,895 to Mexico, 5,511 to Latin American countries other than Mexico, 4,419 to Asian countries other than China and 2,933 to other countries.

* The U.S. Midwest lost the most jobs to outsourcing (18,968) from January through March. Other U.S. regions that lost a lot of jobs were the Southeast (8,604) and Northeast (7,223). The states hardest hit were Illinois (7,555 jobs lost) and Michigan (5,283 jobs lost).

* From January through March, there were 69 production shifts from the United States to Mexico (compared with 30 during the same period in 2001); 58 shifts to China (compared with 25 shifts in January-March 2001); and 31 shifts to India (compared with 1 shift in January-March 2001). The companies shifting jobs to China tend to be large, publicly held, highly profitable and well established, with 72 percent of them owned by U.S. multinationals.

The right-wing, neo-con Heritage Foundation attempts to refute these documented findings claiming that the following are "myths":

"Myth" #1: America is losing jobs.

"Fact": More Americans are employed than ever before.
The household employment survey of Americans indicates that there are 1.9 million more Americans employed since the recession ended in November 2001. There are 138.3 million workers in the U.S. economy today—more than ever before.

So the Heritage Foundation would like us to believe that the recession ENDED in 2001...


"Myth" #2: The low unemployment rate excludes many discouraged workers.

"Fact": Unemployment is dropping, despite a surging labor force. Not only is the unemployment rate low in historical terms at 5.6 percent, but the workforce has been growing—there are now 2.03 million more people in the labor force than in late 2001. Without a higher rate of unemployment or a shrinking workforce, there is no evidence of growing discouragement.

5.6% unemployment? Considering that it was just reported by all the major networks, CNN, AND Fox News Monday that current unemployment figures are 9.5%, I wonder exectly WHERE the Heritage Foundation is getting their numbers, especially since they contradict all other sources.

"Myth" #3: Outsourcing will cause a net loss of 3.3 million jobs.

"Fact": Outsourcing has little net impact, and represents less than 1 percent of gross job turnover. Over the past decade, America has lost an average of 7.71 million jobs every quarter. The most alarmist prediction of jobs lost to outsourcing, by Forrester Research, estimates that 3.3 million service jobs will be outsourced between 2000 and 2015—an average of 55,000 jobs outsourced per quarter, or only 0.71 percent of all jobs lost per quarter.

Current verified numbers indicate that the figures given by Forrester Research are actually on the LOW side.

I could go on with more "facts" and figures from the Heritage Foundation, but you get the point.

The arguments against offshoring focus on impacts on the American consumer and the danger of a brain drain.

Since prices drop only marginally due to offshoring, while wages decrease substantially, the consumer will be unable to purchase the product or service.
America was able to turn on a mighty economic engine that ultimately won World War II. Offshoring destroys the ability to do that again. The considerable profits to be made from offshoring are retained by the rich, while the middle class pays higher taxes and loses purchasing power.

Foreign workers do not contribute to US Social Security or other taxes. The increased tax revenue from corporate profits does not equal the amount lost on US workers income taxes. Companies could save more costs by offshoring the CEO job. The average US computer engineer earns six to seven times his Indian counterpart, but the US CEO gets paid 400 times as much as his average worker.

The "more sophisticated jobs" that US workers are supposed to move on to now that their jobs have been outsourced do not exist. They are never firmly defined. And it is an affront to the US worker who trained for the "jobs of the future" only to see those computer programming jobs outsourced.

The goods and services that have been outsourced overseas are often sent to countries who laws are not as protective of workers and the environment as in the US. We ultimately pay for those oversights in further damage to the planet.

Where it Stands

Offshoring is currently perceived as yet another way for the super rich corporate executives to get richer at the expense of individual workers.
Outsourcing work to companies that can do it more efficiently and less expensively does make sense, provided that it is actually less expensive at the bottom line. Hidden costs include the danger that consumers will stop buying from companies engaged in offshoring.

Offshoring jobs means unemployed Americans will not be able to purchase products and services and lowly paid workers overseas will not earn enough to purchase them. Companies that save money by offshoring will go out of business from lack of customers.

Offshoring makes sense only if it truly saves money at the bottom line, which it quite simply does NOT.


See you tomorrow.


  1. Surprisingly, I DO have a comment, tho' this subject matter is not at the top of my interest list.
    In reference to Heritage Foundations assertion that more Americans are employed than ever before, one must keep in mind that, indeed, more people may be's becoming virtually impossible (or at least really difficult) for a 2-parent family to allow one parent to choose to stay home to focus on raising the children. Granted, this isn't important to some people. But the option should be available.
    And not only can there not be one parent home, but, on minimum wage, there's no way for a family to exist on one job. Multiple jobs for each person has become a fact of life...not so that you can afford the boat or the gym membership, but so that you can pay rent/mortgage and buy food and clothing. Where the balance in that?
    Now, is this a result of outsourcing? I don't know, but it stands to reason that it could certainly have an impact on the sorts of decent-wage jobs available to choose from.
    Sorry, I'm not an economics whiz. And this is probably getting away from your point, but somehow it seems relevant and related. I read a book a while back: "Nickel and Dimed: On (Not) Getting By in America" by Barbara Ehrenreich that followed the plight of the working poor. Every person who makes more than $100,000 per year should read it.
    And now, I have to get back to work! Here in MN. But I'd rather be outsourced to someplace with a beach. Just sayin'. (it's freakin cold here)

  2. Speaking IMHO, all I have to say is; "If the jobs were NOT outsourced, then even MORE Americans would be working."
    Thank you very much