The BLS weighs in on offshoring

One of the problems with the outsourcing debate is that the estimates about job losses due to offshoring are mostly coming from management consultants, who appear to be basing those numbers on some really shoddy guesstimates. Official data collection from the Bureau of Labor Statistics didn’t sem to directly address this phenomenon. My back-of-the-envelope calculations from the BLS Mass Layoff data suggested that the number of people laid off due to offshoring was around and about 3% of total layoffs. Starting this calendar year, however, the BLS decided to ask employers whether offshore outsourcing — or onshore subcontracting that led to offshore outsourcing — was the reason for the mass layoff. Data for the first quarter are now available for extended mass layoffs — and it turns out that my 3% estimate was incorrect. This is from the Bureau of Labor Statistics press release:

Of the 239,361 private sector nonfarm workers who were separated from their jobs for at least 31 days in the first quarter of 2004, the separations of 4,633 workers were associated with the movement of work outside of the country, according to preliminary data. Domestic relocation of work–both within the company and to other companies–affected 9,985 workers…. In establishments that had layoffs related to the movement of work, the average size of a layoff was 135 workers. This compares with an average of 199 for all establishments that had extended mass layoffs in the first quarter of 2004…. Sixty-eight percent of the layoff events involving the movement of work and 65 percent of the laid-off workers were from manufacturing industries during the first quarter of 2004.

So, to conclude — the percentage of jobs lost due to mass layoffs — in turn due to offshore outsourcing — as a percentage of total jobs lost through mass layoffs was not 3% — it was a whopping 1.9%. If you drop out seasonal employment, the figure rises to 2.5%. So my back of the envelope calculations from a few months ago are an exaggeration. My apologies. The caveats — this data does not cover two other kinds of job loss via outsourcing — 1) Those let go due to ousourcing when fewer than 50 people were let go; and 2) Those jobs created de novo overeas that may have been created in the U.S. instead were it not for the outsourcing phenomenom. At the same time, this data also does not cover two kids of job gains via outsourcing — 1) Those jobs created via insourcing, when a foreign firm hires U.S. workers; and 2) Those jobs created via the budgetary savings reaped from outsourcing. The bottom line — offshore outsourcing is responsible for a piddling number of lost jobs. I’ll be commenting on these figures this evening for Nightly Business Report on PBS. Check your local listings!! UPDATE: Here’s how Reuters plays the story:

The bulk of outsourced jobs never leave U.S. shores, the government said on Thursday in a new report suggesting concerns over American workers losing jobs to cheaper foreign labor may be exaggerated. Nine percent of non-seasonal U.S. layoffs in the first quarter were due to outsourcing, but less than a third of the work was sent overseas, the U.S. Labor Department said in releasing new figures on mass layoffs and outsourcing. “In more than seven out of 10 cases, the work activities were reassigned to places elsewhere in the U.S.,” the Bureau of Labor Statistics said in its report on mass layoffs for the January-to-March period.

Only trouble is, the headline says “OUTSOURCING CAUSES 9% OF U.S. LAYOFFS” — which is true but includes onshore as well as offshore outsourcing.