What about the decline in manufacturing jobs? Can we blame outsourcing? For the most part, no. Manufacturing now employs a smaller percentage of workers, given our dramatic increase in worker productivity. Higher worker productivity means fewer workers required. Between 1995 and 2002, U.S. manufacturing jobs declined 11 percent -- identical to the average world decline in manufacturing employment. Yet in the last 15 years, insourced manufacturing jobs grew by 83 percent, while outsourced manufacturing jobs only grew by 23 percent.
The U.S. Department of Commerce reported that, in 2003, the U.S. bought over $77 billion from foreign companies, and sold $131 billion to them -- exporting nearly $54 billion more in services than we imported. This surplus accounted for an additional 400,000 jobs in 2003.
Outsourcing and globalization of manufacturing allows companies to reduce costs, benefits consumers with lower cost goods and services, causes economic expansion that reduces unemployment, and increases productivity and job creation. According to the McKinsey Global Institute, for every $1 outsourced, the economic gain to the U.S. as a whole is $1.12 to $1.14.
Consider the CEO who refuses to outsource, believing -- as does Mr. Dobbs -- this hurts America. His competitor, however, wants to increase profits. When he can, he lowers costs by "outsourcing," using the savings to put back into his business. The CEO who refused to outsource now must explain to his finicky customers why he intends to charge them more.
Consider the real-life example of E-Loan, Inc., a Pleasanton, Calif.-based company that processes loan applications. Because of the growing sensitivity to "outsourcing," E-Loan offered customers a choice. Processing your loan could take 12 days if processed by American workers. If, however, you wanted your results two days earlier -- in 10 days -- you could agree to have your loan processed in India. Guess what? According to the Los Angeles Times, 9 out of 10 customers choose the 10-day, overseas option. So much for, "I only buy if it's made in America."
Sen. Hillary Rodham Clinton seems to have a better grasp of Economics 101 than CNN's Dobbs. Speaking to business and political leaders in India, she called "outsourcing" a "reality." Sen. Clinton, offering yet another reason why she may be savvy enough to win her party's 2008 nomination, said, "There are people who feel left behind . . . because they do not understand the economic benefits of outsourcing."