13 May 2005

The claim by outsourcing's proponents that outsourcing creates new and better jobs for Americans is pure fantasy

Paul Craig Roberts dissects the BLS April 2005 job numbers and debunks the phony jobs hype.
Outsourcing's proponents claim that it benefits corporations and their shareholders. This is true only in the short run. The substitution of foreign labor for American labor allows executives to reduce costs and increase profits, thus producing large bonuses for themselves and capital gains for shareholders. The long run effect, however, is to destroy the US consumer market and to reduce US corporations to a brand name with a sales force selling foreign made products to Americans employed in third world jobs.

Offshore outsourcing is a new phenomenon that has received little attention from economists, who mistakenly view offshore outsourcing as just another manifestation of the beneficial workings of free trade and comparative advantage. In fact, offshore outsourcing is the flow of resources to absolute advantage. Economists have known for two centuries that absolute advantage does not produce mutual gains. Unlike the operation of comparative advantage, absolute advantage produces winners and losers.

80% of the new jobs in the private, or nongovernment sector were service sector jobs (and 60% of those went to Hispanics, who only comprise 13% of the work force), and keep in mind, those are the types of jobs that will be displaced by automation and robotics.