Local view: Offshoring is killing our economyOffshoring is the practice of a firm relocating its production of goods or services from its home market to a foreign country.
By: Bernie Hughes, for the News Tribune
Offshoring is the practice of a firm relocating its production of goods or services from its home market to a foreign country. When an American firm moves production offshore, the United States’ Gross Domestic Product declines by the amount of offshore production, and the foreign GDP increases by that amount. Employment and consumer income decline by that amount. In other words, employment and consumer income decline in the United States while rising abroad.
Whose team are we on?
Our U.S. tax base shrinks as a result of offshoring, resulting in reductions in public services and/or in higher taxes. These are similar to the words of Paul Craig Roberts, chairman of the Institute for Political Economy, author of 10 books and numerous articles in scholarly journals and who has testified before congressional committees on 30 occasions.
Why are loyal and theoretically patriotic corporations taking jobs away from their home country? Lower labor costs increase profits, stock share prices on Wall Street and the unconscionable performance bonuses of corporate management. This is sometimes justified with a claim that the lost income from job losses is more than offset by the benefit to consumers in the form of allegedly lower prices. Proponents have not provided studies that I’ve ever seen to support this claim.
Offshore advocates also have claimed Americans left unemployed soon find equal or better jobs. Our unemployment numbers dramatically dispute this.
We won’t attempt to intelligently discuss money offshoring, which is money hidden in tax havens to escape U.S. taxes. Is there any patriotism shown in that practice?
In addition to offshoring, domestic service jobs, such as teachers and nurses, that can’t be offshored increasingly are being performed by foreigners brought in on work visas. And with the present Internet capability, work even is performed by foreigners who remain in their own countries and sit at computers. This work includes reading X-rays or performing technical service for television companies. There is no end to it.
We’ve already seen the disheartening results of offshoring: loss of jobs, lower wages and that list goes on. Is the worst yet to come? Alan Blinder, Princeton University economist and former vice chairman of the Federal Reserve, thinks so and writes that, “We may have seen so far barely the tip of the offshoring iceberg, the eventual dimensions of which may be staggering.”
More wage lowering obviously is in the offing. More negative financial results are predicted as a result of lost job income, of taxes on that income and of the lowering of our economy as too many people will not have money to spend.
Income equality, immorally, has widened in our nation. Economist Herman Daly summarized our present situation well by saying, “The elites have figured out how to keep the benefits for themselves while ‘sharing’ the cost with the poor, the future and other species.”
Wouldn’t it be great if we could, in addition to nation-
building in Iraq and Afghanistan, do some nation-building at home to build and rebuild our infrastructure? In that process, we would reduce our increasing immoral income spread. More increases of efficiency are promised but the loss of jobs is the result.
And adding to offshoring problems, a new technology is coming to town. The July 29 News Tribune reported Lake State Credit Union’s expansion into Duluth with new technology: interactive machines that transact with remote tellers.
We want more jobs for people. Where will they come from?
Bernie Hughes of Superior is professor emeritus of educational administration at the University of Wisconsin-Superior.