Outsourcing Claims Not Supported by the Data

The Senate is about to consider the “Creating American Jobs and End Offshoring Act” which aims to use various tax 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.

Source: Bureau of Labor Statistics, News Release, “Extended Mass Layoffs — Second Quarter 2010,” August 11, 2010. http://www.bls.gov/news.release/pdf/mslo.pdf