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Outsourcing Is Good For America: Cato’s Michael Tanner

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Could outsourcing of U.S. jobs actually be good for Americans?

The number of U.S. jobs lost to low-wage countries has never been officially calculated — U.S. companies are not legally mandated to report such statistics. Boston-based global research and advisory firm Forrester predicts that more than 400,000 service jobs have been moved offshore since 2000 — and that number will rise to 3.3 million by 2015. More than 2 million manufacturing jobs have been outsourced abroad since 1983. Economists estimate that the number of jobs leaving the U.S. ranges between 12,000 to 20,000 per month.

Relocated U.S. jobs end up going to workers in developing nations like China and India, countries that pay their employees much less than their American counterparts.

Michael Tanner, a senior fellow at the libertarian think-tank Cato Institute, argues that low-skill jobs (such as product assembly and call centers) are not cost effective for U.S. companies anymore. In an interview with The Daily Ticker, Tanner says outsourcing has allowed U.S. companies to penetrate foreign markets, be more competitive and hire more U.S. workers at home.

"Countries outsource to establish a presence in a country in which they plan to do business," he says in the accompanying video. "If we're going to sell cars in China it makes sense to build a plant in China." Overseas profits are brought back to the U.S. "and then those new profits enable them to hire new and more skilled jobs in this country."

Outsourcing: On The Campaign Trail

Republican presidential candidate Mitt Romney has come under withering attacks that his former employer Bain Capital "offshored" thousands of U.S. jobs; whether those layoffs occurred during Romney's tenure at the private equity firm is debatable.

Tanner says Romney should stop fighting allegations that he was responsible for shedding U.S. jobs and embrace the practice of outsourcing on the campaign trail.

"Mitt Romney shouldn't run away from the fact that he ran a profitable business," Tanner notes. "Romney should point out all the good things that came from his investments at Bain. The companies he managed money for included union pension funds, endowments for universities and charities. Simply making stocks go up makes everybody's 401k bigger."

The Obama campaign contends that Bain Capital, under Romney's leadership, shipped U.S. jobs overseas to reduce costs and earn a profit at the companies it owned. Vice President Joe Biden, speaking in Ohio last week, addressed Romney's record as a job creator.

"I honest to God think it's totally appropriate to judge whether he was a job creator, and if he did create them, where did he create the jobs?" Biden said. "I have to admit, after really going into detail, that he did create jobs. But they were in Singapore, China, India. They weren't in Michigan, Ohio, Pennsylvania."

According to a June 21 Washington Post article, Bain Capital purportedly "invested in a series of firms that specialized in relocating jobs done by American workers…companies that were pioneers in the practice of shipping work from the United States to overseas call centers and factories making computer components" during the nearly 15 years that Romney was actively involved in running Bain.

Outsourcing: Is Any Job Safe?

U.S. multinationals cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, according to the U.S. Commerce Department. U.S. corporations employed more than 21 million people in the U.S. and 10.3 million workers abroad in 2009.

Blue-collar jobs are not the sole casualty of outsourcing. The McKinsey Global Institute predicts white-collar offshoring will increase at a rate of 30 percent to 40 percent over the next five years; those jobs could include "back office" jobs such as accounting and payroll processing.

Tell us what you think in the comment section below. Is outsourcing good or bad for America?

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