Saturday, March 1, 2008

Outsourcing, Jobs and Economic Growth

In one of my previous post I discussed the issue of free trade and how a number of political candidates are blaming it for jobs loses in the United States and how the facts and economic data does not back this up. Now in this post I will tackle the other bogeymen of job lost, outsource. Much like free trade, out sourcing has been blamed by a number of people for the lose of American jobs, in particular you hear many of the leading Democrat candidates for President talking about this, Obama and Clinton and Edwards before he dropped, but once again most of their claims are unfounded. In particular you hear the claim that good paying high technology jobs in the United States are under the threat of being relocated to low-wage countries like India, while it is true that a many high tech firms in the United States have relocated some of their jobs to other countries and that during the early part of the 2000s there was a large decline in the number of high tech and IT jobs in the United States, the main reason for the decline in the number of jobs wasn’t outsource but the end of the dot com boom and the overall economic slow down. In the United States tech jobs and IT jobs are projected to be some of the fast growing job areas in the country with 30 percent growth expected out to 2012 and 7 of the 30 fast growing job field are in these areas according to the Labor Department. Secondly during this time period the United States trade surplus in the area of IT services has increased, this means that the amount of IT services that workers based in the United State sell to people and firms in other countries has increased at a faster rate than the amount of IT services that people and firms in the United States buy from people in other countries, this would include jobs “outsourced”.

Final outsourcing as helped to create new jobs in the United States, yes contrary to what you hear from many people outsourcing helps economic growth and creates new jobs, outsourcing as helped to lower input cost and increase worker productivity in the United States. Higher worker productivity means that workers will earn more and produce more reducing the cost of the goods and services that they produce and lower input cost will also help to reduce them, which in turn means that people will pay less to buy those goods and services and have more money left over to save or use to buy other goods and service. Along with these more productive workers will earn more and have more money to spend and save, all of these will add to economic and job growth in the United States. The great economic boom of the 1990s was in part made possible by the globalization of the production of physical inputs in the high tech and manufacturing industries, things like computers, steel, cars, ect, and yes this caused some job lose in the United States, though other factors where far more important, but it also helped to fuel massive economic growth that benefit every sector of American Society and the economy and that kind of growth would not have been possible with out it, and now the service industry is under going the same process of globalization and in the long run it will help to fuel increased economic growth in the United States if we allow to happen and don’t listen the scaremongers and those that have a vested interest in preventing it from happening because doing so will benefit them at the expense of the rest of society. The other thing to keep in mind is that globally the United States is one of the top, and often they top, destination of jobs outsourced from other countries.

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