Dissecting the outsourcing hypothesis
Clay Risen takes a hard look at outsourcing fears in The New Republic and finds them overblown: While offshoring is definitely an economic trend, there is no statistical evidence pointing to the massive employment drain activists call the “coring out” of America’s best jobs. In fact, recent studies show that the opposite is true: While ...
Clay Risen takes a hard look at outsourcing fears in The New Republic and finds them overblown:
Clay Risen takes a hard look at outsourcing fears in The New Republic and finds them overblown:
While offshoring is definitely an economic trend, there is no statistical evidence pointing to the massive employment drain activists call the “coring out” of America’s best jobs. In fact, recent studies show that the opposite is true: While offshoring may displace some workers in the short term, in the medium and long terms it represents a net benefit for both domestic businesses and their workers. In fact, the greatest threat from outsourcing is that its opponents will use it to force a new wave of protectionism. The frenzy over offshoring got going in late 2002, when Forrester Research released a startling study showing that 3.3 million white-collar jobs would move overseas by 2015. Then, in July of last year, the research firm Gartner trotted out its own study saying that as many as 5 percent of all information technology (I.T.) jobs could move abroad between mid-2003 and the end of 2004. And a 2003 report from Deloitte Research said that the top 100 financial-services firms plan to move $356 billion in operations and two million jobs overseas in the next five years. But those numbers aren’t as scary as they sound. For one thing, while offshore outsourcing is definitely occurring, it’s difficult to say just how large a trend it is at present. The Forrester research is based primarily on surveys of business leaders who are merely speculating about future offshoring decisions they might make: “There is no objective data to prove all these jobs are going overseas,” says Michaela Platzer of the AeA (formerly the American Electronics Association). “There’s just a lot of anecdotal evidence.” Some point to the jobless recovery as evidence of offshoring’s impact, but the lack of jobs is just as likely the result of booming productivity and the economy’s (until recently) anemic pace. “I think people are confusing the business cycle with long-term trends,” says Daniel Griswold, an economist at the Cato Institute. “People are looking for someone to blame. They say, ‘Aha, it’s because our jobs are moving to India.’ If you look at the late 1990s, though, all these globalizing phenomena were going on.” In other words, it wasn’t that offshoring practices changed; it was that the economy slowed.
Risen doesn’t even mention the Catherine Mann study, which provides some hard data to back up Risen’s conterarguments. Another story suggests that reports of the outsourcing of call centers has also been greatly exaggerated.
Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast. Twitter: @dandrezner
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