Opinion column: The benefits of misery

By David Johnson

News media love pain and misery. They especially love them when they can be personified – when a few individuals or families can be shown and their distress generalized into a social phenomenon. They jump at the chance to run a story of individual pain and suffering, like those of the millions of white-collar, college-educated workers who have lost their jobs to foreigners over the past several years. Thus we come to equate offshore outsourcing (or “offshoring”) as bad; how could anything that causes so much pain and suffering ever be positive? This view is confirmed by recent surveys suggesting 66 percent of Americans think offshore outsourcing is bad for the economy, and 58 percent believe companies that engage in it should be penalized. Yet, outsourcing isn’t all bad. In fact, it should be embraced as an evolution of modern technology, improving the quality of life for people here and across the globe.

First, a bit of economic theory: intuitively, we may be tempted to view a job moving overseas as a loss to the economy; after all, money leaves the country, and someone is out of work. While mostly true, this analysis ignores other important economic points. The idea of comparative advantage means that if each nation produces those things (whether goods or services) that it does relatively best, the total output of the world economy is greatest. However, what about the U.S. specifically?

The primary reason for companies to relocate services to foreign countries is to reduce costs. Reducing costs means some companies can stay in business, while others now have the opportunity to expand by creating more jobs here (administratively) and abroad. Furthermore, reducing costs leads to lower prices, which means we can buy more goods and services. The transfer of jobs that are now cheaper elsewhere means prices go down. It’s painful to see someone out of a job, but would you really like to pay two or four times as much for everything you buy?

Thus, we can say that because of offshore outsourcing, overall we can afford a better standard of living, and enjoy job creation that somewhat offsets those jobs lost due to relocation.

Of course, real life is more complicated than economic theory. Talking about improving the balance sheet will do little to console those who have lost their jobs and don’t know how they’ll continue to support their families. This is where actual numbers come in.

Imports of services have increased dramatically since the onset of offshoring. However, exports have increased even more, to the point where the U.S. now exports $4.2 billion more than it imports. Clearly the transfer of these jobs is helping our economy because more money comes into our economy than is going out. Furthermore, despite the loss of many service sector jobs due to offshoring, this part of our economy continues to grow. The Bureau of Labor statistics recently predicted that over the next 8 years, professional jobs will grow in number from 43 to 52 million, further increasing the total percentage of jobs in this country in professional services.

Relocating jobs is akin to any technological advance that increases productivity. When the automobile became affordable and widespread, almost every fashioner of buggy whips went out of business. Similarly, the light bulb put candle-makers and whalers in the red. But would anyone seriously argue that those performing an inefficient task deserve to bring the economy down with them?

In short, times change. Our grandparents may well have spent their entire career at one company, rising on the ladder to a comfortable retirement. Our parents have likely moved around some, but by and large stayed in similar professions. Our generation will likely not only switch jobs often, but probably to entirely different markets and industries, learning new skills along the way. So we must not only learn skills; we need to learn how to learn. After all, the job we have now might be outsourced next month.