Policy Study

Offshoring and Public Fear

Assessing the Real Threat to Jobs

Executive Summary

During the 2004 presidential campaign, pollsters found widespread public support for measures designed to impede outsourcing. State and federal lawmakers paid attention, and quickly penned over 200 anti-outsourcing proposals. Now that election year has passed, one might have expected anti-outsourcing momentum to slow. Yet the opposite has happened-legislators are now crafting anti-outsourcing bills at an even faster pace.

Policymakers must step back and separate the outsourcing’s mythology from its reality. Contrary to hyperbolic stump speeches, workers have little to fear from outsourcing. Greater threats may come from shortsighted attempts to stymie outsourcing, and from allowing outsourcing to distract lawmakers from addressing lingering problems.

Outsourcing is not a newly created threat to jobs. It is merely a version of trade, and like previous versions of trade it brings some pain-but it brings even more promise.

The public debate about offshore outsourcing suffers from many misconceptions:

Misconception Reality
Everyone is offshoring Few companies offshore.
Foreign workers are taking American jobs. Most American jobs are lost to other Americans or
absorbed by new technology.
Outsourcing destroys jobs. Job loss from outsourcing has been grossly overstated.
The American worker has nothing to gain from
Outsourcing is a form of trade, and trade creates more
jobs than it destroys.
Outsourcing destroys high-end jobs. Few high-end jobs are at risk, and outsourcing will help
create more high-paying jobs than it destroys.
Outsourcing is a one-way street. Millions of Americans have jobs thanks to “insourcing.”
Companies could simply refuse to go offshore. Refusing to offshore can mean foregoing expansion or worse.
Outsourcing is driven by businesses looking for cheap labor. Where a company decides to do business is determined by many factors.
Government sector offshore outsourcing is widespread. Government sector offshore outsourcing is especially rare.
Only Republicans defend offshore outsourcing. Many well respected voices across the political
spectrum have defended offshore outsourcing.

Fight the Real Threat of Outforcing

Some jobs leave town because the natural evolution of the market allows them to be done somewhere else; others get chased out by costly policy decisions, that is, they are outforced.

In the United States, federal, state and local tax policies, convoluted labor laws and policies, outdated licensing and permitting requirements, unduly burdensome land use and environmental regulations and many other layers of the regulatory apparatus have driven up the costs of doing business and thus creating jobs, making other nations more competitive at producing some goods and services. Increasingly this suite of policies raises costs to the point of outforcing jobs to other nations.

And like outsourcing, outforcing is mostly a domestic phenomenon. Some jobs get forced overseas, but even more get pushed from city to city and from state to state.

Outsourcing absorbs much negative publicity, but actually does more good than harm. Outforcing, on the other hand, is not the source of national outrage even though it makes more mischief. Policy should not fight outsourcing, it should fight the real threat-outforcing.