In the midst of election year outsourcing hysteria, few are taking the time to look at the other side of the offshoring coin. On March 4th, Senator Mitch McConnell introduced a new term to the debate, "insourcing." Insourcing is simply the practice of foreign companies investing in the United States. It has been going on for ages, and it benefits American workers more than outsourcing harms them. According to a U.S. Chamber of Commerce report released in April 2004, the outsourcing naysayers overlook several crucial long-term aspects outsourcing and its insourcing counterpart contribute to the domestic economy. The labor shortage the United States will face in the coming decades due to baby boomer retirement, the large surplus enjoyed in the services trade sector, and the beneficial impact international trade has on labor are virtually unmentioned aspects of U.S economic reality by those who condemn Benedict Arnold CEOs. Ultimately, international trade and investment leads to peaceful, prosperous societies that are efficient, productive and successful.
The U.S Chamber of Commerce estimates that between 2000 and 2010, the baby boomer generation will retire in earnest, and while the labor force is expected to grow by 12%, the number of jobs available should increase by 17%. This shift will continue throughout the decade, and by 2020, the number of retirees will increase by 100%. As a result the United States will face a job surplus of about 10,000,000. Industries such as construction, teaching, nursing, auto repair, and truck driving are expected to be the most heavily in need of workers. Interestingly, none of these jobs are in danger of being outsourced. If a worker shortage is on the horizon, why are politicians, unions, and workers crying job theft?
Additionally, the United States currently runs a $60 billion surplus in the services trade sector, and if it were not for foreign investment in the United States, that number would be significantly lower. According to the Organization for International Investment (OFII), in 2003 alone, new foreign investment in U.S. markets doubled, the total value of which stands at $487 billion and supports 6.4 million jobs. Firms such as Honda, Nestle, Siemens, Sony and Nissan employ thousands of American workers.
Opponents argue that foreign investment in the United States leads to job loss, often citing the period 1991-2001 when foreign owned subsidiaries eliminated 2.78 million American jobs. However, upon closer examination that number averages out to a job loss of 278,000 annually. This number is further diminished when one considers that, according to Dan Griswold of the Cato Institute, "even in times of healthy employment growth, 350,000 people file for unemployment insurance every week." When one considers the bigger picture, 2.78 million jobs lost over a ten-year period cannot be deemed a hefty amount. That is not to diminish the hardship faced by the unemployed, but in an economy that employs 138 million workers, 2.78 million jobs represents less than 3% of the total workforce.
The National Center for Policy Analysis estimates that insourcing led to the creation of 6.4 million new jobs within the United States, a large number compared to the Forrester Research Group estimates, which predict that by 2015, 3.3 million white collar jobs will be outsourced. OFII devotes part of its website to "The Facts About Insourcing." According to their statistics, foreign owned companies operating in the United States support $350 million in worker salaries, 19.1 % higher than the pay offered by their American owned counterparts.
Interestingly, the 16 of the 20 states OFII lists as benefiting from job insourcing are all proposing legislation to curb outsourcing. California, New York, Illinois, and thirteen other states that benefit the most from insourcing are inexplicably proposing legislation to limit outsourcing of so-called American jobs abroad. Hopefully this is a passing phenomenon and that the rash over-legislation of pandering politicians won't force other countries to retaliate in kind.
The contradictory policies of certain state governments may appear to be the answer to worker fears, but the reality is that for workers, insourcing and outsouring, (or foreign direct investment, as it is technically known) are a beneficial and necessary aspect of the global economy. American workers are still in demand worldwide, as insourcing proves. They will also diminish in number with the coming baby boomer retirement. The much hyped-services sector is still running a surplus, despite companies' hiring of foreign workers, and the "jobless recovery" seems to be over, given the most recent unemployment reports. Despite these positive conditions, some persist on demonizing international investment as anti-labor, anti-American, and anti-freedom. If they continue to ignore the facts, their worst fears will be realized.
However you choose to describe it (insourcing, outsourcing, foreign investment), the fact is that international trade is not only economically advantageous; it helps to foster cordial relations between states bolstering international security. A mutually beneficial economic relationship can work wonders for political relations, strengthening ties between countries and encouraging cooperation on a number of fronts. Globalization has brought about an interdependence that can lead to prosperity if states approach these changes in the right way, but a country that attempts to implement protectionist or isolationist economic policies is denying itself the chance for long-term peace and prosperity.
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