C Recent media attention has focused on the debate over the implications of U.S. companies
“outsourcing” manufacturing, and now service, functions to foreign companies.
C Referred to by a variety of terms – “outsourcing,” “offshoring,” and “worldwide sourcing”
– economists widely agree that outsourcing is an important component of a free-market
economy, holding significant benefits for businesses apart from mere labor-cost saving.
C Foreign-owned corporations, such as Siemens, Toyota, and Novartis, are also taking
advantage of outsourcing to bring valuable jobs into the United States. In fact, 6.4 million
Americans were working in such jobs in 2000.
C Despite its economic benefits, outsourcing has an inescapable consequence – jobs
previously performed in the United States are moving to developing nations.
In this situation, the government has a role in addressing these dislocations by helping the
individual worker develop the skills for available jobs.
C The Senate should consider both short-term and long-term solutions:
% Most immediately, dislocated workers need help finding new employment. A variety
of public- and private-sector programs are already available, and additional options
exist to expand such worker assistance.
% More broadly, the Senate must address the underlying issues in the U.S. business
environment that are motivating American companies to embrace worldwide sourcing
and hindering their ability to create new jobs in the United States. These issues are
concentrated in the areas of employee-benefits costs, tax rates, regulatory-compliance
burdens, litigation costs, and energy prices.
March 3, 2004
Outsourcing: Meeting the Challenges
Without Destroying the Benefits
1“I think outsourcing is a growing phenomenon, but it’s something that we should realize is probably a plus
for the economy in the long run,” Remarks by Greg Mankiw, Ch