Thursday, June 10, 2004
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The BLS weighs in on offshoring
One of the problems with the outsourcing debate is that the estimates about job losses due to offshoring are mostly coming from management consultants, who appear to be basing those numbers on some really shoddy guesstimates. Official data collection from the Bureau of Labor Statistics didn't sem to directly address this phenomenon. My back-of-the-envelope calculations from the BLS Mass Layoff data suggested that the number of people laid off due to offshoring was around and about 3% of total layoffs.
Starting this calendar year, however, the BLS decided to ask employers whether offshore outsourcing -- or onshore subcontracting that led to offshore outsourcing -- was the reason for the mass layoff.
Data for the first quarter are now available for extended mass layoffs -- and it turns out that my 3% estimate was incorrect. This is from the Bureau of Labor Statistics press release:
So, to conclude -- the percentage of jobs lost due to mass layoffs -- in turn due to offshore outsourcing -- as a percentage of total jobs lost through mass layoffs was not 3% -- it was a whopping 1.9%. If you drop out seasonal employment, the figure rises to 2.5%. So my back of the envelope calculations from a few months ago are an exaggeration. My apologies.
The caveats -- this data does not cover two other kinds of job loss via outsourcing -- 1) Those let go due to ousourcing when fewer than 50 people were let go; and 2) Those jobs created de novo overeas that may have been created in the U.S. instead were it not for the outsourcing phenomenom.
At the same time, this data also does not cover two kids of job gains via outsourcing -- 1) Those jobs created via insourcing, when a foreign firm hires U.S. workers; and 2) Those jobs created via the budgetary savings reaped from outsourcing.
The bottom line -- offshore outsourcing is responsible for a piddling number of lost jobs.
I'll be commenting on these figures this evening for Nightly Business Report on PBS. Check your local listings!!
UPDATE: Here's how Reuters plays the story:
Only trouble is, the headline says "OUTSOURCING CAUSES 9% OF U.S. LAYOFFS" -- which is true but includes onshore as well as offshore outsourcing.posted by Dan on 06.10.04 at 04:30 PM
this article says 9%posted by: joe on 06.10.04 at 04:30 PM [permalink]
Joe: You're confusing all forms of outsourcing with offshore outsourcing -- which was my concern.posted by: Dan Drezner on 06.10.04 at 04:30 PM [permalink]
“Only trouble is, the headline says "OUTSOURCING CAUSES 9% OF U.S. LAYOFFS" -- which is true but includes onshore as well as offshore outsourcing.”
This is typical liberal media bias. They are fully aware that most readers likely peruse only the headline and maybe the first paragraph. The Bureau of Labor Statistics report severely damages one of Senator Kerry's central themes. His media comrades are doing their best to assist him.posted by: David Thomson on 06.10.04 at 04:30 PM [permalink]
All the Fuss
Outsourcing is just progress towards efficiency. Yes, people will loss jobs. So what, people lose jobs every day.
It is an individual’s responsibility to make themselves employable, or at least flexible enough to find a job when theirs is outsourced.
Politicians looking for campaign issues, that is the real source of this non-issue.posted by: ClearPolitics on 06.10.04 at 04:30 PM [permalink]
“Offshoring is not at the heart of the matter," said Robert B. Reich, who served as labor secretary under President Bill Clinton. "I don't think it is a major part of the job picture."
The Devil must be given his due. In all fairness, I must concede that the headline of the New York Times this morning was appropriate. : “Not Many Jobs Are Sent Abroad, U.S. Report Says.” Please also note the above comment by liberal economist Robert Reich. He is merely stating the consensus opinion of his fellow cohorts. They all know that John Kerry is talking like a fool. One cynically wonders, though, if Reich merely desires to tell the truth---or does Bill Clinton want to torpedo the Kerry campaign?posted by: David Thomson on 06.10.04 at 04:30 PM [permalink]
David Thomson: John Kerry is talking like a fool.
What's he said then that was so foolish? Have you checked http://www.johnkerry.com/issues/economy/outsourcing.html lately? Sounds mostly harmless, doesn't it?
I'm a free trader. I don't agree with Kerry on outsourcing. I think his focus on outsourcing is exaggerated and driven mostly by the idea that it will appeal to voters.
But the focus on outsourcing here is equally or even more so exaggerated (six posts on outsourcing over the last few days!). Is this the last issue that you can identify where you can still whole-heartedly agree with Bush?
