On Offshoring, Perceptions Matter

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." Software engineering and call center jobs leaving for Canada, Ireland and India have added to working families' anxieties. So, while offshoring does not explain most recent job losses, the failure of our government to respond to it could trigger far more serious economic woes in the years ahead. And there are real policy options to address working families' anxieties by creating more and better paying jobs.

America is suffering from a serious job shortage. Just to have kept pace with population growth, our economy would need 5 million more jobs than it has. The shortage is so severe that the Heldrich Center at Rutgers University reports that one third of U.S. employees currently work at a company where somebody was laid-off in the past three years.

While offshoring has taken the spotlight in the national debate, estimates of the jobs lost due to this practice amount to between 300,000 and 995,000 over the last three years. Only a fraction of the jobs America has lost, but hardly insignificant.

Yet, even though offshoring accounts for a relatively small portion of U.S. unemployment, it deserves our immediate attention. For one, the pain and suffering of those who lost their jobs are real. Moreover, for those who still have jobs, offshoring has contributed to the stagnant wages and declining benefits.

Economists and others have long understood that when workers fear for their jobs they are far less likely to demand wage and benefit increases. Today, according to a recent Gallup poll, an astonishing 61 percent of Americans believe that they or people they know are at risk of losing their jobs. The bigger we perceive our risk of losing our jobs the greater the bargaining power our employers will have and the less the gains we'll make in our wages and benefits.

No less damaging is the fact that, over the long haul, Americans will react to offshoring by avoiding occupations that they consider most likely to be sent overseas. As we've seen in the manufacturing sector, people will not train for careers in fields they're convinced are vulnerable. In the case of manufacturing, it wasn't only actual job loss but the belief that policymakers would allow it to continue that led people to pursue careers elsewhere. As a result, industries often found themselves desperately searching for skilled workers, adding to America's manufacturing woes.

The same downward spiral is not unthinkable for software engineers, lab technicians and other "new economy" occupations now seen as ripe for offshoring. If people choose not to enter these fields, innovation will slow, having an impact on our economy. Then, ironically, American firms may be forced to look overseas to find skilled labor. Given that these are often the jobs where productivity growth is greatest, their movement overseas damages our economy and, with it, U.S. living standards.

What can our leaders do? Plenty. First, instead of refusing to extend unemployment insurance for workers who lost their jobs, President Bush should expand it. In addition, unemployed workers must have better health insurance access as costs for medical care continue to skyrocket. The White House leadership should start here.

There's much government can do to create middle class jobs with a future in a wide array of occupations and industries. This can be achieved through public investment in research and development in promising new fields, creating infrastructure that promote the growth of existing and new industries, and instituting improved worker training and education services. These efforts should be coupled with prudent countercyclical spending so that public investments reduce the severity of recessions.

In other words, rather than emphasize costly tax cuts for the wealthy, as President Bush's has, public policy should instead be geared to helping create middle class jobs in the private sector.

When Americans have faith that enough jobs will exist in a given field, they will train for them. Training, however, is not a one-shot deal. It is an ongoing proposition that requires much more public support than President Bush cares to spend. Although President Bush touts his worker training initiatives, his money is not where his mouth is. His latest budget still has not restored the cuts made to training programs in the previous years of his administration. And more is needed. Community colleges, which play an important role in continuous skill development, are struggling from the financial crisis consuming our states, which has only been exacerbated by the federal government's cut back in state aid.

More training, though, is good for employers and our economy. But, unless the administration tries to grapple with offshoring's significant ripple effects, a nascent problem can become a genuine crisis.

Christian E. Weller is a senior economist at the Center for American Progress.