East, East, and Away: Will Your Job Move to China?

East, East, and Away: Will Your Job Move to China? :

You heard the subject brought up in the presidential debates, but how much do you know about the effects of foreign outsourcing? The Wharton School of Business at the University of Pennsylvania published an informative article and book review on this subject, looking at both sides of the issue, as excerpted below.

"Although outsourcing eliminates many jobs, it also creates employment. It does so directly by creating demand for employment in sectors associated with the mobility of production inputs and finished goods (such as logistics, shipping and retail) and indirectly by enhancing the competitiveness of the local firm. Outsourcing permits a company to focus on what it does best (for example, designing and developing new products) and allows for the deployment of resources into areas of comparative advantage that, at least in developed economies, produce more value added and better paying jobs. President Bush’s chief economic advisor was alluding to those benefits when he suggested that outsourcing was good for the U.S. economy, though he neglected to consider its downside potential or show sympathy for the workers displaced."

But, "... as numerous studies have shown, the jobs created by exports seldom go to those workers displaced by imports; close to one-third of the manufacturing employees displaced by foreign competition were unable to find a job. Two-thirds of those able to find work made less than in their old jobs, and while the average earnings loss was 13%, one-quarter suffered earning losses in excess of 30%. Those who found employment in the service sector, where average wages are barely more than half the manufacturing wages and where newcomers lack know-how and seniority, suffered an especially steep drop. "

Click the link above for the whole article.