Outsourcing Offshores Hurt American Labor Forces

ကၽႊန္ေတာ္ Research လုုပ္ထားတဲ႔ ဟာ ကုုိ ၿပန္လည္ မွ်ေ၀ၿခင္းၿဖစ္ပါတယ္… အဂ္လိပ္စာ အေရးအသားညံတာကုုိ သည္းခံေပးပါ. 

            Why has the $30 billion trade surplus that United States enjoyed a decade ago become a $45 billion deficit?  Since most manufacturing operations have moved offshore, United States does not produce the products that they need at home. “Made in America” is quickly becoming a lost phrase.  Obviously it is necessary to buy from other countries to meet the needs of the American people, which explain why surplus has fallen back on deficit. The low labor costs aboard allow many U.S. firms to reduce the cost of production for higher profit for shareholders. As a result of hundreds of corporation’s offshored services and manufacturing, millions of the low-skilled work force has lost jobs. Yet many economists insist that offshoring would create high-pay and high-skill jobs for Americans. In reality, not only those who lost their job can’t find a new job but also millions of high-paying, high –skilled jobs have been outsourced to other countries.   Moreover, a current tax intensive to offshore encourage multinational corporations send job to offshore. Thus, offshoring puts millions of the American work force at risk and deprives billions of government revenue.

            Two decades ago, when Chinese governments change their foreign policy and favor reform for foreign investment in developing counties, many U.S multinational cooperation offshored their manufacturing to China and other’s developing countries. Outsourced offshoring was historically primarily in the manufacturing sector or blue-collar jobs. As a result of low labor cost, outsourcing helps reduce the cost of production and leads to higher profits for shareholders. Moreover, lower costs of production will also leads prices of goods and services to be lower for U.S. consumer. For example, in the early 90s when U.S. chip manufacturer outsource offshores the prices of personal computer dropped between 10 to 30 percent (Hensen par 15).  Lower goods and services, in turn, will help increase the purchasing power of the U.S. consumer.   Many economists believe that this will enhance spending and create and increase better paying jobs.

            Since thousands of manufacturing companies have moved offshore, millions of American’s low-skilled jobs have been outsourced. In fact, the more jobs that are overseas mean fewer jobs in the United States. According to article, “ Globalization is painful for some worker,” in 2003, an estimated 315,300 US services jobs moved offshore and 536,500 in 2004  (Cummins par. 39). Forester Research also estimates job losses of over 300,000 per year and a cumulative loss of 3.4 million jobs by 2015, which representing $151 billion in wages (Bharmi par.16).  Many middle and lower class families are dependent on these jobs. Thus, even though outsourcing reduced the cost of goods and services, consumer spending did not increase as economists expected because of higher job losses.

Besides, since offshoring exported American jobs to lower cost countries, it resulted in higher job loss and lower standards of living in the USA. In fact, as most of the low-skilled worked force lost their job, they found it difficult to find a new job. Thus, often time they may need to retrain and relocate to other industries where jobs are available. Retraining to low-skill, low-educated and older worker can be difficult. Bahrami states that “Because of outsourcing, some older workers may not be able to find alternative job and, since acquiring appropriate training might be difficult for those worker they may be discouraged and leave the labor force” (par. 39).  For example, about one-third of displaced workers from labor-intensive industries such as leathers, textiles, and footwear and clothing, could not find reemployment within three-year period (Hensen, par.6). Thus, outsourcing may result in frequent jobs change for American workers and retraining to stay in labor force.

Numerous researches show that offshoring put downward pressure on domestic wages, especially the sector that competes with foreign labor. According to report “A look at outsourcing offshore,” conducted by North Dakota State University describes that “ Only one-third of American who have been displaced in the past two decades have new jobs that paid the same or higher wages, and one-fourth found their income fall by about one-third”(Baharmi par.46). In addition, if the demand of low-skilled work decreased the price of low-skilled worker’s wage will go down. As a result, the compensations for low-skilled workers will also decreases as well.

Moreover outsourcing does have an effect of increasing the wage gap between skilled and unskilled-workers in America. The increase in demand on high-skilled worker will affect on a decrease in low-skilled workers wages, especially the sector that compete with import and offshore. According to a research “The wage effect of offshoring,” conducted by National Bureau of Economic Research concludes that offshoring have different wage effects across education groups, raising skilled labor wages 3.6 percent and lowering wages by 1.6 for unskilled workers (36).

Since many Americans have lost their jobs, many people will receive unemployment and social welfare, which the state must pay. According to Associated Press, in 2010 for six months workers at about 1,200 offices and plants nationwide were approved for federal Trade Adjustment Assistance, which usually goes to factory works who lost their job because of offshoring or cheaper imports (par.2). Hence, outsourcing not only hurts low skilled jobs work forces but also reduces consumer spending and tax revenues. 

