Loss of jobs offshore is no threat to the U.S. economy

Offshore outsourcing will help rather than hurt the American economy, according to Daniel Drezner.

Forrester Research http://www.forrester.com/my/1,,1-0,FF.html predicts that 3.4 million jobs will be lost to offshore outsourcing by the year 2015. But in an economy of 140 million jobs, that's only 0.2 percent, said Drezner, university assistant professor of political science. He was the featured speaker when alumni and other executives gathered December 16 at Gleacher Center for the Chicago GSB International Roundtable.

Jobs like call center positions would be automated if they weren't outsourced to countries with lower wages, Drezner pointed out. Many IT jobs going offshore would have disappeared anyway, created by the artificially high demand from Y2K problems, the dotcom bubble and an over-emphasis on IT in this country, Drezner added.

The U.S. economy actually shows a net gain from offshore outsourcing, he said, pointing to a McKinsey study that showed for every dollar spent for offshore outsourcing, the U.S. receives $1.14 in benefits from lower prices for consumers, higher margins for companies, and higher returns for investors in company stock.

The economy could gain even more if the devaluation of the dollar continues on a steady pace, Drezner said. He expects the gradual decline to continue as long as Japan or China don't dump their U.S. dollar investments on the world market.

However, Drezner cautioned, the devaluation could hurt the U.S. economy if the dollar loses its status as the world's preferred currency.

 

Phil Britt