The Impact of Offshoring on the U.S. Economy: Policy Perspectives

On Thursday, May 20, the Center for American Progress held an event, "The Impact of Offshoring on the U.S. Economy: Policy Perspectives," on Capitol Hill. The panel was moderated by the Center's director of economic programs, Gene Sperling, and featured Martin Bailey (International Institute of Economics), Lael Brainard (Brookings Institution) and Thea Lee (AFL-CIO). Below are suggestions for how the U.S should deal with offshoring, as well as links to offshoring resources. A transcript of the presenters prepared remarks will be posted here when available.

In recent months, Americans have become increasingly concerned about the impact of offshoring on the United States economy. The practice of offshoring – when U.S. firms relocate their production and service facilities overseas – has increased over the past few years, particularly in white-collar industries that were previously viewed as more stable and less vulnerable to global competition. The phenomenon has raised fears that the U.S. economy may be permanently shedding certain jobs and job categories, which could lead to a hollowing out of the middle class and downward pressure on wages.

Current labor market data show that Americans are justified in worrying about job creation – the economy is still millions of jobs short of where it should be at this point in its recovery. And while the data on offshoring suggest that it is not the primary culprit for our current labor market woes, there is considerable uncertainty as to how large its future impact will be – leaving many unanswered questions about its impact on the U.S. economy. As a country, we need to engage in a serious dialogue on these questions and consider a range of potential public policy responses to address not only the pain and dislocation that offshoring creates, but also the steps necessary to ensure that the American workforce continues to compete and win in the global economy.

• Job creation in the United States is too slow. The U.S. economy has lost more than 2 million jobs since President Bush took office and analysts believe the economy is still significantly lagging in job creation (Morgan Stanley estimates the economic recovery is short 2.4 million jobs from where it should be, while EPI estimates a job shortage of 5.5 million). The Bush administration tax cuts – aimed primarily at the wealthy – have done little to address this concern.
• The pain and suffering of those who have lost their jobs is real. Although many unemployed workers will eventually find new jobs, a substantial number of them will have to work for less pay and fewer benefits. For those that are unemployed, public assistance is woefully inadequate. More out of work Americans are losing their unemployment benefits than ever before (nearly 2 million workers so far this year). Health insurance premiums have skyrocketed and support for job retraining is underfunded.
• Congress should consider specific policy proposals to address the problems created by job loss and offshoring. Congress should immediately strengthen adjustment policies to help dislocated workers. First, Congress should extend the Trade Adjustment Act (TAA) to service workers, who are not currently covered. They should also consider more ambitious wage insurance and temporary health insurance proposals designed to give unemployed workers a cushion of stability and ease the transition between jobs. Finally, Congress should increase support for lifelong learning and retraining programs and consider retraining tax credits or grants to individual workers.
• To compete globally, the United States needs to greatly improve its education and health care systems. Congress needs to focus on improving the U.S. education system so the population is prepared for a new economy. They should increase investment in science and engineering education; ensure that schools focus on math and science at the primary and secondary levels; and increase support to community colleges. We also need a healthcare system that provides for all Americans regardless of their employment status.

Offshoring by the Numbers, May 21, 2004
As the debate over the offshoring of American jobs intensifies, experts on all sides of the issue are complaining about the lack of relevant data.

On Offshoring, Perceptions Matter, by Christian E. Weller, May 21, 2004
Perceptions matter – especially when dealing with an issue as emotionally charged as the exporting of America's white-collar jobs overseas, a process often referred to as "offshoring."

A Progressive Trade Agenda, by John Podesta and Sonal Shah, May 20, 2004
What passes for debate on international trade these days is more akin to a shouting match between extremists – you're either totally for it, or totally against it.

"Offshoring" Service Jobs: Bane or Boon and What to Do?

Exploding the Myths About Offshoring

A New Consensus on Free Trade