Offshoring jobs hurts economy
“Merchants have no country.” “Thomas Jefferson
There’s nothing free about free trade. It can threaten a nation’s security goals, challenge a nation’s sovereignty, jeopardize a nation’s autonomy, lead to unintended tensions among countries, and free trade can inflict economic and noneconomic harm in myriad ways on a country.
Multinational corporations (MNCs) and some small businesses have added new meaning to the term free trade. More and more companies are exporting American jobs to foreign labor markets – a trend called “offshoring,” or “offshore outsourcing.” Companies are increasingly using outsourcing to reduce their labor costs by employing foreign workers in other countries at costs substantially less than those at home.
Offshoring has serious economic ramifications, as more and more jobs are leaving the U.S., leaving thousands jobless and factories empty. In the manufacturing sector alone, the U.S. has lost 2.4 million jobs since February 2001 due to offshoring.
A reputable consulting firm, Forrester Research, recently predicted that over the next 15 years, 3.3 million service jobs will go offshore along with $136 billion in wages.
In his book “Re-Imagine!” Tom Peters predicts that at least 80 percent of America’s white-collar jobs will outsource in the next 15 years. In a move to save money, IBM may offshore 3,000 programming jobs this year and continue moving more jobs overseas in the years to come.
Surprisingly enough, offshoring may very well solve America’s illegal immigration problem through the MNC.
In terms of economic growth, MNCs are beneficial to less-developed countries (LDCs) in that they:
– Assist in the aggregation of investment capital that can fund development in host countries.
– Underwrite R & D that allows technological innovation in LDCs.
– Introduce and dispense advanced technology to LDCs.
– Encourage the training of workers for jobs.
– Facilitate modernization of LDCs.
– Produce new goods and give the opportunity for citizens to buy them by reducing their costs. (source: The Global Agenda)
While MNCs increase the volume of world trade considerably, they promote national revenue in their host countries. Most importantly, they generate income and wealth. MNCs pay over $1.5 trillion in wages throughout the world and employ 90 million people, 20 million in LDCs, and MNCs pay over $1.2 trillion in taxes a year to world governments (source: Global, Inc.).
As MNC employment increases in foreign countries, workers move from abject poverty to higher living standards in time. As more workers earn more money in LDCs, a better quality of life, higher living standards and an improved economy occur, which in turn would lead to less permanent migration to developed countries illegally, such as the U.S. The result would be a marked decrease in illegal immigration into the U.S. Simply put, rather than venture out, foreigners would opt to stay “home” instead, satisfied with a healthy economic environment, among other things. (They would still internationally travel, but not permanently migrate illegally to the U.S. as economic refugees as they are doing now.)
Offshoring’s fine for foreigners, but what about the lost jobs here due to offshoring? On Jan. 26, Federal Reserve Chairman Alan Greenspan said, “We can thus be confident that new jobs will displace old ones, as they always have, but not without a high degree of pain for those caught in the job-losing segment of America’s massive job turnover process.”
In this election year, the economy will play a key role in who will become president. Notably, of the voters in this past New Hampshire election, a full 85 percent told pollsters that the economy played a very important part in how they voted.
When IBM offshores to save $168 million annually by not paying its programmers $56 an hour here in the U.S., and paying $12.50 an hour to workers in China, India and Brazil, it hits home for many Americans who are suffering from offshoring’s effects. If this continues, the U.S. will gradually become a third world country
The Washington Post recently reported that jobless rates have remained steady for managers and professionals last year, at just under 3 percent. By contrast, unemployment in production and transportation jobs finished the year at a hefty 7.2 percent. The U.S. has among the lowest unemployment rates in the world, but when companies can save 58 cents for every dollar transferred in jobs offshore (McKinsey Global Institute) unemployment figures increase.
Not only will offshoring seriously undermine the U.S. economy, but also hasten the decline in American living standards if action is not taken soon. Strong American leadership is needed to solve this problem.
David Briceno lives in Alta Sierra.
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