Torture? Who cares?! Quick, let's start another thread about outsourcing instead!
Tom Friedman was right. Outsourcing, far from being the bogeyman of the American job scene is a win- win situation for both Americans and thousands of people all over the world.posted by: Piranha on 06.10.04 at 04:30 PM [permalink]
“David Thomson: John Kerry is talking like a fool.
What's he said then that was so foolish? Have you checked http://www.johnkerry.com/issues/economy/outsourcing.html lately? Sounds mostly harmless, doesn't it?”
That’s much of the problem. John Kerry is trying to be all things to all people. However, we currently are battling the forces of evil in the Middle East---and President Bush clearly comprehends the task at end. He knows that the Muslim world must be brought into the 21st Century. Peace is unattainable until this is accomplished. Kerry doesn’t even have a clue. He merely gravitates towards the next set of ideas which might help him win the election. In regards to the Massachusetts senator you are always kept guessing. The current president is not a pig in a poke. He clearly lets you know where he stands on peace and war issues. More importantly, he has a proven record of taking political risks to achieve his goals. President Bush did not stop the invasion of Iraq due to the Turks not allowing us to enter Iraq from the north. This decision was not an easy one. Senator Kerry would not have been willing to confront our “allies” and do what needed doing. The man was a wimp during the Cold War and he remains one today. He will find any excuse not to do anything.posted by: David Thomson on 06.10.04 at 04:30 PM [permalink]
"2) Those jobs created de novo overeas that may have been created in the U.S. instead were it not for the outsourcing phenomenom."
After all, there's only a finite number of people who *could* have been laid off and had their jobs offshored, but the number of new jobs created by US companies overseas that never existed for US employees is essentially infinite (in theory) because that set includes all future job creation.
A little gedankenexperiment:
If American businesses didn't lay *anyone* off ever again, but simply *stopped hiring* in the US, instead hiring overseas, eventually regular attrition (through death, retirement, etc) would result in *zero* employment in the US. New entrants into the employment market would stop finding work, and if anyone did have to leave a job, they'd never find another.
Obviously, this is unrealistic, but the point is just to show why it's kinda important to consider these positions.
David Thompson ranted: "The man was a wimp during the Cold War and he remains one today."
You're talking about Bush, right? Mr. "defending the US from airborne sharks"? That's a wimp, not a guy who took shrapnel in combat in Vietnam.
"He will find any excuse not to do anything."
You're talking about Bush again, who has found excuses not to take his flight physical, thus failing to live up to his commitment to his nation during a time of war. He couldn't even do that little, when he had a posh, safe, easy, part-time military assignment.
“You're talking about Bush, right? Mr. "defending the US from airborne sharks"? That's a wimp, not a guy who took shrapnel in combat in Vietnam.”
President Bush did not serve in Vietnam. Neither Franklin D. Roosevelt nor Abraham Lincoln ever served in combat. Still, the latter gentlemen possess a solid record of running a war. The same holds true of the current president. John Kerry deserves our respect for going into combat. And yet, he is a failure in the U.S. Senate. President Reagan’s funeral took place today. John Kerry humiliated himself by opposing Reagan’s strategies in dealing with the Soviets. Guess which man turned out to be right? No, it is indeed very fair to describe Senator Kerry as a foreign policy wimp. The man has a solidly established track record that we can look at. Kerry prefers to embrace policies premised on appeasement.
Why are you so interested in Kerry? I would suspect that Ralph Nader would be more to your liking. Kerry is a mealy mouther regarding trade issues and the war. Nobody doubts where Nader stands on the issues.posted by: David Thomson on 06.10.04 at 04:30 PM [permalink]
Did you take the other outsourcing post down by mistake? The one with CNN, Lou Dobbs etc.?
The direct URL still works:
Dan--I'm not sure that these numbers really reflect what is happening. Consider the following scenario:
A major company (GM, for example) terminates its contract with a US-based parts supplier, deciding to instead make the parts in Mexico via a contract with a new supplier.
The US-based parts supplier lays off 100 people. However, these jobs were not offshored by the parts supplier; they merely went away as a result of a terminated contract. Hence, they will not be reported as "offshored" by the parts supplier, and will not show up in the numbers.
