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Offshoring Has Little Effect on U.S. Economy

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Sept. 28, 2004 -- Despite a recent surge in offshoring and its emergence as a key issue this election season, there remains little evidence that it is significantly affecting the U.S. economy, according to a new study.

A report released last week by the Government Accountability Office called offshoring a "small but growing trend" relative to U.S. imports of other services. The practice -- sometimes also called outsourcing -- generally refers to replacing services produced domestically with services imported from abroad, and has become most notably symbolized by the loss of certain technology and customer service call-center jobs to India. After an eight-month study, the GAO found that while outsourcing may be on the rise, there remain few accurate means to quantify jobs lost to offshoring or measure the net gains and losses for the U.S. economy.

"Offshoring causes controversy because some jobs are lost immediately and visibly, while other potential impacts such as lower costs, job creation in other sectors, and economic growth are less visible, more diffuse and typically delayed," the report stated.

The GAO cited Commerce Department trade statistics showing that U.S. imports of business, professional and technical services commonly associated with offshoring grew 77%, from $21.2 billion to $37.5 billion, between 1997 and 2002. But data show that U.S. exports of those same services increased by 49% during that period, and that the U.S. still maintains an overall trade surplus in this category.

The report also cited Department of Labor's Mass Layoff Survey (MLS) figures showing that layoffs attributable to overseas relocation have increased since 1999, but that such layoffs amounted only to 13,000 workers, or less than 1% of the 1.5 million layoffs reported in 2003. The GAO noted, however, that the survey was limited because it only looked at companies with 50 or more employees that reported significant layoffs of at least 50 people within a 5-week period.

While currently available statistics offer insight into some basic trends, the reported noted that they do not provide a complete picture of the various and complex business transactions encompassed by offshoring. The GAO made no specific recommendations based on the findings of the study.





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