Magazine article Foreign Policy in Focus

Outsourcing: A Policy Agenda

Magazine article Foreign Policy in Focus

Outsourcing: A Policy Agenda

Article excerpt

Key Points

* Although the number of U.S. service jobs lost to outsourcing is currently small relative to the total work force, the fear of a seemingly limitless loss of jobs to lower-wage countries has caused widespread anxiety.

* U.S. companies dominate global services outsourcing, and India is the top developing-country destination.

* National and state legislators have introduced a flurry of anti-outsourcing bills, but corporations are mounting a strong counter-attack.

"Don't worry; they'll get better jobs in the service sector." During the last three decades of the 20th century, this was the mantra of most government and business leaders when corporations transferred auto or apparel jobs to Mexico or China. That line doesn't work anymore, since U.S. companies have started shifting a wide range of service jobs as well--from high-skill computer programming to entry-level call center jobs--to India and other lower-wage nations. This breaching of the final frontier of American jobs has caused understandable anxiety and has become a hot-button issue in the presidential election campaign.

The trend toward foreign "outsourcing" of service jobs is an extension of a longstanding practice of cutting costs by subcontracting parts of business operations to nonunion shops within the United States. The practice has gone global, in part because of technological changes. Massive amounts of information can now be transmitted across the world at low cost, making geographic distances less important. International financial institutions and trade agreements have also facilitated the trend by promoting investment liberalization and privatization of public services, creating new opportunities for U.S. corporations in overseas markets.

Forrester Research estimates that about 40 percent of Fortune 1,000 firms have already outsourced some work and that at least another 3 million service jobs will leave the United States by 2015, led by information technology work. A study by the University of California, Berkeley estimates that 14 million U.S. jobs (11 percent of the total work force) are vulnerable to being outsourced.

Although the number of jobs lost so far is small relative to the total work force, these layoffs have a huge impact on the affected communities, and the potential for white-collar jobs to be offshored is deeply unsettling for many American workers. In addition to job cuts, service workers must now also contend with the enhanced power of highly mobile, increasingly unregulated global corporations to bargain down U.S. wages and working conditions by threatening to move jobs elsewhere.

According to McKinsey and Company, a consulting firm that helps businesses develop offshore operations, U.S. companies make up about 70 percent of the global outsourcing market. …

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