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There’s a surprising, and positive, side to the ‘offshore’ jobs debate

MADISON – The national AFL-CIO has taken its “Show” on the road. Convinced that American companies are shipping too many jobs overseas, the labor union organized an eight-day, 18-city bus tour called “Show Us the Jobs.”

Laid-off workers, students, a priest and creators of anti-offshoring Web sites were among the 51 people who toured Wisconsin and seven other states last week, countering similar trips by the Bush administration to promote a growing economy.

Make no mistake: “Show Us the Jobs” was mainly about election-year politics. Wisconsin, Missouri, Minnesota, Michigan, Ohio, Pennsylvania and West Virginia are all considered battleground states in the race between President Bush and the presumptive Democratic nominee, Sen. John Kerry.

But the bus tour was also about putting a human face on “offshore outsourcing,” which the AFL-CIO contends is depleting America of much-needed jobs and doing little to improve the conditions of the world’s working poor.

Although he didn’t arrive by bus, Wisconsin AFL-CIO President David Newby delivered that message in a characteristically eloquent manner Saturday at Madison’s Edgewood College, where a forum on the pros and cons of globalization drew about 100 people.
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Newby argued that “offshoring” and flawed trade pacts, such as the North American Free Trade Agreement, are hurting American workers and widening the gap between rich and poor in the United States and abroad. At the same time, Newby didn’t call for protectionist barriers against trade – he simply asked that the rules of the game treat workers fairly.

That’s an entirely reasonable position for a labor leader. My role at the same globalization forum was to argue that workers everywhere stand to gain through largely unfettered trade, and that offshoring isn’t the disaster the AFL-CIO and others might have you believe.

Americans have long bought manufactured goods from overseas. However, they’re now taking advantage of revolutionary improvements in telecommunications, information technology and an increasingly educated foreign workforce to locate some service functions – call centers, for example -- in other countries. In 2001, the estimated market size of all offshore services was less than $25 billion, or a fraction of 1 percent of the total U.S. economy. By 2015, however, the number of jobs located offshore will grow to 3.3 million – meaning a loss of about 200,000 jobs per year.

Worth debating? Of course. Disastrous? Not by a long shot.

For starters, foreigners outsource more service and office work to the United States than American companies send abroad. The Wall Street Journal reported recently that there’s a $77 billion balance of trade in America’s favor for legal work, computer programming, telecom, banking, engineering, consulting and other business services. Overall, the U.S. economy has added 2 million jobs in the past year.

Offshoring is also creating new markets for American products. As nations such as India and China grow tech-based economies, they are buying computer, software, telecom equipment and more from American companies. The high-end jobs needed to make those goods have stayed home.

Offshoring spurs the economy. A study by McKinsey Global Institute concluded that for every $1 spent offshore by an American company, $1.45 in value is created for the global economy, of which $1.12 accrues to the United States.

In short, offshoring is a 21st century form of trade. In a knowledge-based economy, it shouldn’t be surprising that knowledge is a commodity that can freely flow across international borders. Like all other forms of trade, it is a cornerstone of global security. Countries that trade good and services don’t trade gunfire and missiles.

None of this is to suggest that there have been real human costs associated with offshoring. American workers who thought their futures were secure found themselves laid off and their jobs shipped overseas. One solution has been suggested by McKinsey, which insists companies can easily help laid-off workers with financial support as they retrain for jobs at a higher level.

If offshoring companies invested 5 percent of the savings from such outsourcing, McKinsey concluded, those companies could insure all full-time workers who lost their jobs as a result. The program could pay those workers for 70 percent of the wages they lost from the time they were laid off to the time they were re-employed, plus offer health care subsidies for up to two years.

Those who remember the recession of the late 1970s and early 1980s will recall the warnings that jobs would be lost forever – yet the U.S. economy came roaring back in the late 1980s and through the 1990s. That will happen again, so long as we don’t crimp free trade and the natural evolution of our knowledge-based economy.

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Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.

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