Ferguson: Offshoring Impact on US Employment Exaggerated
An article at Newkerala.com quotes yet another US official who says that reports of losses incurred through offshore outsourcing have been greatly exaggerated.
Federal Reserve Board Vice Chairman Roger W. Ferguson Jr. said during the remarks at the Cato Institute in Washington that "We must not exaggerate the importance of outsourcing to the nation's overall employment picture."
Although he said he had no "conclusive data" to prove his argument, Ferguson cited a study by the Forrester research firm projecting that fewer than 300,000 jobs a year will be displaced through services outsourcing over the next decade -- "less than two percent of the 15 million in total gross job losses" expected during that period.
Ferguson also contended that "only a fraction" of those jobs represent high-skill, high-wage jobs and that the US itself gains employment by performing service jobs for other countries.
Cautioning against erecting trade barriers to prevent jobs from leaving the US, the official said: "The proper response to the disruptions associated with trade is not to reduce trade, but rather to ameliorate the pain associated with those disruptions through enhanced assistance and retraining for displaced workers."
He said protectionism "is not the appropriate response" to the US current account deficit, which is now above five percent of the gross domestic product (GDP). The current account is the broadest measure of US transactions with the rest of the world.
Don Hicks, Vice Chairman of the American International Auto Dealers Association, also cited this Forrester research in August this year when he published an article in defense of offshore outsourcing, saying it does not mean lower wages for Americans, and does not take away jobs from US workers.
In April this year, at the Twelfth District Community Leaders Luncheon at the Federal Reserve Bank of San Francisco, California, Ferguson said:
Other observers have pointed to the outsourcing of production abroad as a reason for the weakness in the labor market. Again, however, the magnitude of this phenomenon seems too small to explain more than a small part of the decline in employment over the past two years. Private-sector estimates of outsourcing are on the order of 1 percent of the gross job losses that occur each year. Moreover, because outsourcing abroad represents a shift of both production and labor input to a foreign country, outsourcing is probably not a major explanation for our recent history of elevated productivity growth.
...
In the longer run, it is important that we as a society recognize the considerable economic benefits associated with sustainable increases in productivity and intensify our efforts to ensure that as many individuals as possible profit from the substantial productivity gains associated with innovation and increased competition. Unless we do so, the support of the population for flexible markets, technological change, and free and open trade--so crucial to the ongoing improvement of our standard of living--will erode further.
Even in this earlier speech, Ferguson emphasized the need for retraining displaced workers, for the US to offset the job losses brought about by offshoring on the domestic front.
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