The Impact of Offshore Outsourcing on Developed Countries

Jens Christiansen and Jim BurkeFebruary 20, 2006

CS/Econ/IR/Politics 125: Global Challenges

10,000

8,000

7,000

92

9,000

6,000

94 9593 96 9897 0099 0201 0403 05 06

Quarterly data

Job gains Job losses

Th

ou

sa

nd

s

Source: BLS

Job Losses and Gains Since 1992

Setting the stage for corporate offshoring, 1970 – 2006: the creation of the ‘disposable’ American worker

US Economic Growth, 1949 – 20053-year average, %

0

2

4

6

8

1970-2004

1951-1969

Rate of growth, %

0

3

6

9

12

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

Un

emp

loym

ent,

%

1949 - 69

1970 - 2005

US Unemployment Rate, 1949 - 2005

Setting the stage for corporate offshoring, 1970 – 2006

Lowering the barrier to layoffs as a corporate strategy

Declining economic growth and rising unemployment rates

Deregulation of industries

Declining union bargaining power

Growing influence of financial markets and financiers over corporate management

A falling minimum wage and the rise of a low wage, low value workforce

Large-scale and ongoing layoffs have become an acceptable business practice for corporations – an ‘unfortunate necessity’

‘The Doubling of the Global Workforce’

– Richard Freeman

1980

2000

2,930million

960million

Full page anti-union ads in The New York Times and The Washington Post from last Monday, February 13th

IMPORTS & EXPORTSAS PERCENT OF GDP

• US GDP 2005: $ 12.770 trill. EXPORTS: $ .928 trill. (7.3%) IMPORTS: $ 1.727 trill. (13.5%)

GERMAN GDP 2005: $ 2.830 trill.

EXPORTS: $ 1.016 trill. (36%) IMPORTS: $ .801 trill. (28%)

Corporate and Personal Income Tax, United StatesPercent of GDP

Corporate Income Tax Personal Income Tax

1970 2000 Change 1970 2000 Change

3.2 2.1 -1.1 8.9 10.3 1.4

Source: Budget of the United States, Historical Tables, 2006

 

Mean US Family Income, 1970 – 20032003 dollars

Bottom 20th Top 20th Top 5th

1970 $12,570 $81,856 $125,692

2003 $13,871 $163,322 $281,467

Percent change, 1970 - 2003

+ 10 % + 99 % + 124 %

Source: US Bureau of the Census

Hourly wage for male workers, 1970 – 20032003 dollars

Bottom 20th Top 10th Top 5th

1970 $9.93 $27.80 $33.51

2003 $9.22 $34.05 $43.48

Percent change, 1970 - 2003

- 7 % + 22 % + 30 %

Source: Economic Policy Institute from CPS

Employer provided pension insurance, 1979 – 2003Percent of employees covered

All Workers

Men WomenHigh

SchoolCollege

1979 51 57 41 51 61

2003 46 47 44 40 60

Percent change, 1979 -

2003- 5 % - 10 % + 3 % - 11 % - 1 %

Source: Economic Policy Institute

Employer provided health insurance coverage, 1979 – 2003Percent of employees covered

All Workers

Men WomenHigh

SchoolCollege

1979 69 75 59 70 80

2003 56 60 52 53 69

Percent change, 1979 - 2003

- 13 % - 15 % + 7 % - 17 % - 11 %

Source: Economic Policy Institute

GDP per head at purchasing power parity, 2002

Household incomeadjusted for inequality

GDP per head adjustedfor leisure(GDP per hour worked)

United States = 100

“Grossly Distorted Picture”

from The Economist, Feb. 11, 2005