Is this interpretation correct?posted by: David Foster on 06.10.04 at 04:30 PM [permalink]
David Thomson: The current president is not a pig in a poke. He clearly lets you know where he stands on peace and war issues.
You have the audacity to say this after Bush ran in 2000 on a near-isolationist platform deriding Clinton's "nation-building exercises"? (Not a pig in a poke? Yeah, I guess it wasn't even a pig!)
And now don't come back with "9/11 changed everything". If that is so, how can you use Kerry's prior record against him? That just leaves us with Bush's post-9/11 performance and the mess he got us into in Iraq - for no good reason other than ideological neo-con dreams.
And how often have those alleged reasons for the war been revised? First it was just about WMD, then it was about a long-term Middle East strategy, then about humanitarian reasons. Except we also had to engage in torture to invalidate the very last reason that we could have held up to the World to justify what we did there.
More importantly, he has a proven record of taking political risks to achieve his goals.
Bush has a record of political flip-flops that are much more stunning than anything Kerry has ever pulled. First opposing, then vetoing a law in Texas, but then taking credit for signing it into law - when he didn't even actually sign it and just let it become law by default after his veto was overruled. That's just stunning. And this even came up during the 2000 primaries, and he still managed to pull through because his attack machinery killed McCain.
Then he explained how we had to give those huge surpluses back to the American people. Poof went the surpluses, but the tax cuts came anyway - tailored not to revive the economy, but to give a lot of money to the top 1 %. It's one thing to do this and stand by it, but it's yet another thing to blatantly lie about it and to keep claiming that "the vast majority of tax cuts goes to the bottom end of the spectrum". That's what Bush did. He lied and got away with it.
And you are still letting him get away with it. And even worse, you even claim he's been consistent and straight-talking when in fact he's been lying, flip-flopping, reversing course and taking credit for things he didn't do.
President Bush did not stop the invasion of Iraq due to the Turks not allowing us to enter Iraq from the north.
Amazing how you turn a diplomatic failure that probably would never have happened in the first place under a skilled diplomat like Kerry into an asset for Bush!
David Foster: Yes, I think your interpretation is quite correct. My company is just going through something similar - not quite the same, but it comes out to the same effect. Jobs lost are not counted as outsourced, even though at least some of them probably wouldn't have been lost if Management hadn't already been planning the new offshore operation.
I wrote about that in the thread that's been removed from the main page, for whatever reason:
“President Bush did not stop the invasion of Iraq due to the Turks not allowing us to enter Iraq from the north.
Amazing how you turn a diplomatic failure that probably would never have happened in the first place under a skilled diplomat like Kerry into an asset for Bush!”
This is probably the number one myth advanced by the Kerry campaign. It is utterly ridiculous that somehow President Bush might have diplomatically persuaded France, Germany, and Russia, to support the war on Iraq. As matter of fact, the French conned Colon Powell. They stabbed the Secretary of State in the back. The lack of cooperation of these three “allies” discouraged the Turks from opening their territory to our troops. We now know that these countries were playing footsie with saddam Hussein under the table.
George W. Bush did indeed tend towards isolationism before 9/11. But he always argued for a resolute foreign policy willing to defend our national interests. Not so, Senator Kerry. His record has always been one of appeasing our enemies. We can live with Bush’s turn against isolationism---but we cannot accept a known appeaser as leader of our country!
When you complain about the Neo-cons, are you possibly hinting that the Jews got us to invade Iraq? Has neo-con become a synonym for Jew? Both the far right and radical left hold this position. Is this also your own?posted by: David Thomson on 06.10.04 at 04:30 PM [permalink]
David Thomson: It is utterly ridiculous that somehow President Bush might have diplomatically persuaded France, Germany, and Russia, to support the war on Iraq.
This is entirely beside the point. Do you have any evidence at all for your allegation that Turkey somehow gave in to French or German or Russian pressure to not open its borders for our troops? In fact the Turkish government had already agreed to let us in, it was the Turkish parliament that then didn't authorize it. I find it quite unbelievable that Turkish parliamentarians would do what the French or German or Russian governments wanted them to do. Again, do you have any evidence to the contrary, or did you just make this up on the spot?
We now know that these countries were playing footsie with saddam Hussein under the table.
You are extremely quick to accept for facts allegations that you like, aren't you? Just as quick as you are otherwise to dismiss allegations you don't like. This is just an observation - I have no inclination to defend France or Russia (I don't think Germany has been accused of anything in connection with "oil-for-food").
