Offshoring fails to make its mark on jobless totals
By Christopher Swann in Washington
Financial Times; Jun 11, 2004

Offshoring accounted for just 2.5 per cent of recent job losses in the US, according to figures released yesterday.

The finding, the first official tally, is likely to cool the sharp controversy over the shifting of employment overseas.

Moving work abroad cost 4,633 workers their jobs in the first quarter of this year, the Labor department said, out of a total of 182,456 redundancies.

Jobs moving within the US accounted for double the number of redundancies from offshoring - 5.5 per cent of the total.

Fears that companies were exporting a significant number of jobs abroad sparked a heated discussion this winter, with some blaming the trend for low rates of employment growth.

The Lou Dobbs show on CNN even started a nightly slot called Exporting America, in which the presenter read out a list of employers that had moved jobs abroad.

John Kerry, the Democratic presidential nominee, proposed a reform of corporate taxation to discourage companies from creating jobs overseas. But as jobs growth has revived, the controversy has faded.

Non-farm payrolls climbed by 248,000 in May - above the 225,000 expected. Figures last week also showed 74,000 more jobs were created in March and April than had previously been thought, taking total job creation over the past three months to 947,000.

Yesterday's figures should help put offshoring in its proper context, economists said. "These are minuscule figures in a labour market consisting of 138m workers," said Alan Ruskin, director of research at 4Cast, an economic consultancy.

It is possible, however, that the data understate the employment cost of moving jobs overseas. Rather than making US workers redundant, some companies may be hiring in lower-cost locations such as China or India rather than adding to staffing levels in the US.

Nevertheless, market economists remain convinced that offshoring is doing little to damage job growth in the US and may even be adding to jobs.

"If a company is saving money by producing cheaply in China, it often means that they will be able to add management, IT or logistical jobs in the US," Mr Ruskin said.

A recent study by Global Insight estimated that offshoring created a net 90,000 jobs in the information technology industry alone last year by bringing down costs.

Nariman Behravesh, chief economist at Global Insight, said the indirect effects of moving some jobs overseas were positive for the US economy and job growth. "Outsourcing should bring down the cost of goods to consumers and thus increase their spending power," he said. "This should mean that jobs are created elsewhere."

By helping subdue inflation, offshoring should also help keep prices under control and ensure lower interest rates for a given level of demand


 

 


 

 

 

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