Los Angeles (May 19, 2005) — A new Reason Foundation report shows the offshore outsourcing monster that American workers fear, and politicians are drafting legislation to defend against, has been greatly exaggerated: Between 1996 and 2003, offshore outsourcing was responsible for just 0.9 percent of the jobs lost in mass layoffs in the United States. The study says a more imminent threat to jobs is outforcing, poor policies coupled with high tax rates that force companies to seek out friendlier business climates.
“We need to put offshoring into its proper context as part of the entire economy,” stated Adrian Moore, vice president of research at Reason Foundation and co-author of the report. “Even if the extreme, high-end predictions that 3.4 million jobs will head offshore by 2015 are true, that figure still means just 0.2 percent of working Americans will be affected.”
The Reason study finds that underneath the fiery political rhetoric surrounding outsourcing, data actually shows technological advancements are creating a natural evolution of jobs — creating them in new sectors as they are eliminated in others.
“The growing popularity of digital photography and home printers has decreased the need for film processors, which prompted Kodak to layoff 15,000 workers during the first quarter of 2004,” said Ted Balaker, a policy analyst at Reason and co-author of the report. “Kodak’s layoffs were three times greater than the number of jobs lost to offshore outsourcing during that same period. And as one aspect of the photography business fades, we have to remember that the digital camera boom is also creating new jobs. New technology displaces some jobs and creates new jobs. The same pattern holds for offshoring. Right now we are experiencing a drop in computer programming jobs, but an increase in better paying software engineering jobs.”
Over 200 anti-outsourcing bills have been contemplated by state and federal governments in recent years. The Reason study concludes that government efforts to impede outsourcing are likely to result in a bevy of unintended consequences that stifle economic growth.
“A law that can’t properly define outsourcing is going to create problems. The 2001 Ford Escort is made up of 60 percent domestic content, while the Honda Civic coupe is 75 percent domestic. How do you define foreign-made in today—s global economy?” Balaker, the Jacobs Fellow at Reason, asked.
Instead of passing anti-outsourcing laws, states should focus on current policies driving away businesses. “America is losing jobs to America. States are competing with each other. For example, California doesn’t need to ban offshoring, it needs to stop outforcing,” Moore said. “California’s high taxes and burdensome regulations are outforcing jobs to nearby competitors such as Nevada and Arizona.”
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Adrian Moore, Vice President of Research, Reason Foundation, (661) 477-3107
Ted Balaker, Jacob’s Fellow, Reason Foundation, (310) 391-2245 ext. 3014
Chris Mitchell, Media Relations, Reason Foundation, (800) 582-2245 ext. 3037