Not so, Senator Kerry. His record has always been one of appeasing our enemies.
Repeating lies doesn't increase their truth value, you know.
When you complain about the Neo-cons, are you possibly hinting that the Jews got us to invade Iraq?
What?? How could anything I wrote have led you to believe that? I couldn't care less about the ethnic or religious background of the neo-cons.
Both the far right and radical left hold this position. Is this also your own?
No, it's not, and I am also no member of the "radical left". I have indeed had discussions with those types, too, and they called me "a member of the Israel faction", among other things, which they meant as an insult. They also called me, believe it or not, a "Bushist".
I guess it does all depend on one's point of view. Sigh.
I note that you had no response to Bush's flip-flops and lies.
Not to be overly cynical, but I note that the method of the survey was to ask the employers what the reason for the layoff was. Perhaps the result would have been 6% if they asked the laid off employees?posted by: Eli Rabett on 06.10.04 at 04:30 PM [permalink]
"I find it quite unbelievable that Turkish parliamentarians would do what the French or German or Russian governments wanted them to do."
Many members of the Turkish political community want to be members of the EU. Opposing the wishes of these three major European nations was perceived to risk that growing relationship.
“Not so, Senator Kerry. His record has always been one of appeasing our enemies.
Repeating lies doesn't increase their truth value, you know.”
Are you smoking an illegal substance? John Kerry’s opposition to President Reagan during the Cold War is well established. He was indeed an appeaser of the Soviet Union. How could you be so uninformed?posted by: David Thomson on 06.10.04 at 04:30 PM [permalink]
David Thomson: Many members of the Turkish political community want to be members of the EU. Opposing the wishes of these three major European nations was perceived to risk that growing relationship.
First off, Russia is not a member of the EU.
Secondly, the Turkish government has a majority in parliament, but some islamist nationalists of the ruling AKP joined the anti-war left-of-center CHP in voting against getting involved in the Iraq war. The vote was extremely close, and there were actually more votes in favor than against, but they didn't get the necessary absolute majority.
It is quite interesting to see how your global political speculations are so NOT grounded in reality.
John Kerry’s opposition to President Reagan during the Cold War is well established. He was indeed an appeaser of the Soviet Union.
Kerry's opposition to Reagan and his huge deficits does not make him an "appeaser of the Soviet Union" - that's just ridiculous.
There was an extremely interesting op-ed in the New York Times yesterday: How Reagan Beat the Neocons.
Here are some quotes from the article:
Mr. Reagan eagerly sought to work with Mr. Gorbachev to rid the world of such weapons and to help the Soviet Union effect peaceful change in Eastern Europe.
posted by: gw on 06.10.04 at 04:30 PM [permalink]
For the love of God please use spell check when writing your column. It is hard to take anyone seriously with so many misspellings in their argument.posted by: Juan Rivera on 06.10.04 at 04:30 PM [permalink]
Job losses during and after the recession may not have been caused by offshoring. They might have been a reaction to the business cycle, efforts to cut costs during the slump, etc.
But, two years later, if the company decides to staff up again, but goes offshore rather than hiring locally, that wouldn't count in the survey as "offshoring-related layoffs", even if the staffers laid off 2 years prior were being replaced, belatedly, by offshore workers.
So, again, the BLS study is worth less than you're prepared to admit.
Furthermore, I'm not sure why a measure of layoffs is important during a period when layoffs are down, anyway.
Nobody'd fear being laid off, whether their job was offshored or not, if they didn't worry about finding a new job. Finding a new job is made difficult by slow job growth, which is exacerbated by offshoring, particularly offshoring of jobs that are new, or jobs which were cut some time ago.
The BLS report seems to be answering questions that are beside the point.posted by: Jon H on 06.10.04 at 04:30 PM [permalink]
The numbers are skewed badly.
A good number of IT workers (in many corporations, nearly 2/3 of total IT force is comprised of consultants/contractors). Many of these are independents who subcontract out to a "pimp" firm, er, consultant firm. People don't get "laid off" from those jobs, their contract is completed or terminated.
So I would say you have to multiply the number by a factor of 2 or 3 to get an accurate representation. That is, if you place creedence in self-reporting...posted by: naum on 06.10.04 at 04:30 PM [permalink]
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