The most alarming prediction of jobs lost due to outsourcing - by Forrester Research - estimates that 3.3 million US service jobs will be outsourced between 2000 and 2015. At the end of 2004 US Congress in a fiscal spending bill included a provision prohibiting federal agencies from outsourcing some kinds of work to private companies that use workers in foreign countries. Indeed, 23 states are considering similar restrictions and 4 have already passed them. However, the debate over the offshoring of business-processing jobs misses the mark completely.
A recent report by McKinsey even quantified that for every US $ outsourced, between US $ 1.12 – 1.14 returns to the US. True, some workers will lose their job, but the long-term benefits far outweigh these short term losses. However, the economy gains in both direct and indirect ways. First, companies save on average 58 cents on the dollar by outsourcing to India. These 58 cents are either invested into new business opportunities [creating new jobs], returned to shareholders [e.g. households saving for their retirement or their children’s college tuition], or transferred to consumers in the form of lower prices driving up demand. Furthermore, the indirect benefits add at least another 54 cents by freeing up companies resources, enabling them to create new business opportunities and focus on higher value added processes, again creating even more jobs. Moreover, these newly created jobs are often higher-paying than those outsourced.
Any short-term disruption from job losses must be weighed against not only the much broader benefits to consumers and businesses but also the disastrous consequences of resisting change. If companies can't move work abroad, they will become less competitive—weakening the economy and endangering many more jobs—and miss the chance to raise their productivity and to concentrate their resources on the creation of higher-value jobs.
