Outsourced Jobs Become Midterm Election Issue

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In a poll by The Wall Street Journal, Americans cited outsourcing as the top cause of the country's economic problems. Steve Inskeep talks to Matthew Slaughter of the Tuck School of Business at Dartmouth College and Thea Lee, deputy chief of staff at the AFL-CIO, which has launched a searchable outsourcing database, to assess the impact of outsourcing on the economy.

MARY LOUISE KELLY, host:

This is MORNING EDITION from NPR News. I'm Mary Louise Kelly.

STEVE INSKEEP, host:

And I'm Steve Inskeep.

We've been watching campaign ads about outsourcing.

(Soundbite of ad)

Unidentified Man: Pat Toomey - he's working to bring jobs...

(Soundbite of gong)

Unidentified Man: ...to China. In Congress, Toomey voted to give China special trade status.

INSKEEP: A Democratic campaign committee made this commercial to oppose Republican Pat Toomey, who's running for Senate in Pennsylvania. You may have heard the sound of the Chinese gong there. On video you see a Chinese flag and a fortune cookie. And a statement by Toomey is quoted out of context.

Mr. PAT TOOMEY (Republican Senatorial Candidate, Pennsylvania): It's great that China is modernizing and growing.

INSKEEP: Democrats are running hard on the issue this fall, and whatever the politics, surveys show many Americans blame outsourcing - shipping jobs overseas - for their own trouble. We're going to talk over what's really happening with a couple of economists.

One is Matthew Slaughter, who was an economic advisor to President George W. Bush.

Welcome to the program.

Mr. MATTHEW SLAUGHTER (Economist): Thank you. It's a pleasure to be here.

INSKEEP: And he's joined by Thea Lee, a trade economist and the deputy chief of staff at the AFL-CIO - the umbrella union organization.

Welcome to you.

Ms. THEA LEE (Economist): Thank you, Steve.

INSKEEP: So we've obviously got an issue that raises a lot of partisan heat here, but there's also genuine concern in the public. NBC News and the Wall Street Journal did this survey asking people what they thought was the major reason that the economy is struggling, that it's hard for people to get jobs.

And the number one answer - 86 percent of people agreed or strongly agreed that U.S. companies are outsourcing much of their production and manufacturing work to foreign countries where wages are lower. People think that's the leading problem that they face. Thea Lee, is it true?

Ms. LEE: Well, there's a lot of truth to it, because we've been running these huge and chronic trade deficits for many years now. And a lot of Americans have seen their jobs go overseas. They've seen their neighborhoods decimated by plant closings.

And there's no secret that a lot of those jobs have gone to other countries where companies are in search of not just cheap labor but also workers who lack basic human rights, of environmental laws that aren't enforced, workplace health and safety laws that aren't enforced.

INSKEEP: And people can see that in places like Ohio or Pennsylvania. But Matthew Slaughter, let me bring you in. Is the picture any more complicated than what you see if you drive past a closed factory?

Mr. SLAUGHTER: It is. Those dislocations and hardships are very real, but what's less visible but no less important is the fact that when you look at all U.S.-based multinational companies together, the scholarship and research to date shows quite clearly that when they expand abroad, that hiring and capital investment abroad tends to expand their hiring and capital investment back here in the United States as well.

INSKEEP: Well, how's that work?

Mr. SLAUGHTER: A lot of companies, what they're searching for is revenue opportunities. They're trying to grow their business. And frankly, in the rest of the world right now growth is so much quicker than it is in the United States that when thinking about where they can realize returns on new investments, a lot of that opportunity is outside the United States.

But when they hire colleagues abroad, oftentimes that stimulates hiring back here for support staff, for accounting staff, for managerial staff, for research and development.

INSKEEP: Isn't there still a net loss of jobs?

Mr. SLAUGHTER: Trade and outsourcing I think of as more about the kinds of jobs we have in America, not the numbers of jobs. I think a good example is all of you that might have an iPhone, what's written on the back of it are the words: Designed by Apple in California, assembled in China. And I think that's a good example of this notion of the composition of jobs.

INSKEEP: Thea Lee, I'm trying to read the dubious expression on your face just now.

Ms. LEE: Well, I think Apple's actually a pretty good example. There are 250,000 workers in Foxconn in China. These aren't Apple employees per se, but they're producing Apple products in China. There are 25,000 Apple employees in the United States.

And I think one of the problems with the point that Matt raised is that as we begin to move a lot of production, particularly high tech production, overseas, what happens next is that a lot of the engineering and the research and development jobs go with it. And so we are actually starting to see higher unemployment rates here in the United States for engineers and computer technicians and so on.

We're actually - were not just outsourcing bad jobs. We're outsourcing some of the very best jobs in the United States, because that's where some of the biggest savings are.

INSKEEP: I think this points to a larger concern that bothers people about outsourcing and about trade deficits. It's not necessarily just about someone losing a job. People are worried about the United States and whether the United States is losing its position in the world. I'd like to know if you share that concern when you look at the trade deficits the U.S. has and you look at the outsourcing that's going on. And Matthew Slaughter, I'll let you start.

Mr. SLAUGHTER: I do share that concern. There's not a law of physics that says the United States is always going to retain these good jobs at good wages. I hope that we do. But the challenge is to allow globalization, as it has for generations, to continue to benefit America on net but to try to allow those gains be enjoyed by more firms and more communities and more workers.

INSKEEP: Continue to benefit America on net. Is America benefiting right now on net, would you say?

Mr. SLAUGHTER: Oh, it definitely is. This is one of those things where economists disagree on lots of issue, but there's a wealth of evidence that shows America overall benefits.

Ms. LEE: Well, Matt, when you talk about America benefiting from the current set of trade and globalization relationships, I think you have to really dig down a little bit and look at the distributional impact of the kind of trade policies that we've put in place, and what you do see is over the last 30 years, a disturbing trend toward greater wage inequality in the United States, and I think a lot of economists have taken a look at that and said that trade, outsourcing, globalization is responsible for somewhere between 25 to 40 percent of that growth in inequality in the United States.

INSKEEP: Meaning somebody with a blue-collar job, or even a white-collar job has to compete against someone in India who is paid on just a completely different pay scale in a completely different economy. That's what you're saying?

Ms. LEE: Absolutely. And so if you look at the median worker in the United States, for example, that worker - the median male full-time worker is earning less in 2009 than he or she did in 1975.

INSKEEP: Mr. Slaughter, would you accept that as a basic fact that the median worker is doing worse than decades ago?

Dr. SLAUGHTER: Oh, I would. There's a couple of big questions we need to ask though. One is most of the research to date that Thea cites has concluded that it's technology innovations of many kinds, that tend to favor demand for skilled workers that has put pressure on the wages of so many Americans.

So from a policy perspective, a question is, well, what do we want to do about that? Do you want to get rid of the computers that we've created over the past 30 or 40 years?

INSKEEP: Matthew Slaughter was an economic advisor to President George W. Bush. He's now at Dartmouth. Thanks for taking the time.

Dr. SLAUGHTER: Thank you. I appreciate it.

INSKEEP: Thea Lee is a trade economist and a deputy chief at the AFL-CIO. Thanks.

Ms. LEE: Thank you so much.

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