Job loss claims are a myth

Is the U.S. exporting its best jobs overseas? Many people believe so. Manufacturing positions are fleeing to China, they say, and service-sector employment is being "offshored" to India. However, the doomsayers have it all wrong, argues Brink Lindsey, director of the Cato Institute's Center for Trade Policy Studies, Washington, D.C. In "Job Losses and Trade: A Reality Check," he combats the current job-loss hysteria with a broad array of facts and figures:

Job losses are normal. From 1993-2002, total U.S. employment grew by 17,800,000. Yet, during that decade, 310,000,000 jobs were eliminated--and replaced with 328,000,000 new jobs. Job losses are an inescapable part of a dynamic market economy.

"Deindustrialization" is a myth. While manufacturing's share of gross domestic product has been declining, the primary cause is the superior productivity of U.S. manufacturers. Output per hour in the overall U.S. nonfarm business sector rose 50% between 1980 and 2002; by contrast, manufacturing output per hour shot up 103%. Meanwhile, total output has climbed 93% between 1960 and 2003.

The recent drop in manufacturing employment was not due to imports. Between 2000 and 2003, manufacturing employment fell by nearly 2,800,000. Over the same period, though, manufactured imports rose a mere 0.6%.

Offshoring helps to boost productivity and economic growth. The offshoring of computer-related manufacturing jobs has accounted for 10-30% of the drop in hardware prices, according to Catherine Mann at the Institute for International Economics. The resulting increase in productivity encouraged the rapid spread of computer use and thereby added $230,000,000,000 in cumulative additional gross domestic product between 1995 and 2002. Offshoring of computer-related service jobs could promote further diffusion of information technology throughout the economy.

The U.S. is an information technology net exporter. This country runs a trade surplus in the IT services most directly affected by offshoring. In the categories of "computer and data processing services" and "data base and other information services," the U.S. ran a trade surplus of $4,200,000,000 in 2002 (double that of 1995). If politicians declare war on outsourcing, American producers and workers will suffer the most.

The present job scare is nothing new; similar fears have arisen during previous economic downturns. Lindsoy states that "again and again, serious and influential voices have raised the cry that the sky is falling. It never does. The root of their error is always the same: confusing a temporary, cyclical downturn with a permanent reduction in the economy's job-creating capacity." Like the downturns, the rhetoric never lasts. "Each time, those predictions were put to rest by the ensuing economic expansion."

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