Outsourcing the American dream?

By Christian Sandstrom | 26 July 2005

A recently published book by Christopher M. England, Outsourcing the American Dream, is skeptical towards today's outsourcing process. A dramatic passage like the following one is typical for the book:

The Mighty Eagle, corporate America, is eliminating its most valuable asset, its employees in order to save money.

Clearly, the same old worry that "our jobs" are lost is on the loose again. It is true that millions of US jobs have vanished over the past years. But nonetheless, unemployment remains low in America. Old jobs are constantly eliminated, but only in order to create new ones elsewhere in the economy. For instance, between 1993 and 2002, 309.9 million jobs were eliminated in the US. But during this period, 327.7 million jobs were created, which results in a net gain of 17.8 million jobs.

Moreover, the new jobs tend to be better than the old ones. For example, as a share of the IT workforce, the jobs that require high skills have increased from 55% to 59% between 1999 and 2002. In spite of the offshoring trend, the US Department of Labor forecasts a 35% increase in computer and maths related jobs over the next decade. Just as the classical liberals of the 19th century predicted, less skilled jobs are being swapped for relatively higher skilled jobs that are better paid.

Furthermore, Mr England refers to the outsourcing process as a short-sighted way of making profits. But outsourcing is anything but short sighted. In the same way as jobs can be lost because of new technologies or new work processes, they can be lost by trade and offshoring. It's all a part of the long-term process of innovation and productivity that is the main source of economic growth.

Holding back this process in order to avoid temporary job losses, on the other hand, is extremely short sighted. In contrast to what Mr England believes, the American dream lives on in America, partly thanks to outsourcing.