As a champion of manufacturing – where our clients are mostly employed and employers — our blog occasionally touches on the touchy topic of outsourcing. Recently, an article in Bloomberg Businessweek that chided the current presidential candidates for ‘pandering’ for votes over who was the worst offender when it came to outsourcing jobs, brought a more realistic view into focus. In fact, it shows up just how misguided so many pundits today are. And where employment trends are heading.
Economists who study these things tell us that companies create jobs outside the U.S. for more than job labor/cost saving reasons – though that is one valid reason. But companies also create jobs – especially larger companies – because it’soften necessary in order to pursue sales opportunities in those new markets. They want to be close to the economies that are growing the fastest, and to have access to ‘local’ resources, and to staff who understand the local culture.
As Businessweek points out in its July 16th issue, companies that don’t hire locally in foreign markets “for some patriotic reason… would be at a disadvantage to European and Asian competitors, which would probably cause market share to drop and eventually result in U.S. layoffs.”
And, truth be told, outsourcing has had benefits: It’s meant less expensive goods for U.S. consumers. Meanwhile, workers in Asia are becoming more like Americans and are increasing demand for U.S. made goods. Outsourcing, the article points out, also “allows more advanced industries to replace outdated ones.”
Meanwhile, a combination of rising wages overseas, a strengthening Chinese currency, and the availability of low-cost natural gas have actually caused some jobs to flow back to the U.S. – a phenomenon known as insourcing.
The politicians leave the impression that companies are bad for outsourcing, and if only they’d stop doing so, the jobs would come back. But the truth is more complicated. For one thing, automation has eliminated jobs – that’s just companies becoming leaner, more efficient. Overall employment in manufacturing is down significantly from years past (even as firms become more efficient, as they must, to survive). Meanwhile, middle-skill (and middle-wage) occupations are declining rapidly – and as The Boss once famously said… “and boys them jobs ain’t coming back.”
There are many who believe that improved education in science and math is one key to long-term employment prosperity. Retraining workers to perform higher skilled tasks would be another. This seems to be a conversation heard less often than the political rhetoric – and a problem a whole lot harder to solve.