An Inconvenient Truth About “Shipping Jobs Overseas”

October 14, 2008

Barack Obama frequently says he will remove the "tax breaks for companies that ship jobs overseas." Yet, he has never either identified the specific parts of the tax code that is supposedly encouraging such outsourcing nor has he identified any specific company that has engaged in such actions.

In fact, according to Department of Labor statistics, the hysteria over outsourcing is greater than the actual occurrences of jobs being shipped abroad. According to DOL's April 2008 report on extended mass layoffs, "In 2006, employers laid off about 936,000 workers in 4,885 private nonfarm extended mass layoff events."

As the chart below shows, only 3.6% of these workers were separated because their jobs were relocated to a foreign or domestic location. Indeed, only 1.4% of all workers separated in 2006, 13,367 in total, were laid off because their jobs were relocated overseas. The vast majority of these job changes were relocations within the same company and not "outsourced" to another firm.

By contrast, 2.2% of all laid off workers, 20,669 in total, were separated because their jobs were relocated to another part of the United States. Again, the vast majority of these job changes were made within the same company.

2006

Numbers of Workers

Percent of Total

Total Non-Farm Separations

935,805

Separations because of Work Relocation

34,036

3.6%

Out-of-Country Relocations

13,367

1.4%

Within Company

11,776

1.3%

Different Company

1,591

0.2%

Domestic Relocations

20,669

2.2%

Within Company

18,210

1.9%

Different Company

2,459

0.3%

Source: http://www.bls.gov/mls/mlsreport1004.pdf

There are two lessons from this. First, the data tells us that U.S. workers are in greater danger of having their jobs moved from one state to another rather than from this country to overseas. Secondly, if most out-of-country relocations are within the same firm, then it is unlikely that tax breaks of any kind were the motivating factor for the change.

What is really affecting U.S. workers and the broader economy is the fact that the U.S. has one of the highest overall corporate tax rate in the world – now 50 percent higher than the OECD average. Studies show that countries with high corporate taxes see slower wage growth than countries with low corporate taxes. Moreover, a recent OECD study found that corporate income taxes are the most harmful tax for GDP growth.

Bringing the U.S. corporate tax rate in line with our major trading partners would be a major benefit to American workers because it would make the U.S. far more attractive to foreign and domestic investment. That should be the goal of both candidates.


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