By Daniel W. Drezner (the blogger)
http://www.foreignaffairs.org/
http://www.foreignaffairs.org/20040501faessay83304/daniel-w-drezner/the-
outsourcing-bogeyman.html
> ...As for the jobs that can be sent offshore, even if the most dire-
> sounding forecasts come true, the impact on the economy will be
> negligible. The Forrester prediction of 3.3 million lost jobs, for
> example, is spread across 15 years. That would mean 220,000 jobs
> displaced per year by offshore outsourcing -- a number that sounds
> impressive until one considers that total employment in the United States
> is roughly 130 million, and that about 22 million new jobs are expected
> to be added between now and 2010. Annually, outsourcing would affect less
> than .2 percent of employed Americans.
There is also reason to believe that the unemployment caused by outsourcing will be lower than expected. Gartner assumed that more than 60 percent of financial-sector employees directly affected by outsourcing would be let go by their employers. But Boston University Professor Nitin Joglekar has examined the effect of outsourcing on large financial firms and found that less than 20 percent of workers affected by outsourcing lose their jobs; the rest are repositioned within the firm. Even if the most negative projections prove to be correct, then, gross job loss would be relatively small.
Moreover, it is debatable whether actual levels of outsourcing will ever match current predictions. Despite claims that the pace of onshore and offshore outsourcing would quicken over time, there was no increase in 2003. In fact, TPI Inc., an outsourcing advisory firm, even reports that the total value of business process outsourcing deals in the United States fell by 32 percent in 2003.
There is no denying that the number of manufacturing jobs has fallen dramatically in recent years, but this has very little do with outsourcing and almost everything to do with technological innovation. As with agriculture a century ago, productivity gains have outstripped demand, so fewer and fewer workers are needed for manufacturing. If outsourcing were in fact the chief cause of manufacturing losses, one would expect corresponding increases in manufacturing employment in developing countries. An Alliance Capital Management study of global manufacturing trends from 1995 to 2002, however, shows that this was not the case: the United States saw an 11 percent decrease in manufacturing employment over the course of those seven years; meanwhile, China saw a 15 percent decrease and Brazil a 20 percent decrease. Globally, the figure for manufacturing jobs lost was identical to the U.S. figure -- 11 percent. The fact that global manufacturing output increased by 30 percent in that same period confirms that technology, not trade, is the primary cause for the decrease in factory jobs. A recent analysis of employment data from U.S. multinational corporations by the U.S. Department of Commerce reached the same conclusion.