CNN Money

Mark Gongloff


March 1, 2004

Outsourcing: what to do?

As more U.S. companies move jobs overseas, debate rages on answers to a divisive issue.


NEW YORK (CNN/Money) - If you haven't turned on a TV or read a magazine or a newspaper recently, you probably haven't heard that your job is moving overseas. 

Odds are, it's not, of course. But a growing number of jobs are, and many of them are higher-skilled jobs that once seemed immune to outsourcing.

U.S. companies moving jobs offshore has helped keep the job market in its most painful slump since World War II, creating tremendous worry for millions of workers and triggering a vigorous national debate about how best to respond.

Here are some of the more common proposals, along with some of the arguments for and against:

Scrap WTO, trade pacts

Some people argue the United States should simply pull out of the World Trade Organization, NAFTA and other world trade pacts, a view proposed by three candidates for president: Rep. Dennis Kucinich, D-Oh., Rev. Al Sharpton and Ralph Nader.

"The WTO, as long as we belong to it, will not let us protect the jobs," Kucinich said in a debate last week. "This is the reason why we have outsourcing going on right now. We can't tax it. We can't put tariffs on it."

Kucinich says he would withdraw from most existing trade agreements and negotiate new agreements on a case-by-case basis, requiring trading partners to meet certain environmental, labor and human rights standards.

Critics say similar protectionist steps have led to slower economic growth and would likely do so again.

" We need reforms that will enable us to thrive in a dynamic, open, world market and not seek to shut our borders and go down a path proven to lead to reduced national wealth and overall lower standards of living," said Aaron Lukas, a trade policy analyst at the Cato Institute, a libertarian think tank.

Of course, none of the proponents of these measures are likely to become president this year, and such proposals would be unlikely to pass Congress.

Other Democrats, including Sen. John Kerry, the leader in the race to face President Bush this fall, and his closest rival, Sen. John Edwards, suggest less-drastic measures, including greater enforcement of existing trade pacts.

Protect government contracts

Especially loathsome to opponents of outsourcing is the idea of federal and state governments sending jobs overseas, right alongside "Benedict Arnold" companies, as Kerry calls them.

In that vein, Congress in January passed a law requiring that government functions shifted to contractors had to go to contractors in the United States. In Indiana and New Jersey this year, two state government contracts to move call-center work offshore were canceled under political pressure. And dozens of anti-outsourcing bills await action in federal and state legislatures.

Critics of the bills say they would save just a handful of jobs and cost millions of dollars to taxpayers, potentially doing more harm than good.

" There's a hidden cost that can play out," said Stuart Anderson, executive director of the National Foundation for American Policy (NFAP), a pro-trade group. These measures can discourage foreign investment in the states that enact them, leading to job losses that "far outweigh the number of jobs saved at some call center in New Jersey or Indiana."

Slow visa entries

Temporary work visas for high-skilled foreign workers also irritate outsourcing opponents. Not only do they take jobs from U.S. workers in the short run, but visa holders sometimes return home and make future offshore outsourcing even easier for U.S. companies.

" I find it rather ironic that people who claim to wear the free market mantle would turn around and support government meddling in the marketplace of labor -- right now we have the government encouraging people to dump their cheap labor here," said Scott Kirwin, founder of the Information Technology Professionals Association of America (ITPAA), a worker's rights group.

Supporters say many visa holders end up staying in the United States, helping U.S. companies develop new technologies that create jobs and becoming consumers in the broader domestic economy.

" I find it ironic that some of the same folks against jobs going overseas also don't want people to come here who would be benefiting and creating more jobs in the United States," said the NFAP's Anderson.

Caller ID

Sen. Kerry and other outsourcing critics also want to require workers in overseas call centers to reveal their location in service calls.

Not only would such a measure carry on the spirit of the existing requirement to mark foreign-made goods with their country of origin, it might also allow customers to decide whether they want to discuss personal information with a call-center worker in, say, Vietnam, where privacy laws may not be as stringent as they are in the United States.

Opponents say this will hurt how call-center workers do their jobs, meaning the U.S. companies using those centers will have to pay more for their services.

Compromise alternatives could be to pass measures that would ensure the privacy and security of customers' information.

Helping displaced workers

It's all well and good to discuss the long-term economic benefits of trade, as most economists do. But those arguments ring hollow with the millions of workers who will be unemployed or have lower standards of living while they wait for those benefits to come to fruition.

" People lose in trade, and because our social safety nets here are so thin to begin with, the resistance is greater than it is in some of the other industrial countries," Lael Brainard, a senior fellow at the Brookings Institution, a left-leaning Washington think tank, said in a January speech on outsourcing.

Some possible solutions include increased unemployment insurance, wage insurance, and a system that would let workers carry health benefits from job to job.

Such measures would require government spending, and so would are viewed with some skepticism by conservatives -- but they're likely to be politically popular, and conservatives don't dismiss them out of hand.

" We have to acknowledge that individuals can face transition costs when trade barriers come down," said Lukas of the Cato Institute.


Lukas and like-minded conservatives, including President Bush and Fed Chairman Alan Greenspan, believe an even better response is to improve grade-school education and spend government money retraining workers at community colleges.

" The capacity of workers, after being displaced, to find a new job that will eventually provide nearly comparable pay most often depends on the general knowledge of the worker and the ability of that individual to learn new skills," Greenspan told Congress last month.

While almost everyone agrees that U.S. grade-school education could be better, some critics doubt education is the only answer to outsourcing, noting many unemployed workers already have advanced degrees.

In January, for example, there were more unemployed workers 25 or older with college degrees than there were unemployed workers without high school diplomas, according to the latest Labor Department data.

" No one criticizes the higher education system here -- that's why we still draw as many foreign students as we do," said Kirwin of the ITPAA. "Most of the jobs we're sending abroad currently require a college education just to get in the door."

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