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Truth and Consequences of Offshoring

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Publication Date: August 2005

Publisher(s): Economic Policy Institute

Author(s): Josh Bivens

Topic: Labor (Employment and labor supply)

Type: Brief

Abstract:

Over the past two years, economic observers have focused attention on a new trend in the American economy: increased global competition for white-collar jobs that used to seem well-insulated and secure. While blue-collar labor (particularly in manufacturing) has felt a squeeze from global competition for decades, both in terms of employment security and wage growth, white-collar jobs held by well-credentialed Americans have been largely safe from pressures stemming from the global labor market.

Recent reports of companies sending work abroad, ranging from call-center operators to software programmers, have changed this feeling of security. Such insecurity, especially coming from a group that many assumed would be a prime beneficiary of globalization--i.e., well-credentialed, white-collar workers--has generated a potent political anxiety about the implications of global economic integration for American workers.

In response to this anxiety and an incipient political backlash against offshoring, a number of studies have been released by various organizations touting large economic benefits that will accrue to the American economy through the offshoring of white-collar work. A closer examination of these studies, however, shows that the promised benefits of offshoring are far overstated, while the likely economic costs are not addressed at all. Further, even the potential benefits to the American economy from offshoring are likely to be concentrated in the incomes of a relatively select percentage of American households.

This briefing paper examines three studies claiming that the offshoring of white-collar work will result in large benefits to the U.S. economy.