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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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Congressional Research Service (CRS)

 

Offshoring (or Offshore Outsourcing) and Job Loss Among U.S. Workers

Linda Levine, Specialist in Labor Economics

December 17, 2012

http://www.fas.org/sgp/crs/misc/RL32292.pdf

[full-text, 12 pages]

 

Summary

Offshoring, also known as offshore outsourcing, is the term that came into use more than a

decade ago to describe a practice among companies located in the United States of contracting

with businesses beyond U.S. borders to perform services that would otherwise have been

provided by in-house employees in white-collar occupations (e.g., computer programmers and

systems designers, accounting clerks and accountants). The term is equally applicable to U.S.

firms’ offshoring the jobs of blue-collar workers on textile and auto assembly lines, for example,

which has been taking place for many decades. The extension of offshoring from U.S.

manufacturers to service providers has heightened public policy concerns about the extent of job

loss and the adequacy of existing programs to help unemployed workers adjust to the changing

mix of jobs located in the United States so they can find new positions.

 

No comprehensive data exist on the number of production and services workers who have lost

their jobs as a result of the movement of work outside U.S. borders. The only regularly collected

statistics on jobs lost to the out-of-country relocation of work come from the U.S. Bureau of

Labor Statistics’ (BLS) series on extended mass layoffs. Since 2004, BLS has asked firms with at

least 50 employees that let go at least 50 workers in layoffs that lasted 31 or more days whether

the firms moved the laid-off workers’ jobs out of the United States. Given the series’ exclusion of

small companies and focus on large layoffs, it underestimates the number of jobs lost to

offshoring.

 

Researchers have tried to fill this gap by determining which occupations possess characteristics

that make them relatively vulnerable to being offshored (e.g., routine task content and able to be

performed at a distance from customers due to advances in communications technology) and the

number of persons employed in those occupations in a given year. Those studies usually have

focused on occupations that provide services. One analysis by the BLS estimated that in 2007, 30

million people were employed in service-providing occupations it found to be potentially

offshorable; they accounted for over one-fifth of total employment in that year. The serviceproviding

occupations that BLS deemed most vulnerable to being offshored had quite different

skill requirements: administrative support occupations (e.g., office clerks) typically have lower

education or training requirements than professional and related occupations (e.g., computer

programmers). One of the few studies that includes both production and services occupations

similarly concluded that, whether measured by education or wages, jobs with offshorable

characteristics run the gamut from less to more skilled. According to one of Blinder’s estimates,

about 29 million workers were employed in offshorable production and services occupations, or a

little over one-fifth of total U.S. employment in 2004.

 

This approach may overstate the number of jobs that actually have been or will be lost to

offshoring because it does not consider other factors that may affect employers’ decisions about

the location in which work is performed. Some observers note cases of firms bringing jobs back

to the United States for such reasons as dissatisfaction with the quality of service being provided,

narrowing of the wage gap between U.S. and some nations’ workers, and increases in the cost of

shipping goods to the United States. Others point to strategies that offshore outsourcers have used

to work around some obstacles.

 

Contents

Introduction ...................................................................................................................................... 1

The Development of Domestic and Offshore Outsourcing in Production and Services Activities .................................. 3

Job Losses and Offshore Outsourcing ............................................................................................. 4

 

Tables

Table 1. Occupational Categories by Degree of Offshorability ....................................................... 7

 

Contacts

Author Contact Information............................................................................................................. 9

 

 

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