Do you think that outsorcing jobs is a economic threat to the United States?Do you think that outsorcing jobs is a economic threat to the United States?
For many years I ran a business in the construction industry, and I have considered this question a lot, not from the usual economist's bottom-line numbers standpoint, but from a different perspective. I do believe that sending jobs offshore is going to hurt the US economically in future generations, because of a subtle piece of psychology. The average American worker is losing self esteem and no longer values what his or her job produces, because they don't produce anything tanglble.
One of the key reasons the US was victorious in World War II was that we outproduced the Axis. WWII was a time of great national pride and focus. Companies put a lot of effort into cheering on their workers and giving them material evidence of their own productivity. Now, with production jobs leaving the US, that is changing. Many younger Americans have no clue how to build or repair anything, and no idea where the things they use every day come from. I believe this is leading to loss of self esteem on a national level, and is an insidious factor contributing to the loss of the middle class. It's no longer considered acceptable for young people to pursue a trade, almost everyone is expected to go to college instead. As a result the young people who are entering the trade programs in this country are those who can't find a decent job anywhere else - they are the least capable of our labor force, and you are trusting your life to them every time you step on the brakes, get into an elevator, or cross a bridge.
I assume that you are asking about "offshoring" more than "outsourcing." The two are often used interchangeably, but only the former necessarily refers to jobs going to other countries.
I would argue that offshoring is not a real threat to the overall economy of the United States. That does not mean that it is not a major source of pain to individual people and to some sectors of the economy. Instead, this means that the economy of the US as a whole is not threatened by this process.
The reason for this is that the jobs that are offshored are typically ones that do not really need to be done by Americans. Americans have access to enough education and training that they should be doing jobs that add more value than the typical offshored job. Instead of trying to prevent jobs from being sent abroad, we should be encouraging the creation of the sorts of good jobs that Americans could do better than low-wage workers in other countries who lack skills and training.
This is the classical economics answer. It argues that the US only loses jobs in industries where it does not have a comparative advantage. This is not a threat to our economy in the eyes of economists. Instead, it is a way of encouraging us to build up our economy in areas where we do have a comparative advantage.
I do see outsourcing as an economic threat. I will give you a specific example to show you why.
I life in birthplace of Gateway computers (The southeastern part of South Dakota). During the big computer boom of the 80's, the local Waitt brothers used the midwest work ethic and built Gateway into a Fortune 500 company. Then, they made the mistake of outsourcing much of the computer production business to China. When they did that...they devastated this area...putting hundreds of locals out of work. Since there are few other big companies in the area...it hit the local economy hard...with many never getting another job...or having to move out of the area to do it.
On top of that...because the chinese company they worked with had poor communication skills...the lead time to get a custom computer doubled...which made customers leave in droves. Needless to say Gateway is now defunked.
I agree that this is and can be a major threat to the U.S. economy. American wages tend to be higher than in other areas; for that reason large companies which anticipate significant labor costs are inclined to ship work to other areas and save money that way. Wal-Mart's products are largely made in China or other areas, as are other large distributors. The U.S. Textile industry is now practically non-existant. There is some benefit to consumers by way of lower prices, but the price for this is loss of jobs. Every job sent overseas is a job lost here. A job lost here means less consumption here, which also places downward pressure on the economy. I for one am all for higher tariffs and job protection.
I have in mind a saying that a threat is actually an opportunity under a different name. I do agree that many Western economies have been affected and are still impacted today by taking jobs overseas. We can see this in many telephone companies that have employed Indians at a much cheaper salary to do the same job that nationals used to. However, at the same time, we cannot hold back progress or development, and so maybe our response to this should be to try and strengthen other areas of our economy where we are strong.
I absolutely believe that outsourcing is a threat (although not presently a major one) to the U.S. economy. Any time that an American business eliminates its native workers in favor of cheaper workers overseas, the U.S. economy is affected. It may help the corporate owner, who gets richer from the money he saves by paying cheap labor, but the prospective American workers are the ones who lose out, adding further to the rising unemployment rate in the U.S.
There is no way we can prevent outsourcing. The only alternative would be to pay our people less than the workers overseas are paid, and that would not work with our cost of living. So the only thing we can do is focus on jobs that can't be shipped overseas, including service jobs. We can also try to train our young people for the future, instead of keeping them in schools where they are prepared for jobs that no longer exist in our country.
In an ideal world, American workers would all be gainfully employed doing the more skilled work in every business setting, and the low-skill jobs would be sent to workers in other countries because we are busy doing the "most important" jobs. However, in today's economic environment that just does not seem like a realistic plan, and it does seem that fewer jobs in America right now is a threat to our economy.