The recent trend toward globalization has made it easy for
companies to cut costs conveniently by moving some of their
operations to other countries, where the cost of labor can
be a fraction of what it is here in the United States. Some,
like President George W. Bush’s chief economic adviser
Gregory Mankiw, believe this is a good thing because when companies
can produce cheaper products abroad, they can substantially
cut costs, pass on those savings to the consumer, and increase
profits for investors.
Another argument in favor of job outsourcing is that doing
so is just another form of international trade: American
companies have to export certain jobs to be able to compete
firms that have lower costs.
The two countries that have been attracting the most jobs
are China and India. Both have highly educated work forces
substantially lower labor costs, on average less than one
third of American labor costs, according to The Wall Street
The fact is, countries all around the world have welcomed
American companies looking to cut costs, and this has prompted
American groups, including labor unions, and local governments,
to push for tougher trade laws that would keep jobs here
In New Jersey, for example, the issue gained notoriety
when (D) Senator Shirley Turner became outraged because
company that was contracted by the
state to assist welfare recipients, sent nine jobs to India. This prompted
the New Jersey senator to introduce legislation that
would require contractors bidding
for state contracts to hire only local employees.
More recently, President Bush signed a bill that would stop
the outsourcing of federal contracts.
In fact, the job outsourcing issue has become so politically charged
that it has become almost as important to some people as the war in Iraq,
such as Lou Dobbs, one of CNN’s top political and economic news anchors,
dedicating many hours to discussing the issue. On a regular segment he calls “Exporting
America,” Dobbs openly criticizes companies and politicians who support
the outsourcing of jobs.
Thea Lee, assistant director of the AFL-CIO (American Federation
of Labor – Congress
of Industrial Organizations), illustrated the fears of labor unions when she
said: “The logical extension is that you will see massive erosion of living
standards of a big chunk of the U.S. middle class.” The sudden rise in
popularity of such politicians as John Edwards, who have criticized foreign policy
that allows companies to move jobs overseas, proves that this will be a crucial
subject for the presidential elections.
Still there are those who, like Treasury Secretary John Snow,
believe that outsourcing jobs is a good thing. Snow said
in an interview on
think American companies need to do what they need to do to be competitive, and
as they’re competitive, it’s good for their shareholders, it’s
good for their consumers, and its good for their employees.”
Snow and other Bush officials such as Mankiw, have been the
target of a lot of criticism for not opposing the outsourcing
of jobs, and
it by holding seminars for executives on how to do it (NPR, 4-6-04).
the truth is, nobody really knows how many jobs have been lost
to outsourcing to
cheaper labor markets outside the United States since President
Bush took office.
In the past few years, the U.S. economy has experienced recession,
terrorist attacks, and corporate scandals. Any of these, or the
be responsible for the downturn of the job market.
According to The Economist, the U.S. economy is recovering
from the recession. Optimistically, perhaps the job market
The great hollowing out myth,” The Economist, Feb. 19 2004.
Michael Schroeder. “Unions and states aspire to block job outsourcing.” The
Wall Street Journal.
India warned about job outsourcing.” Silicon Valley/San Jose Business Journal,
Feb. 16, 2004.
Treasury’s Snow defends U.S. job outsourcing.” Reuters, Feb. 24,