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The Toll of Offshoring Work

Reshoring tax incentives can ease the wage and employment pressures

Part of a Series

idea light bulbThe global economy is becoming a more integrated and competitive neighborhood. Driven by new investments and the jobs that come with them, the expansion of the global economy into coordinated production and supply chains brings both benefits and opportunities. It also raises questions about the source and location of future jobs and growth.

Offshoring, the practice of moving production to foreign locales while continuing to sell goods to the U.S. market, is a pervasive feature of the U.S. economy today. Market pressures drive businesses to seek reduced production costs, often in places where standards of living and protections for workers and the environment are more lax than in the United States. Moreover, an ineffective tax structure further encourages the relocation of assets and production to foreign countries with lower costs. Policies such as a tax credit that reduces the costs a company incurs when it reshores jobs back to the United States would help slow this trend. In addition, the financial incentive to bring production back would help workers here at home, where production loss has led to broad downward pressure on wages across the economy, even in industries relatively insulated from international trade competition.

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