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Press Enterprise - Business and Economics Op-Ed
9.1.2007

Press Enterprise (CA), Sept. 1, 2007


 

U.S. companies have outsourced labor for decades, but in recent years, this practice has drawn criticism as Americans see highly paid jobs shifting overseas. That scares many workers, and receiving a pink slip can be devastating. But offshore outsourcing can provide great benefits to Americans when driven by natural market forces rather than government mismanagement.

In the course of a year, about 400,000 American workers are displaced because of foreign outsourcing. In relative terms, this isn't a large loss. According to former Federal Reserve Chairman Alan Greenspan, about 1 million American workers leave their jobs for one reason or another each week.

And there is evidence that workers displaced because of outsourcing find new jobs relatively quickly. American workers are successfully adapting to a changing global economy and are gaining more and better jobs.

According to the U.S. Bureau of Labor Statistics, growth in high-skilled, well-paying jobs has been rapid during the past 20 years and will continue into the foreseeable future. Between 2004 and 2014, employment in managerial, business, financial and professional occupations is expected to increase from a combined 30 percent of total U.S. jobs to 32 percent.

Transferring certain positions overseas in order to reduce labor costs has increased economic growth, American living standards and demand for high-skilled laborers at home. This is the case because cheaper foreign labor costs are ultimately shifted to American consumers in the form of lower prices and wider availability of innovative products and services.

Greater use of these productivity-enhancing technologies leads to stronger economic growth and creates demand for workers with the skills to utilize them. Computer hardware is a good example. Significant drops in hardware prices and wider availability because of lower foreign labor costs have led to greater computer use in the United States and greater worker productivity.

Americans will continue to benefit from the offshoring of certain jobs, but there's no reason to actively encourage firms to pass up American employees. We should recognize that basic market forces compel some American businesses to move certain jobs offshore in a globalized economy. We should also realize that some foreign jobs have been moved offshore to the United States.

But putting American workers at a disadvantage because of government policies that make doing business in the United States excessively costly hurts our ability to fully realize the potential benefits from globalization.

A study prepared for the National Association of Manufacturers found that among the greatest cost drivers making the American manufacturing industry less globally competitive are a relatively high corporate tax rate and extremely high litigation costs.

According to research by the Tax Foundation, the United States has the highest overall corporate income tax rate of all countries in the Organization for Economic Cooperation and Development at 39.4 percent -- more than 10 percent points higher than that of the average country in that organization.

Reforming the corporate tax code to make it more competitive and eliminating costly inefficiencies in the American legal system would keep many important jobs from leaving the country. This would benefit American workers, as economic growth in other nations expands global markets for American products and increases growth at home.

Americans should not allow their government to prevent us from receiving the full benefits of a globalizing economy.

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