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For those of you not in the US, outsourcing has become an enormous political
issue over the past few months, with Democrats and Republicans both going on
the rampage agaist "Benedict Arnold CEOs[who] send American jobs overseas"
(© John Kerry). Lou Dobbs, the CNN business reporter, seems obsessed to
the point of monomania on the issue. And two senatorslawmakers from Connecticut (yes,
Connecticut, not South Carolina) are sponsoring the USA Jobs Protection Act
to prevent US companies outsourcing jobs when American workers are available.
Amid all this rhetoric, the truth will out eventually. And Dan Drezner is the perfect person to out it. He's now published a magnificent Foreign Affiars article extolling the virtues of outsourcing; good blogger that he is, he's listed all his sources here. After reading the article, we learn that:
Drezner's just as partisan as his opponents, of course. One minute he says that you shouldn't make comparisons with the year 2000 because that year was a statistical blip thanks to the dot-com bubble and Y2K fears; the next minute, when discussing "insourcing", he goes ahead and does just that. But given the one-sided nature of the debate so far, we needed a strong response, and this is it.
Even better, he's helped to settle the debate that Charles and I were having about whether steel tariffs were good or bad for US employment: Drezner, citing the Institute for International Economics, says that, net-net, "between 45,000 and 75,000 jobs were lost because higher steel prices made US steel-using industries less competitive".
In the grand scheme of things, however, I doubt this essay is going to reduce the rhetorical viability of outsourcing as a political bludgeon one iota. Politicians don't care about facts: what they want is something that sounds good and plays well to their audience. The best we can hope for, in the words of Robert McTeer, president of the Federal Reserve Bank of Dallas, is that we "get through the year without doing something really, really stupid".
Felix --you might try reading the original Hufbauer and Goodrich article. Along with enough assumptions to open a can-opener store, they say that if the crudely estimated change in labor income in steel-using industries was all taken in job losses, then *that* would equal 26k jobs. Of course, it wouldn't be. It would be taken in slightly slower pay rises, probably --which is pretty much what I suggested in our original exchange.
Posted by: Charles on March 24, 2004 05:16 PMOK, I've read the article, and I'll agree that Drezner is over-egging the pudding: I don't see a range of 45,000 to 75,000 anywhere. Your 26,000 number, on the other hand, comes not from the IIE numbers, but from the USITC numbers, which imply a much lower net loss of jobs. The USITC was working on an assumption of a 0.93% increase in steel prices, while the IIE chaps were working on an assumption of a 3.3% increase.
The key thing to note here, however, is that the better the steel tariffs work -- the more that steel prices rise -- the worse the total impact on employment. At the margin, steel tariffs cost jobs, rather than save them.
Posted by: Felix on March 24, 2004 06:37 PMKey things to note here are that (1) we can say nothing about employment and (2) we can't really say much with any certainty about any impact at all. This is why it is better for Matthew to be in love, right and probably wrong than out of love, left and probably right.
Posted by: charles on March 24, 2004 08:47 PMI think Felix's last paragraph hits the nail on the head: economic theory ain't going to play in Peoria. It barely played in my micro & int'l trade theory classes.
A stronger argument with voters would focus more on the updating of TAA (and other safeguards) as a better way to protect workers from economic shifts: currently, you can't even apply for it individually, like you can with unemployment (only union reps or employees in groups of three or more need apply). Nor, as Drezner mentions, are you eligible unless your whole industry is in a slump.
(Also, Felix: it was a Senator and a Representative -not two Senators- from Conn. that proposed the Jobs Protection Act. When I first read that line, I was surprised to see Joe Lieberman suggesting such a thing...)
Posted by: mike on March 24, 2004 09:29 PMA lot of those outsourcing estimates are really off, and they don't calculate the fact that a lot of the jobs that are lost are replaced by jobs that suck a ton. Like if you lose a 10 dollar an hour a job with benefits and end up at Walmart working 30 hours a week for less pay and no benefits...that's not exactly evening out.
And as a Village Voice article profiled so well, is that often the cost of education or re-education is so high that once you're done with it you NEED to work to play catch up to pay off accumulated debt and just when you start to make headway WHOOPS we've outsourced your job again and you have to start all over again.
Also lost in this debate is that life is supposed to be about more then survival and accumulation of stuff. I wish more people, more politicians would ask about the big picture, like what the heck life is about, what we're doing here on this planet, what's THAT about, and figuring out how to create a planet where people can reach for a higher purpose then figuring out how to get McDonalds jobs reclassified as Manufacturing jobs and keeping us all stuck in the quagmire. I'm lucky to have a job, but I really question why I NEED to be at work for fourty hours a week and I wonder why as an 'adult' I have less control over my life then I did as a student/child.
Posted by: Kendra on March 26, 2004 05:50 PM