Government // Enterprise Architecture
Commentary
10/27/2010
07:45 PM
Bob Evans
Bob Evans
Commentary
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Global CIO: President Obama's Dangerous Campaign Against Outsourcing

For every U.S. job outsourcing displaces, it creates two new ones—so why is the White House so intent on demonizing outsourcing?

Conventional wisdom (also known as uninformed speculation) has long held that outsourcing decimates American employment by shifting "our jobs" to another country and leaving nothing in its wake but rising rates of joblessness and ever-shrinking prospects for career growth, individual prosperity, and U.S. competitiveness.

In this scenario—a favorite for tub-thumping politicians and out-of-touch labor leaders looking to demonize corporations and pit "the working class" against "management"—amoral or even immoral business executives gleefully fire thousands of Americans and greedily hire thousands of lower-cost workers in other countries to prop up profits and fatter year-end bonuses.

According to this hallucination, these piggish executives ship "our jobs" overseas even though they know full well that those actions will undercut their companies' ability to compete, slash product quality and customer service, and eventually turn America into a third-world basket case, a barren wasteland filled with 300 million louts incapable of creating anything, producing anything, or caring for ourselves.

Well, it turns out that that depiction of outsourcing and of the citizens of the United States of America is not only grossly insulting but also wildly inaccurate.

The real truth about the impact of outsourcing on U.S. employment has been revealed via the research of economist Matthew Slaughter of Dartmouth's Tuck School of Business, whose astonishing findings were reported recently in the Wall Street Journal.

Consider these four head-spinning highlights from Slaughter's voluminous research on outsourcing's impact over the past decade:

--Instead of shredding employment opportunities in this country, outsourcing actually creates two jobs for every one displaced to another country.

--Those new U.S.-based jobs created as a result of the dynamic impact of outsourcing not only outnumber the jobs they replaced by a factor of 2 to 1, but the new jobs also offer better pay and demand higher skills than the old ones.

--The phenomenon is not limited to the U.S.: in the past generation, companies based outside the U.S. have doubled the number of jobs created in America.

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--And, those workers at U.S.-based subsidiaries of foreign corporations earn significantly more—31% more—than do their counterparts at competing firms based in the U.S.

In his Journal guest editorial on outsourcing and politics that highlights Slaughter's work, former Secretary of Defense William S. Cohen writes that "when U.S. firms hired lower-cost labor at foreign subsidiaries overseas, their parent companies hired even more people in the U.S. to support expanded operations."

Cohen continues:

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