Offshoring/Outsourcing Overview

Job Loss “Just a New Way” to Trade: Service Sector Offshoring and the Outsourcing debate
In an unavoidable political snag this year, offshoring and the outsourcing of jobs, has become a contentious issue in the free trade debate, heightened by growing dissatisfaction and media attention over the so-called jobs “recovery” in which 9.9 million Americans currently find themselves out of work. Insensitive comments by Administration officials have drawn further attention on the issue, especially those made by the chairman of President Bush’s Council of Economic Advisers who called the transfer of US service jobs overseas “just a new way to do international trade.”1

Offshoring refers to the multi-national corporate tendency to send jobs to low-wage countries as a way to reduce the bottom line. This is similar to “outsourcing” which refers generically to government contracting of work – in this context, work that is sent overseas.

Though much attention has lately focused on the massive movement of jobs in the computer engineering and IT sectors, the exodus spans a startling number of service sector and professional jobs. Call-center workers, paralegals, architects and draftspersons, technical writers, accountants and tax professionals -even some of the highest paid doctors in medicine, radiologists ­ are now subject to low-wage earning “competition” as their jobs make a run for the border. With international trade poised to facilitate unregulated global corporate expansion through a number of bilateral and regional agreements, some economists predict that 3.3 million jobs will leave the US in the next decade.

This speculation coupled with a sluggish US economy has created anxiety for white-collar workers who now lament what manufacturing employees already know: the current “free trade” model means massive displacement and sustained unemployment. In crisis since 1994, the manufacturing industry in the US has already shed over 3 million jobs since the introduction of the North American Free Trade Agreement (NAFTA). Not coincidentally, those who lost their jobs in the manufacturing sector were told by NAFTA promoters that they would be absorbed by the service sector – the very same service sector now going offshore. As though NAFTA’s ten year record isn’t bad enough, workers now find themselves faced with what some term a new “phase” in globalization in which “the American cubicle farm is the new textile mill, just another sunset industry.”

The looming question then becomes, what next? If so many different kinds of jobs are endangered in the information age by “free trade” and offshoring, where does future employment lie in the US? The answer is that no one really knows. Meanwhile, as the Economic Policy Institute reports, \”We are giving up some of the most productive jobs in our economy.\” At stake is whether standards of living will continue to decline in the coming decade for the majority of Americans while good-paying jobs are sacrificed to satisfy the ever-increasing corporate accumulation of wealth. The US is now experiencing the longest period of sustained job loss since the end of the Great Depression and economic patterns over the past decade show that US income inequality has grown at a rate unprecedented since the robber baron age.

Given the severity of this dilemma it is no surprise that offshoring and its governmental counterpart –outsourcing – have taken the stage in public debate. And, as citizens look for sound government policy to address the widening employment gap, the practice of government outsourcing is especially contentious. In one of the most outrageous of examples, Wisconsin, North Carolina and California outsourced their state food stamp programs to call centers in India and Mexico where workers are trained not to reveal their location. The irony of outsourcing jobs from the state in order to service the unemployed apparently was lost on certain state officials (save the Governor of North Carolina, who recently announced an initiative to bring call centers back to the state). The good news is that currently at least 28 states are looking at legislation to prevent outsourcing contracts. As questions of economic stability and uncertainty about regulating service work done overseas pile up, especially relevant in health care work and financial services where privacy is a top concern, further serious revisions to trade policies and federal outsourcing contracts need to be considered.

1. AFL-CIO, Statement by Presiden John J. Sweeney on the Bush Administration’s Economic Report to Congress on Outsourcing Jobs, February 10, 2004.
2. N. Gregory Mankiw, “Economic Report of the President,” Feb. 2004.
3. Teicher, Stacy “White-collar Jobs Moving Abroad,” Christian Science Monitor, Jul. 29, 2003.
4. Anderson, Chris “The Indian Machine,” Wired Magazine, Feb. 2004.
5. Price, Lee “’Insourcing’ Myths, Part 2” Economic Policy Institute, April 7 2004.
6. Public Citizen “Addresing the Regulatory Vacuum: Policy Considerations Regarding Public and Private Sector Service Job Offshoring,” April 2004.
7. North American Alliance for Fair Employment, “Outsource This? American Workers the Jobs Deficit and the Fair Globalization Solution” April 2004.
8. Public Citizen “Addresing the Regulatory Vacuum: Policy Considerations Regarding Public and Private Sector Service Job Offshoring,” April 2004.