North Carolina and, indeed, the entire country, have lost thousands of jobs in recent years to companies in foreign countries. With lower trade barriers, many foreign companies are able to under-price domestic producers and sell to U.S. consumers.
Now, some say there’s a new twist to this situation: U.S. companies cutting jobs here and moving them to foreign countries. This process is called out-sourcing, and many are worried it presents a new challenge to U.S. workers.
Currently, there are about 10 million out-sourced jobs (jobs operated by U.S. companies in foreign countries), accounting for 7 percent of domestic U.S. employment. The jobs are evenly split between manufacturing and other industries.
Out-sourcing also isn’t new. Out-sourced jobs as a percentage of total U.S. employment have ranged between 5 percent and 8 percent for 30 years.
Although out-sourcing sounds gloomy, there is a positive, flip side to the story. In-sourcing also occurs. In-sourcing happens when foreign companies establish jobs in the United States and hire American workers.
The latest statistics show in-sourcing accounts for more than 6.5 million jobs. Although out-sourced jobs exceed in-sourced employment, the gap has narrowed considerably in the past quarter century. In other words, there’s been a trend of foreign companies adding jobs in the United States faster than U.S. companies have increased jobs in foreign countries.
For example, since the mid-1990s foreign companies have added 400,000 jobs in U.S. factories manufacturing vehicles, computers, electronics, and other machinery. Over the same time period, U.S. companies moved 300,000 jobs to foreign countries in the same sectors.
What about the out-sourcing debate in North Carolina? Unfortunately, we don’t have comprehensive information for out-sourced jobs from North Carolina factories and offices. But we do know there are 240,000 in-sourced jobs in North Carolina, 100,000 of which are in manfacturing. And the total number of in-sourced jobs in North Carolina has also increased in recent years.
So despite the headlines, the news isn’t all bad about out-sourcing. While U.S. companies have moved jobs to foreign countries, foreign companies have put millions of high-paying jobs in the United States and thousands in North Carolina.
Yet, in an increasingly globalized economy, more and more jobs are candidates for out-sourcing. The jobs most vulnerable are those performing routine tasks, not requiring close supervision, and where lower-cost foreign labor is readily available.
For example, 20 years ago computer programming was a new and “cutting edge” job. Today, many programming tasks are straightforward and routine, and millions of workers worldwide have been trained to do them. These are the kinds of technical jobs that can go to foreign nations with lower costs.
To compete against out-sourcing, U.S. workers should go beyond entry-level training in their fields and arm themselves with more specialized and advanced skills. This will make U.S. workers more valuable and unique and, consequently, not inter-changeable with millions of competing workers worldwide.
Also, don’t forget that out-sourcing has its benefits if it means lower-priced imported products for U.S. consumers. American buyers can then use the savings to purchase other products and services made in the United States.
If current trends continue, the number of both out-sourced and in-sourced jobs will increase in the future. While we need to be aware of the number of out-sourced jobs and the implications for domestic workers, we shouldn’t ignore that the door also swings the other way with foreign companies moving jobs here. And both out-sourcing and in-sourcing ultimately make for a more efficient, and least costly, economy.