More — or Less — on Outsourcing

By May 17, 2007General

Due to the press of business yesterday we didn’t get a chance to do justice to Bob Samuelson’s piece about the big nothing sandwich that is outsourcing. You’ll recall that this was the big John Kerry/Lou Dobbs issue of the campaign of 2004. But once the election was over, mentions of the word in the mainstream press dropped precipitously, showing the issue for what it was — a political, not an economic phenomenon.

Samuelson in his piece cites the recent work of Jacob Funk Kirkegaard of the Peterson Institute. Kirkegaard studied the impact of outsourcing on US, EU and Asian employment. His conclusion? “Data for the United States, EU-15, and Japan indicate only a limited impact of offshoring/outsourcing on employment in the three regions. Correspondingly, developing Asia is unlikely to experience large employment gains as an offshoring/outsourcing destination region. ”

Kirkegaard looks at the Bureau of Labor Statistics (BLS) data from their Mass Layoff Statistics (MLS) program and concludes the following:

“…[W]ith the broadest and most valid available empirical evidence …showing that just 1 in 25 US separations in mass layoffs can be attributed to either offshoring and offshore outsourcing, one cannot escape the conclusion that the heated public and political debate on the issue has been vastly overblown at least in the United States and that the direct employment effects are very limited.”

We have made the point repeatedly that the vast US economy loses jobs every year and also creates jobs. The trick is to create more than we lose. On this point, Kirkegaard says,

“This is especially the case in the US economy as a whole, where very large numbers of jobs are constantly created and destroyed. The latest available data for 2005Q3 show that more than 8 million jobs were created, while 7.4 million were lost.”

Don’t expect to see Lou Dobbs talk about the Kirkegaard study, ’cause it’d only wreck his buzz. Once again, the hysteria is just not supported by the facts. At the end of the day, when it comes to outsourcing, to quote Gertrude Stein, “there’s is no there there.”