Misconception #1: Offshoring is good for us!

Doesn't offshoring lower the prices we pay for goods and services?

Reality:

Price reductions of goods and services that have been offshored are greatly exaggerated. Yes, those who do the work to produce the goods and provide the services are paid much less. But most of that cost saving ends up as increased corporate profits and expanded CEO pay, very little is passed on to consumers. How much cheaper are athletic shoes as a result of their being produced offshore?

Moreover, direct costs are not the only costs and sticker price is not the entire price. While business interests profit from cheaper labor in foreign countries, the loss of jobs at home has a broad economic impact. Each lost job has a multiplier effect, taking money out of circulation, depressing economic activity, and causing other jobs to be lost. That's a big price to pay.

Workers who lose their jobs are converted from tax payers to tax consumers. Government not only pays unemployment benefits but society shoulders the costs of unemployment-induced social problems: broken homes, drug addiction, and crime.

By focusing attention on the price of consumer goods, this argument misses the primary impact of job flight from the country—namely, that offshoring undermines our financial security, our well being, and our communities.

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A large portion--perhaps a majority--of offshored work is performed by sub-contractors and sub-sub-contractors. Each of those sub-contractors is a separate, independent profit-making business that must first extract its profit before passing on any savings to consumers.

The cost-of-consumer-goods argument assumes that the primary measure of our quality of life is how many possessions we have. Corporations spend more than $200 billion each year to convince us that buying their products creates the path to happiness. Yet for most people, personal dignity, health, family, safety, friendship, community, and a meaningful productive life are far more important than the latest cell-phone feature, personal-grooming fashion, or entertainment device.

Misconception #2: Offshoring is good for the economy and employment

Doesn't offshoring stimulate the economy and create more jobs in the long run? Even in the short run, doesn't it make companies more competitive and saves us job?

Reality:

This misconception is based on the assumption that boosting profits for trans-national corporations and making the financial elite wealthier is what stimulates an economy and creates new jobs. However, this trickle-down economic argument has been exposed by the recent jobless "economic recovery." While profits have recovered, unemployment and underemployment have not gone down.

When offshoring creates new jobs, by its own logic, those new jobs will be created mostly offshore, not here. The profits repatriated from offshore operations are re-invested offshore; When workers here lose their jobs, they no longer have wages to spend to keep other sectors of the economy healthy.

Even N. Gregory Mankiw, Chairman of the President's Council of Economic Advisers, repudiated his remark that offshoring was good for the economy, explaining that the Bush Administration did not regard the unemployment of 14.2 million Americans as good for the economy. And Paul A. Samuelson, Nobel Prize-winning economist, regards mainstream economists' assumption that offshoring will provide a long term benefit to the American economy as "the popular polemical untruth." Referring to the downward pressure of offshoring on wages in the service economy, he says, "If you don't believe that changes the average wages in America, then you believe in the tooth fairy."

Lee Price, research director at the Economic Policy Institute, referring to the offshoring of software development, said, "This trend to offshore productive jobs in the U.S. economy is making us less productive and not stimulating the economy. We are giving up some of the most productive jobs in our economy."

Similarly, Institute of Electrical and Electronics Engineers (IEEE-USA) President John Steadman says, "It's going to be difficult to remain technologically competitive, if we continue offshoring the jobs of our innovators."

More Reality:

The Mckinsey Global Institute has published data that shows a $0.26 loss for U.S. workers resulting from every $1 offshored. This undermines the economy, it does not stimulate it.

Harvard University economist Robert Z. Lawrence, a free-trade advocate, says, "If foreign countries specialize in high-skilled areas where we have an advantage, we could be worse off. I still have faith that globalization will make us better off, but it's no more than faith."

Moreover, offshoring only gives a competitive advantage to those companies that engage in it. CEOs of midsize manufacturers and their labor unions formed an anti-offshoring coalition, the Jobs and Trade Network, that regards offshoring as the root of many economic woes, from the disappearance of manufacturing jobs to the liquidation of family-owned retail stores. Rather than increasing competition, offshoring tends to concentrate economic power in fewer hands.

Misconception #3: Offshoring is exaggerated

Aren't special interest groups exaggerating the extent of offshoring? Isn't it a poor economy, not offshoring, that is causing the loss of high-tech and professional jobs?

Reality:

No one, not even the U.S. government, knows how many high-tech and professional jobs have been offshored. Despite mounting pressure, the U.S. government has failed to collect and release such statistics.

Most information on the extent of offshoring comes from studies made by the information technology industry and other research groups. Forrester Research predicts that 3.4 million white-collar jobs will be offshored in the coming decade (830,000 by 2005). Gartner Group estimates that 10% of all U.S. technology jobs will be moved offshore by 2005, and that up to 25% of traditional information technology jobs will be offshored by 2010.

Those who blame a "poor economy" for the large number of unemployed and underemployed high-tech workers are simply denying what these workers know from direct experience. In an informal poll conducted by the TECHWR-L technical writers website, 9% of respondents reported that their jobs had been offshored. Only 35% reported that they have not been affected at all by offshoring.

Note that when politicians and corporations say "special interests," they mean any constituency whose interests differ from those of the investor and corporate CEO class.

More Reality:

The Offshore Tracker of Techs Unite, an affiliate of the Washington Alliance of Technology Workers (CWA 37083), reports that in the last couple years, almost 300,000 technical jobs have been offshored by over 300 companies.

A September, 2004 report by the Center for Urban Economic Development at the University of Illinois, Chicago, found the U.S. high-tech economy lost 200,000 jobs between November 2001, when the recession officially ended, and April 2004. According to silicon.com, Nik Theodore, co-author of the study, says that high-tech workers are experiencing something worse than a jobless recovery. "For America's IT workforce, this has been a job-loss recovery," he said.

