As such, it is essentially a self-selected group of firms that have chosen to offshore their labor specifically because offshoring provides the largest economic gains. This rate of return, then, applies only to those firms for which offshoring would have the largest payoff; it is not the average payoff that could be expected from a representative U.
Second, MGI fails to account for how the increased imports resulting from white-collar offshoring will be financed by the U. An individual company need not concern itself with finding exports to offset its imports, but any analysis of the effects of offshoring on the U.
MGI assumes that this generates five cents worth of exports. But the other 95 cents of imports still has to be financed by increasing exports, which transfers resources that could instead be used to support U.
MGI, by focusing only on a select group of firms instead of the wider economy, enumerates the benefits of offshoring i. Third, while the firms that have already engaged in offshoring may have reaped large returns, this still does not mean that recent trends toward increased offshoring are an unambiguous windfall for the American economy.
While it may make sense for an individual firm to offshore, if this practice becomes widespread enough to result in a rapid increase in foreign productivity in sectors in which the United States is a net exporter, this could actually result in a loss to U.
This possibility describes precisely the situation that occurs when U. The 1 Even if this does not occur, the terms of trade effect could still lean against any efficiency gain from offshoring, leading to a smaller economy-wide effect than suggested by the firm-level analysis of MGI. The cost savings from offshoring to low-wage locales is 58 cents, while U. This implies a loss of 11 cents for labor earnings from each dollar of production that is offshored, money that is a pure redistribution of income away from U.
MGI correctly identifies the benefits of this redistribution as accruing to capital incomes greater profits or lower prices. If the redistribution goes strictly to capital-owners, then workers are unambiguously worse off assuming that workers earn little income from capital-holdings. If the latter scenario occurs, and some of this redistribution forces down prices, then workers can recoup some of their lost wages as consumers purchasing at these lower prices.
The degree to which this money goes to price declines which benefit consumers versus enhanced corporate profits which hurt the average worker is largely unknown.
However, it is clearly the case that the current recovery is the most unbalanced on record in regards to wages growth versus growth in corporate profits. Figure 2 shows the share of corporate sector income that has accrued to capital incomes versus labor compensation up to this point in the current recovery compared to all other recoveries that have lasted this long since World War II. While this entire shift in the income distribution is surely not driven by offshoring, these data are exactly in line with what one would expect if offshoring was already a major feature of the U.
Further, even if some of the corporate savings manifested as price declines, this would still not necessarily lead to higher living standards for American households. A commonly identified reason for the continued lagging of growth in labor compensation behind growth in productivity in recent decades is the persistent gap between inflation in the prices of goods consumed by American households relative to the price of goods produced by American workers.
As shown in the figure, the CPI has risen much more sharply than the GDPD over the past two decades, meaning that American households tend to consume goods whose prices are rising relatively rapidly. Whether offshoring-induced price declines show up as improved living standards for American households is an open question, dependent upon how intensively these households consume the services that are being offshored.
This ignores offsetting costs to the U. Further, even if the U. In the report, GI used their in-house macroeconometric model to assess the impact of offshoring.
In regards to the labor market effects of offshoring, GI claims that their model projects that offshoring can be expected to boost total employment in the U. The GI study is not actually measuring the effect of offshoring ; rather, it is a prediction about how much rapid cost declines in IT services provision would benefit the U.
The proposition that offshoring will lead to these rapid cost declines is an assumption not an outcome of their model. In the aggregate, the economy will more than make up this loss through expansion in sectors like construction, transportation and utilities, and health and education services. While discussion about the full structure of the GI model or any other macroeconometric model is outside the scope of this paper, there are a number of modeling issues faced by GI that are described in brief here.
This estimate is based largely on the MGI report discussed in the previous section. As pointed out, the MGI report was based on study of firms that had already undertaken offshore production and were thus most likely to see the largest benefits from offshoring.
The MGI number was not an estimate of the average cost savings that U. Second, GI assumes that declining costs for IT input s through offshoring will result in lower prices for IT services purchased in the United States, rather than in increased profits for IT firms. In terms of pre-packaged software Microsoft Windows, for example , patent protection keeps producers from having to lower prices in the face of competition.
When measured as a share of GDP, this surplus is unambiguously shrinking, as shown in Figure 4. The GI conclusion is that offshoring reduces prices for software, leading to lower economy-wide software prices, more investment in software, and an accompanying rise in productivity.
The most-quoted data from the report are numbers showing that offshoring will raise economy-wide real wages by 0. However, the GI model also predicts that domestic employment growth in IT-related sectors will fall by , due to IT offshoring. The GI report emphasizes that more jobs are created in the IT sector globally through offshoring, but it also shows that the number created in the United States drops from , to , The GI report does not calculate global employment growth in any other sector besides IT.
The last thing to note about the GI results involves putting the numbers they generate for job growth in their proper context. Offshoring is perceived as yet another way for the super-rich corporate executives to get richer at the expense of individual workers, but offshoring is neither a cure-all for business nor an economy-destroying monster.
The financial advantages for businesses are often smaller than first anticipated due to hidden costs. And in the long term, there is a danger that consumers will stop buying from companies engaged in offshoring or that neither the Americans unemployed due to offshoring nor the low-paid workers overseas will be able to purchase the company's products. Outsourcing work to companies that can do it more efficiently and less expensively can make sense, provided that it is actually less expensive in the long run, and done with mindfulness toward its impact on people and the planet.
Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Data from the Bureau of Economic Analysis show the share of trade in services exports that occurs within related corporate entities.
This was up from around 45 percent in The trend is clear: As offshoring practices increase, companies need to provide more wraparound services—the things needed to run a businesses besides direct production—to their offshore production and research and development activities.
Rather than indicating the competitive strength of U. The United States tax code actually incentivizes moving production, jobs, and profits overseas by favoring overseas investment with a lower effective tax rate. Gravelle , foreign-source income for U. Finally, offshoring and import competition are taking a toll on wages in the United States.
As is evident from the figures above, increased economic competition, market pressures, and an ineffective tax system have resulted in an increase in the practice of moving production to offshore locales and then selling goods back to the U. Policies such as a tax credit that reduces the costs of reshoring jobs back to the United States would go far to ameliorate this trend.
Although offshoring can cause some workers to lose their jobs, we should take a wider view when considering its effects on the national unemployment rate. The U. Normally, an unemployment rate that is lower than that causes bottlenecks in the labor market and inflationary pressures.
In January , the U. Nevertheless, many still worry that the negative effects of the — financial crisis are still with us.
And, due to the way labor statistics are calculated, current figures mask the high number of part-time workers, slow growth in middle-class wages, and a low labor force participation rate. One important counterweight is that, when the unemployment rate rises above its full-employment level, the government and the central bank typically respond by implementing expansionary fiscal and monetary policies to increase demand e.
Although it may take awhile, those actions should help bring the unemployment rate back toward the full-employment level. Most workers who lose their jobs due to offshoring or other causes should, eventually, find new ones.
Of course, the downside is that many of those jobs may not be as fulfilling as the old ones or pay the same salaries.
0コメント