Is America outsourcing too much?

At a time of relatively high unemployment, tales of outsourcing woes that have stripped white-collar job securities from our decently educated strike fear into the hearts of many middle class Americans. Rumors that “most of our best jobs can be outsourced”, and that “Americans have no place to move up”, and that outsourcing is making us "lose our national sovereignty" provide for a grim future. Worse, the fact that we, proud Americans, do not have the competitive advantage in business that many of us thought we were born with, is just plain appalling.

Perhaps this article can provide some perspective to help save this nation from heartburn.

First, we have almost no idea how much America is really outsourcing. Due to lack of reporting requirements, the data on this activity are quite hard to keep track of. Remarkably, much of the media hype (including the statements made above) has been based entirely on anecdote, rather than fact.

Second, those who have put effort into crunching numbers seem to have results that are a lot less scary than what the media buzz indicates. For example, Forrester Research estimates that only 0.2 percent of Americans will be affected by outsourcing per year. Foreign Affairs Magazine estimates that almost 90 percent of jobs in the United States require geographic proximity. Such jobs include everything from retail and restaurants to marketing and personal care, and outsourcing them overseas is not an option.

And as for the “better jobs” in service and IT industries, the future for these folks also seems brighter than expected. McKinsey Global Institute has probably done the best job of trying to get hard numbers on this sector. Extrapolating from a study of eight industrial sectors, the institute estimates that by 2008 there will be 4.6 million service jobs outsourced abroad from developed countries. To set that in context, it points out that “an average of 4.6 million Americans started work with a new employer every month”. This means that even most aggressive projections of jobs lost to offshoring are rather small compared to turnover rates. The OECD confirms this statement.

Interestingly, recent surveys are even showing hesitation among decision-makers to pursue outsourcing with as much vigor as recent years. DiamondCluster, a Chicago-based management consulting firm, found in its last survey that “buyers of outsourcing” have been increasingly dissatisfied with their service providers and that satisfaction rates with outsourcing arrangements have declined by 17% since last year. Contracts are being terminated early. Perhaps even more important, the importance of cost savings as a benefit of outsourcing is secondary to the ability to refocus companies’ employees on their core strengths.

So, perhaps we shouldn’t all go run and invest in Tums just yet. But it probably wouldn't do this nation harm to beef up our education systems and trim our pride a bit to make ourselves more competitive. But before we peg outsourcing as the uncontrollable scapegoat, it would do us good to look at the numbers (and ourselves as employees) to figure out why unemployment remains high.

Posted by Michelle Smith on August 18, 2005 07:32 AM