In a more official expression of the impact of offshoring, the Institute of Electrical and Electronics Engineers (IEEE-USA), representing 225,000 members, issued a policy position in March, 2004 stating that offshoring is "currently contributing to uprecedented levels of unemployment among American electrical, electronics, and computer engineers." As a result, the IEEE-USA recommended, among other things, that government procurement favor work done in the U.S.

The U.S. Bureau of Labor Statistics shows virtually no job growth in most of the high-tech sector and reports that long-term unemployment in the information industry continues to grow faster than the national average.

Misconception #4: Offshoring is temporary

Won't offshoring decline, because employers are starting to be aware of the hidden costs?

Reality:

Neither the offshore corporations nor the academic and political supporters of offshoring view it as temporary. A recent survey found that 86% of corporate executives expect to send more technology jobs abroad in the next year, compared with 32 percent two years ago.

While there are a large number of hidden costs involved in offshoring high-tech and professional jobs, most companies attribute these to mismanagement of offshoring operations. Employers eager to adopt offshoring as a business strategy do not appear to be concerned about the hidden costs of doing business overseas. They assume that with time these management problems will be resolved. An entire industry now exists to assist in transitioning high-tech and professional work to offshore operations.

Misconception #5: Offshoring is avoidable

Can't you protect your job from being offshored? If you enhance your professional qualifications and skills, won't you make yourself more valuable to employers, maybe even irreplaceable?

Reality:

For technical jobs, there is really no safe haven from offshoring.

In April, the Boston Consulting Group, an influential consulting firm, urged U.S. companies to speed up offshoring operations to China and India, including high-powered functions such as research and development. "One of the most intriguing advantages we have come across is faster (and lower-cost) R&D," the report states. For most companies, research and development are considered to be core competencies.

There are simply no high-tech skills or professional qualifications that workers in other countries cannot learn just as fast and just as well as American workers. In fact, given the declining state of education in the U.S., countries that have been serious about education have an advantage over the U.S.

More Reality:

Forrester Research finds that the only occupations safe from offshoring are doctors and nurses, plumbers, auto mechanics, soldiers, teachers, day laborers, and utility workers. For high-tech workers, staying ahead of the pack by learning new skills and obtaining advanced degrees or certification appears to provide little security from offshoring. As one Toronto researcher put it, "If you sit in front of a computer screen, your job is in jeopardy."

Misconception #6: Offshoring is inevitable

Is there really anything you can do to stop offshoring? It's about competition; if labor is cheaper in another country, that's where the work will be done. Isn't that only fair?

Reality:

Offshoring, rather than being inevitable, is the result of conscious decisions and conscious economic policies that have been promoted by trans-national corporations and international financial institutions. The World Trade Organization (WTO), the North American Free Trade Association (NAFTA), and the Free Trade Association of the Americas (FTAA), are all part of a global strategy by which wealth is concentrated in a small financial elite at the economic expense of the world's population. This global strategy is carried out through the conscious exercise of economic, political, and military power.

However, a growing international movement is challenging this global strategy, precisely because it does not advance economic development for most of the world. Rather, it creates conditions of impoverishment and then seeks out the cheapest labor from which to extract the greatest profits.

Yes, the world economy is steadily becoming more integrated and interdependent. But it is neither inevitable, nor "good," nor "fair," that a "race-to-the-bottom" will drive global wages and working conditions down to the level of the most oppressive and exploitative nations. Inevitably, the logic of global offshoring will be repudiated, because it threatens the survival of 99% of the world's population.

More Reality:

In May 2004, the Communications Workers of America (CWA successfully negotiated the return of 3,000 technical jobs from India and the Philippines back to the United States. By organizing with other unions and organizations to oppose offshoring and support worker rights, we help build a broader movement for economic justice.

Misconception #7: Blaming the victim

Aren't high-tech workers in the U.S. overpaid, and isn't that why their jobs are being offshored?

Reality:

It's not high-tech workers in the U.S. who are being overpaid, it's corporate CEOs and executives. But that does not seem to have caused any rush to offshore their jobs.

This argument is used, mainly in conjunction with threats to offshore high-tech jobs, to intimidate workers into taking lower salaries.

The truth is that compared to the value they create, technology workers' real income is not that high compared to other workers. And in terms of real income adjusted for inflation, the take-home wages of high-tech workers has been rapidly declining.

Misconception #8: Discrediting the opposition

Aren't those that oppose offshoring just special interests groups that are xenophobic, nationalistic chauvinists, or racists? Doesn't offshoring benefit foreign workers and increase the standard of living of their countries?

Reality:

It is true that some have opposed offshoring on racist, nationalist, and xenophobic grounds. But not only are such arguments morally repugnant, they are ultimately self-defeating. In the long run the best response to offshoring is to unite with people suffering in low-wage nations, help them form unions, and support their efforts to achieve decent pay and working conditions.

Given the well-known history of trans-national corporations fostering racism, nationalism, and xenophopbia for their own ends, it is ingenuous for offshoring apologists to smear offshoring opponents in this way. In fact, the anti-globalization movement that has developed over the last decade supports self-determination and human rights for the world's peoples. Few of the low-wage nations to which the bulk of jobs are being exported have even minimal human rights standards or protections against race, religious, or gender discrimination, abuse, and persecution.

Related Documents:

Read an < overview of high-tech and professional offshoring >.

Read about government support of offshoring.

Read about threat to personal security posed by offshoring.

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