The devastating effects of outsourcing and offshoring aren't limited to the workers who lose their jobs. Our entire economy suffers.
Wages Go Down—for Everyone*
Outsourcing, whether within the U.S. or abroad, tends to drive wages down.
| | *Well, not quite everyone . . . Pay goes down for everyone— except CEOs, that is. CEOs who outsource jobs got a 46% pay increase last year. From 2001 to 2003, the top 50 outsourcing CEOs earned $2.2 billion while sending an estimated 200,000 jobs overseas. |
| | (Source: United for a Fair Economy, Executive Excess: CEO Pay Soars at Companies That Send Jobs Overseas) |
| | |
First, workers employed by contractors are paid less than the employees they replace. Then, the workers who lost their jobs to outsourcing may be able to find new jobs elsewhere, but it's often at a lower wage.1
It's not necessarily much better for the workers at the core company who were lucky enough not to lose their jobs. They are dissuaded from seeking higher pay, for fear that their jobs will be outsourced. And employees at companies that have not yet been hit with outsourcing may feel forced to agree to lower wages and benefits because of the the threat of outsourcing and offshoring.
And it's not as though there are lots of good-paying jobs coming down the pike.
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| | Hourly Wage, U.S. | Hourly Wage, India |
| Telephone Operator | $12.57 | Under $1.00 |
| Health Record Technologists / Medical Transcriptionists | $13.17 | $1.50 -$2.00 |
| Payroll Clerk | $15.17 | $1.50 -$2.00 |
| Legal Assistant / Paralegal | $17.86 | $6.00 -$8.00 |
| Accountant | $23.35 | $6.00 -$15.00 |
| Financial Researcher / Analyst | $33.00-$35.00 | $6.00 -$15.00 |
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| Programmers – Annual | $60,000-$80,000/yr. | $5,880-$11,000/yr. |
| Source: Ashok Deo Bardhan and Cynthia A. Kroll, “The New Wave of Outsourcing,” University of California-Berkeley, Fisher Center for Real Estate and Urban Economics, Fall 2003. |
According to the Bureau of Labor Statistics, a majority of the jobs of the future will pay below average wages. (Of the 30 occupations projected to have the largest growth in the decade 2002-12, 17 pay in the bottom half of median annual earnings.)
The Trade Deficit Goes Up, Up, and Away
Outsourcing and offshoring contribute to a deteriorating trade balance. (Wait—don't let your eyes glaze over. This is important.)
We export many products (say, cookies) to other countries and import many other products (say, limosines). If we export more cookies than we import limos, we've got a trade surplus; we're bringing more money into the U.S. than we're sending to other countries. That money fuels investment in U.S. industry, creates new jobs, and gives the government money to pay for things like schools, the military, Social Security, national parks, highways, and scientific research.
These days, we're importing a lot more products than we're exporting.
Not to worry, though, we've been told: We'll just sell more services (tech support, accounting, software development, customer service) to other countries, and that will keep us from running a trade deficit. And all those laid-off cookie makers can train for service jobs, especially in the high-tech sector.
You see the problem, right? Now, service jobs are moving, too. U.S. companies send jobs to other countries, and then turn around and buy the services those workers provide. So now we're importing more and more services, and we have less and less available to sell to other countries.
As a result, the U.S. trade deficit rose to $490 billion in 2003, and will likely keep growing. And, those out-of-work cookiemakers who were training for new high-tech jobs are out of luck.
So, what can we do about it?
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1While those who lose their jobs usually find work again, academic research suggests that displaced workers find work at rates that are on average 13% lower than previous wages. According to the brokerage firm CIBC World Markets, the average wage of the sectors of the economy gaining jobs in the last three years has been 30% lower than the sectors losing them.
