The Real Cost of Offshoring
BUSINESS WEEK, JUNE 18, 2007
By Michael Mandel
The Real Cost Of Offshoring
U.S. data show that moving jobs overseas hasn’t hurt the economy. Here’s why those stats are wrong
Whenever critics of globalization complain about the loss of American jobs to low-cost countries such as China and India, supporters point to the powerful performance of the U.S. economy. And with good reason. Despite the latest slow quarter, official statistics show that America’s economic output has grown at a solid 3.3% annual rate since 2003, a period when imports from low-cost countries have soared. Similarly, domestic manufacturing output has expanded at a decent pace. On the face of it, offshoring doesn’t seem to be having much of an effect at all.But new evidence suggests that shifting production overseas has inflicted worse damage on the U.S. economy than the numbers show. BusinessWeek has learned of a gaping flaw in the way statistics treat offshoring, with serious economic and political implications. Top government statisticians now acknowledge that the problem exists, and say it could prove to be significant.The short explanation is that the growth of domestic manufacturing has been substantially overstated in recent years. That means productivity gains and overall economic growth have been overstated as well. And that raises questions about U.S.
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