Does outsourcing lead to loss of jobs?
Source: New York Times
ECONOMIC SCENE
What Goes Abroad Usually Comes Back, With Benefits
By HAL R. VARIAN
Published: March 11, 2004
THE Jan. 31 issue of The Economist described the consequences of high-tech jobs moving overseas.
According to the story, "with the trans-Atlantic shift in R&D goes many high-value jobs, as well as a greater share of the industry's profits." This trend has led to an "increasing concern" in the industry, with some executives speaking out against the outsourcing trend.
Old news, you might say. The press is filled with articles about high-tech jobs being outsourced to India.
The twist here is that the article is about biotech research jobs being outsourced to the United States from Europe. But the language is eerily familiar: replace "biotech" with "infotech" and switch the roles of Europe and America and this story could pass for yet another Silicon Valley requiem.
Articles like this should remind us that trade is a two-way street.
The money paid to foreign producers, whether businesses or workers, typically comes back home to buy domestic goods and services, thereby generating domestic employment. That is true whether it is European companies paying American biotech researchers, or American companies paying Indian programmers.
Think about it. If Oracle sends $10,000 abroad to pay an Indian programmer, then that money either finds its way back to the United States or it doesn't. If it comes back, it can be used to buy American goods and services, employing American workers. If it doesn't come back then it's even better from the viewpoint of the country: we've sent them paper, while they've sent us valuable goods and services.
Yes, these days it's more likely bits than paper, and maybe they are sending us more services than goods. And perhaps the way the money comes back is via a purchase of Treasury bonds or other financial securities.....
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