Stifling Good News about Outsourcing
by Virginia Postrel • Aug 24, 2004 at 11:52 am
The California Assembly commissioned a study, from the respected Public Policy Institute of California, on the economic effects of outsourcing jobs overseas. The study found that outsourcing actually increases employment in California. Now the Assembly is sitting on the study. Dan Weintraub has the story:
A new analysis commissioned by the Legislature suggests that sending American jobs overseas, far from being a blow to employment, can actually help preserve existing jobs and create new ones.
The paper, prepared by the Public Policy Institute of California, warns lawmakers against trying to stem the practice by prohibiting offshoring in state contracts, noting that such a ban would drive up the cost of services and take money away from other programs in the budget.
I have seen a copy of the report, sent 10 days ago to the Assembly Office of Policy Planning and Research, which requested it in May. But that office has yet to release the document publicly, and a spokeswoman for the researchers who prepared it said the paper is still a draft that is being reviewed by the Assembly for possible revisions.
"It's a work that is very close to being completed," said Abby Cook, spokeswoman for the policy institute. "We're waiting for some final feedback."
That feedback is not likely to be warm from the Democrats who control the Legislature. Many of them have jumped on the outsourcing issue, hoping to demonstrate their affinity with working people.
The last thing they want is a study done in their name that claims shipping jobs overseas is not only good for the economy, but for workers as well.
But that, more or less, is the conclusion of the 47-page report, for which authors Jon Haveman and Howard Shatz culled all the recent research on the issue and examined trends in California employment. While conceding that data on the latest trends are still in short supply, Haveman and Shatz wrote that offshoring is probably overrated as an economic phenomenon for good or ill, but that, if anything, it is likely to be a net positive.
"Because of the dynamics of the U.S. economy and offshoring's expected effect on productivity, the overall, longer-run effect of offshoring may be to increase living standards at home," they wrote....
That's not just economic theory. The numbers in the real world support this view. Between 1991 and 2001, wrote Haveman and Shatz, U.S. firms that expanded their employment abroad also increased their domestic employment by 5.5 million workers. Their share of overall U.S. employment also increased during this period.
The LAT has more:
"What data are available suggest that the number of jobs being offshored is small relative both to the overall labor market and to the number of people working in the relevant at risk-occupations," the report says. "The bigger challenge for California is the ... movement of jobs from California to elsewhere in the United States."
The report warns that foreign countries might retaliate by limiting their purchases of California goods, and that the state may end up spending more taxpayer money if it hires only companies offering domestic workers, because the higher labor costs will make the contract prices larger.
"At a time when California is considering decreases in help to the poorest Californians and making other difficult spending choices, limits on offshoring will aid above-average wage earners," the report said.
The Assembly's Office of Policy Planning and Research, which commissioned the report for $25,000, has not released it, but a copy, dated Aug. 12, was obtained by The Times.
That passage appears in an article reporting that the legislature has passed the first of six anti-outsourcing bills. A bill to "prohibit the state from hiring outside service contractors, such as software companies and call centers, if they planned to use foreign workers for the jobs" is headed to the governor's desk. Only a girly-man would sign it.