Many economists argue that major technologies advance change the structural of economy. These changes can be painful for certain population in short run however in long run technological change will create more better paying job and benefit for economy (Bahrami, par.4). However in recent years, as a result of advance in technologies that enables lower cost of communication and availability of skilled workers in developing countries, allow U.S. firms to extend their offshoring from blue-collar worker to services jobs of white-collar. According to their report “ Offshoring (or offshore outsourcing) and Jobs loss among U.S. workers” by Congressional Research Services, the number of   well-educated individual in developing countries such as China, Eastern Europe, India and Philippines, exceeded the immediate needs for their local economy (Levine 4). Thus, availability of significantly cheap high-skill labor in aboard put U.S. white-collar jobs at risks. Baharmi also state that because of outsourcing about 14 million of U.S. white –collar jobs are at risk (par.15).

In the mean time, Forrester Research, Inc. forecast that a total of 3.4 million-service sector jobs might mover abroad by 2015 (Levine 6). Some examples of white-collar jobs include computer programmer, accounting (tax preparation), human resources, customer services, information technology, telephone call centers, health care services and design and engineering. In fact, offshoring service industries would affect the U.S economy more significantly than manufacturing. The research article “The world offshoring: H-1B visas can e utilized,” conducted by Hamline University School of Law describe that services industry make up 60% of U.S economy and employed two third of its workers, in contrast, manufacturing make up only 14 % of U.S output and employ 11% of jobs (Halliday par.12).  

            The talent crisis in U.S. is also another factor that many industries offshore their services. In fact, in the articles “ The global talent crisis,” according to manpower in early 2008, when the unemployment rate was 5.6%, 3million white-collar jobs remained vacant, when unemployment hit 9.4% by May 2009 those jobs were still vacant (Gordon par.11). As a result companies have to turn to an international pool of high skill work forces. In order to fill those jobs many company decided to offshores services jobs or use H-1B visas, which allow high-skilled foreigners to work in U.S.  In ordered to fill the gap of the U.S. workforce. The H-1B visa currently allows 85,000 foreign workers to work in the high-skilled sector. This means every year Americans lost 85,000 high-skilled sector jobs to foreigner.

Another factor that encourages many corporations to outsources offshoring is taxes. According to the report “ Sending Jobs Overseas: The Cost to America’s Economy and Working Families,” conducts by Working America and The AFL-CIO, on most of U.S. multinational corporation foreign earnings, they are allow postpone their payment of U.S. taxes until those earnings are repatriated to the United State (4). That means multinational that shifts their earing through offshore can save billions of dollars in taxes. Jesse Drucker, Bloomberg News reporter, reports, “Google has saved $3.1 billion in taxes in the past three years by shifting the majority of its foreign profit to accounts in overseas”(par.3).  Obviously, the government lost billions of dollars in tax revenues every year.

As a result of multinational corporations shifting billions of income to low-tax countries it is depriving the government tax and revenue. The article published in USA Today, “ Does tax code send U.S jobs offshore?” states that in 2004, multinationals shifted almost 50 billion in income, taking away the government tax revenues by 17.4 billions (David). This tax rule encourages many multinational corporations to continue offshoring their investment especially in developing countries with low tax rates. Moreover, failure to invest in domestic operation will cause fewer jobs creations in U.S. According to the Bureau of Economic Analysis, from 2000 through 2005 multinational cooperation eliminated 2.1 million jobs in the U.S while adding 784,000 to their payroll abroad. The result is a financial spiral in which businesses grow less and pay less to the government. As the less taxes revenues receives by the government the higher the deficit will be.

            As United States is the world’s leading economy, unemployment rate of 7.8 % is undesirable. Even though offshoring is not the only reason for high unemployment, offshoring has large number of contribution on that, since offshoring has cause millions of unskilled and skilled jobs being offshored. However, offshoring will likely increase because low labor cost and resources those developing countries can provides. This will result in n frequent jobs change for American workers and retraining. Therefore, in order to adapt and perform in difference with minimum retraining, the government should   enhance the quality of human capital of American work force. The government and business should invest more in education and skill building for long-term perspective. Thus, companies that outsourced should spend their saving from outsourcing for training and compensation on those who lost their job.  Therefore, government should end the tax-intensive to those offshoring. In addition, the government should provide tax incentive to the corporation that manufacturing their product at home. Consequently this will help reduces the deficit and increased the tax revenue.

      By   Khun Zayar  Min, Wichita State University , Wichita , Kansas . USA   

Bibilography

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Bahrami, Bahman. “A Look at Outsourcing Offshore.” Competitiveness Review 19.3  (2009): 212-223. ABI/INFORM Complete. Web 3 Oct. 2012.

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Drucker, Jesse. “How offshore Tax Haven Save Companies Billions” Npr.org. NPR,  17 Mar. 2011. Web 1.Nov 2012.  

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