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News > Jobs & Economy
Outsourcing still small but growing fast
GAO report says impact on economy and job market from shift of jobs overseas difficult to measure.
September 23, 2004: 10:34 AM EDT

NEW YORK (CNN/Money) - Outsourcing of services overseas by businesses has seen a significant percentage increase since 1997, but the impact of the job shift on the U.S. economy is still relatively small and difficult to measure, according to a new government report.

The report from the General Accounting Office, the bipartisan congressional agency that conducts research, found that U.S. imports of business, professional and technical services grew about 77 percent between 1997 and 2002 to reach $37.5 billion. During the same period U.S. exports of those same types of services grew 48 percent.

The study also found that the U.S. investment in low-wage countries such as India and the Philippines, that get much of the attention for outsourcing of jobs, particularly tech jobs, represented about 4 percent or less of total investments by U.S. businesses overseas.

As to the impact on the U.S. job market, the report referred to an earlier Labor Department report that found only a small fraction of significant layoffs by large employers can be directly attributed to overseas outsourcing of work. But it said there were gaps in that report, and it acknowledged that experts have different views about the effects of overseas outsourcing on U.S. workers.

"Some predict that offshoring may eliminate 100,000 to 500,000 IT jobs within the next few years," it said. "However some also predict economic benefits from offshoring, including lower prices, productivity improvements, job creation in sectors using offshored services and overall higher growth for the U.S. economy."

The report said that current data has many gaps when trying to get a sense of the impact of outsourcing or possible policies that could change the trend.

"U.S. government data provide some insight into the trends in offshoring of services by the private sector, but they do not provide a complete picture of the business transactions that the term offshoring can encompass," said the report. "In particularly, they do not identify U.S. imports of services previously produced by U.S. employees."

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U.S. Economy

The report does not make any recommendations on changes in policy that would limit offshoring of jobs or limit its impact on the economy. It basically takes a neutral position on the controversial subject, which has been one of the hot issues in this year's election.

Still, some union groups said they were pleased by the report for bringing attention to what they see as a growing problem for U.S. workers.

"The GAO has clearly stated in this report that outsourcing of U.S. jobs abroad can not be ignored, and the government needs to act in order to address the issue in terms of data collection and policy solutions," said Marcus Courtney, president of WashTech, a local of the Communications Workers of America that is actively organizing high-tech workers in Washington state.  Top of page

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