Is Moving Jobs Offshore Really That Bad?

By Deane Barker on October 26, 2003

Who wins when jobs move offshore?: McKinsey has an opinion piece that has some interesting things to say about the current trend in shipping U.S. jobs overseas.

“Many people believe that money spent to buy services abroad is lost to the U.S. economy, but such views are easily disproved. Companies move their business services offshore because they can make more money, which means that wealth is created for the United States as well as for the country receiving the jobs.

[…] from 1979 to 1999, 69 percent of the people who lost jobs as a result of cheap imports in sectors other than manufacturing were reemployed. The mean wage of those reemployed was 96.2 percent of their previous wage. [There’s a tendency to catch your eye on the “96.2 percent of their previous wage” figure, which seems good, but note that only “69 percent” of people were reemployed at all. — Deane]

[…] Indian companies that provide offshore services need goods and services themselves, ranging from computers and telecommunications equipment to legal, financial, and marketing expertise. Often, they buy these from U.S. companies. We estimate that for every dollar of corporate spending that moves offshore, suppliers of offshore services buy an additional 5 cents worth of goods and services in the United States.”

Read the entire piece — it’s very well thought-out. The reaction to jobs heading offshore is very knee-jerk, because on the surface it’s so obviously a bad thing. But is it really? I don’t make any claims as to the validity of McKinsey’s claims here, but this article makes you think about it.