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Outsourcing Claims Not Supported by the Data

2 min readBy: Scott Hodge

The Senate is about to consider the “Creating American Jobs and End Offshoring Act” which aims to use various taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. credits and incentives to discourage U.S. firms from moving jobs overseas and encourage them to bring back jobs that have been previously outsourced abroad.

While the premise of the legislation is that U.S. companies have been furiously moving domestic jobs offshore, job loss data from the Department of Labor does not support the claim that offshoring is a significant factor in mass layoffs.

In its more recent quarterly report on mass layoffs, the Bureau of Labor Statistics reported that 338,064 workers lost their jobs for more than 31 days in mass layoffs in the second quarter of 2010. As the table below shows, nearly half of these job losses were among seasonal workers. The reduction in business demand accounted for 26 percent of the losses, while organizational changes (such as ownership changes) and financial issues (such as bankruptcy) are the other major factors in job losses.

Of all the factors that resulted in recent mass layoffs, job relocations accounted for only a tiny percentage. Indeed, excluding seasonal layoffs, 175,479 workers lost their jobs in mass layoffs in the 2nd quarter of 2010. Of these, just 10,206 – or 6 percent – were the result of their jobs being relocated elsewhere. In the first quarter of 2010 and 2nd quarter of 2009, only 4 percent of non-seasonal job losses were the result of relocations.

Of these relocated job, BLS is typically able to determine the destination for about half of them. But of the 4,188 jobs in which the destination was identified in the 2nd quarter of 2010, 29 percent were moved to out-of-country locations (most were within the company), while 71 percent were moved to another U.S. state (again, most within the company).

The bottom line is that offshoring accounts for a small percentage of overall job losses and that jobs are at least three times more likely to be relocated from one U.S. state to another than overseas. The offshoring of jobs may make for good headlines and political points, but it is not supported by the data.

Separated Workers
Quarter II
Quarter 1
Quarter II
Total, Non-Farm Mass Layoffs 651,318 313,660 338,064
Top Reasons for Mass Layoff
Business Demand 228,473 112,292 88,786
Percentage Demand 35% 36% 26%
Organizational Issues 35,873 20,075 23,587
Percentage Organizational 6% 6% 7%
Financial Issues 74,301 27,450 25,517
Percentage Organizational 11% 9% 8%
Seasonal 160,045 68,625 162,585
Percentage Seasonal 25% 22% 48%
Other/Misc. 150,104 81,615 33,957
Percentage Other 23% 26% 10%
Total Mass Layoffs, Excluding Seasonal and Vacation Events 491,273 245,035 175,479
Separations due to movement of work 21,365 10,962 10,206
4% 4% 6%
Relocations where reason is known 11,478 5,949 4,188
Out-of-country locations 2,849 1,023 1,200
Percent Out-of-country 25% 17% 29%
Within company 2,759 933 1,160
Different company 90 90 40
Domestic relocations 8,629 4,926 2,988
Percent domestic 75% 83% 71%
Within company 7,406 3,992 2,529
Different company 1,223 934 459

Source: Bureau of Labor Statistics, News Release, “Extended Mass Layoffs — Second Quarter 2010,” August 11, 2010.