Home > Congressional Research Service, globalization, labor > CRS — Offshoring (or Offshore Outsourcing) and Job Loss Among U.S. Workers

CRS — Offshoring (or Offshore Outsourcing) and Job Loss Among U.S. Workers

December 20, 2012

Offshoring (or Offshore Outsourcing) and Job Loss Among U.S. Workers (PDF)

Source: Congressional Research Service (via Federation of American Scientists)

Offshoring, also known as offshore outsourcing, is the term that came into use more than a decade ago to describe a practice among companies located in the United States of contracting with businesses beyond U.S. borders to perform services that would otherwise have been provided by in-house employees in white-collar occupations (e.g., computer programmers and systems designers, accounting clerks and accountants). The term is equally applicable to U.S. firms’ offshoring the jobs of blue-collar workers on textile and auto assembly lines, for example, which has been taking place for many decades. The extension of offshoring from U.S. manufacturers to service providers has heightened public policy concerns about the extent of job loss and the adequacy of existing programs to help unemployed workers adjust to the changing mix of jobs located in the United States so they can find new positions.

No comprehensive data exist on the number of production and services workers who have lost their jobs as a result of the movement of work outside U.S. borders. The only regularly collected statistics on jobs lost to the out-of-country relocation of work come from the U.S. Bureau of Labor Statistics’ (BLS) series on extended mass layoffs. Since 2004, BLS has asked firms with at least 50 employees that let go at least 50 workers in layoffs that lasted 31 or more days whether the firms moved the laid-off workers’ jobs out of the United States. Given the series’ exclusion of small companies and focus on large layoffs, it underestimates the number of jobs lost to offshoring.

Researchers have tried to fill this gap by determining which occupations possess characteristics that make them relatively vulnerable to being offshored (e.g., routine task content and able to be performed at a distance from customers due to advances in communications technology) and the number of persons employed in those occupations in a given year. Those studies usually have focused on occupations that provide services. One analysis by the BLS estimated that in 2007, 30 million people were employed in service-providing occupations it found to be potentially offshorable; they accounted for over one-fifth of total employment in that year. The serviceproviding occupations that BLS deemed most vulnerable to being offshored had quite different skill requirements: administrative support occupations (e.g., office clerks) typically have lower education or training requirements than professional and related occupations (e.g., computer programmers). One of the few studies that includes both production and services occupations similarly concluded that, whether measured by education or wages, jobs with offshorable characteristics run the gamut from less to more skilled. According to one of Blinder’s estimates, about 29 million workers were employed in offshorable production and services occupations, or a little over one-fifth of total U.S. employment in 2004.

This approach may overstate the number of jobs that actually have been or will be lost to offshoring because it does not consider other factors that may affect employers’ decisions about the location in which work is performed. Some observers note cases of firms bringing jobs back to the United States for such reasons as dissatisfaction with the quality of service being provided, narrowing of the wage gap between U.S. and some nations’ workers, and increases in the cost of shipping goods to the United States. Others point to strategies that offshore outsourcers have used to work around some obstacles.

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