Fun with BLS numbers

The Bureau of Labor Statistics has a Mass Layoff Statistics program, in which firms that lay off 50 or more workers must provide as reason for such a move to the BLS. Those reasons range from automation to product line discontinuation. Offshore outsourcing is not one of the options, but “import competition” and “overseas relocation” are options. So, it’s possible to estimate the extent to which offshore outsourcing is respinsible for job destruction via mass layoffs [How do you know that the firms aren’t lying to the government?–ed. You don’t — but since the names of the firms are kept strictly confidential, there’s no reason for them to lie either]. You can do it too — just click here to create your own table. Here are the percentages of jobs lost through mass layoffs because of either import competition or overseas relocation for the last seven years:

1996: 1.78% 1997: 1.87% 1998: 2.10% 1999: 2.50% 2000: 1.82% 2001: 2.88% 2002: 1.89% 2003: 2.41%

Now, these figures do not cover instances when a firm let go less than 50 people, so clearly there’s a bias in the data towars multinational corporations over small businesses. That said, these numbers reveal two important facts:

1) Offshore outsourcing is not responsible for a significant percentage of the jobs that have been lost. 2) There is no evidence that offshore outsourcing is responsible for an increasing number of jobs lost over time.

Finally, some have argued that the massive increases in U.S. labor productivity are due to sloppy GDP accounting: “[T]he work done by Indian software firms is being recorded as US economic activity and growth because it’s been offshored.” If true, this would be a serious measurement error, since the government would be overstating both economic growth and labor productivity The BLS issued a memo in late March on this very issue back in March that’s worth perusing. The highlights:

[W]e have experienced nearly 13 years of faster productivity growth. While a number of explanations have been put forth and to this list some have added measurement issues related to outsourcing and offshoring, any set of explanations should cover not just the last few years, but the entire 13 year period…. Offshoring affects business sector productivity change only through changes in the composition of domestic production and its effect is likely to be small. In manufacturing, the combination of domestic outsourcing and offshoring has contributed about 1.5% per year to sectoral output per hour growth through 1995 but only about 1% per year thereafter and as a result, they do not appear to be an explanation for the productivity speed-up. This conclusion must be qualified in two ways. First, there is no information on the relative importance of offshoring relative to domestic outsourcing and so it is not known if foreign suppliers have become a growing substitute for domestic suppliers of intermediate inputs. Even if they have, under reasonable assumptions, offshoring appears to explain only a small fraction of the productivity speed-up. Second, not all BLS data extend beyond 2001 and so it cannot be ascertained if there has been a sudden shift in trends. Even if there has, the impact of outsourcing and offshoring on productivity change is likely to be small.