4:30pm

Tue July 24, 2012
U.S.

Offshore Jobs Play Role In Campaigns And Economy

Originally published on Wed July 25, 2012 3:46 pm

President Obama and Republican challenger Mitt Romney have been trading attacks over the issue of American jobs being moved overseas.

The president has pounded Romney for the investments made by his former firm Bain Capital in the 1990s. Not to be outdone, the Romney campaign has suggested most of the money from the president's stimulus program went to create jobs overseas.

Independent fact checkers have concluded the Romney charges are inaccurate and that Obama's claims about Romney are misleading. Harvard economist Mihir Desai says the emphasis the candidates are placing on the offshoring of jobs is out of proportion to its effect on the economy.

"We're going through something very dramatic economically and it is tempting to pin that on the most visible articulation of economic change, which is globalization," Desai says.

He says it's true that since the nation's financial crisis hit, multinational companies have been creating more jobs overseas than in the U.S. But, he says, that doesn't mean those offshore jobs were created at the expense of American workers.

"This crude logic, which is when firms grow abroad that means we're worse off at home, is probably not right," Desai says. In fact, he says, when firms add employment abroad, often to serve foreign customers, they're more likely to add jobs at home.

"And that's not the natural way for people to think about the world, but once you start to say to yourself, 'Well, so now they are growing abroad,' " Desai says, "... that allows them, for example, to do more [research and development] in the United States; that allows them, for example, to have more headquarter activities in the United States because they're successful abroad."

But that doesn't mean there haven't been hundreds of thousands of U.S. workers hurt when their jobs moved overseas. Desai says the focus of this debate should be on what sort of compensation and training those displaced workers can receive.

"I think that's an important thing to talk about," Desai says. "We just have to learn how to talk about that without throwing the proverbial baby out with the bath water and saying our firms who go abroad are somehow being traitorous."

Desai says a pox on both the candidates for distorting this issue. Princeton economist Alan Blinder has a slightly different view of the importance of offshore jobs in the presidential debate.

"I think it's modestly relevant in our current economy and likely to become increasingly relevant," Blinder says.

Before the financial crisis hit, Blinder thought offshore jobs would be the biggest economic issue of the next 20 years. That's because he estimates that over that period, a quarter of all the jobs in the U.S. will be vulnerable to move offshore because of advances in communications technology.

That doesn't mean they'll all move overseas, but Blinder says the victims won't be just call center and manufacturing workers. A big swath of jobs higher on the skills ladder will be threatened.

"These are people that if you raised this question 15-20 years ago, 'Are you vulnerable to competition from foreign labor?' It would have been a far-fetched thought," Blinder says.

But the answer is not to try to stop American companies from growing overseas, he says.

"I think to the extent it's a public policy issue, it's mostly whether the tax code should be encouraging this," Blinder says. "There I think it's a lot easier to give an answer [of] 'No.' That's a long way from banning it."

Obama has said he wants to close tax loopholes that create incentives for companies to move jobs overseas. But there's another complicated debate over how best to do that.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

AUDIE CORNISH, HOST:

And I'm Audie Cornish.

Over the past few weeks, President Obama and Republican challenger Mitt Romney have traded attacks over the issue of American jobs being moved overseas. Here's President Obama at a recent campaign appearance in Cincinnati.

PRESIDENT BARACK OBAMA: Governor Romney's experience has been investing in what were called pioneers of the business of outsourcing. Now he wants to give more tax breaks to companies that are shipping jobs overseas.

CORNISH: This issue has taken up a lot of space in this presidential campaign. But as NPR's John Ydstie reports, many economists feel the debate is not enlightening voters.

JOHN YDSTIE, BYLINE: The president has pounded Mitt Romney for the investments made by Romney's former firm Bain Capital back in the 1990s. Not to be outdone, the Romney campaign has suggested most of the money from the president's stimulus program went to create jobs overseas.

(SOUNDBITE OF A POLITICAL AD)

UNIDENTIFIED MAN: So where did the Obama stimulus money go? Windmills from China, electric cars from Finland.

SENATOR CHARLES SCHUMER: Seventy-nine percent of the 2.1 billion in stimulus grants awarded through it went to overseas companies.

MITT ROMNEY: I'm Mitt Romney, and I approve this message.

YDSTIE: Independent fact-checkers have concluded the Romney charges are inaccurate and that Obama's claims about Romney are misleading. Harvard professor of finance Mihir Desai says the emphasis the candidates are placing on the offshoring of jobs is out of proportion to its effect on the economy.

MIHIR DESAI: We're going through something very dramatic economically. And it is tempting to pin that on the most visible articulation of economic change, which is globalization.

YDSTIE: Desai says it is true that since the financial crisis hit, multinational companies have been creating more jobs overseas than in the U.S. But he says that doesn't mean those offshore jobs were created at the expense of American workers.

DESAI: This crude logic, which is when firms grow abroad that means we're worse off at home, is probably not right.

YDSTIE: In fact, Desai says, when firms add employment abroad, often to serve foreign customers, they're more likely to add jobs at home.

DESAI: And that's not the natural way for people to think about the world. But once you start to say to yourself, well, so now they are growing abroad and that allows them, for example, to do more R&D in the United States. That allows them, for example, to have more headquarter activities in the United States, because they're successful abroad.

YDSTIE: But that doesn't mean there haven't been hundreds of thousands of U.S. workers hurt when their jobs were moved overseas. Desai says the focus of this debate should be on what sort of compensation and training those displaced workers should receive.

DESAI: I think that's an important thing to talk about. We just have to learn how to talk about that without throwing the proverbial baby out with the bathwater and saying our firms who go abroad are somehow being traitorous.

YDSTIE: Desai says a pox of both the candidates for distorting this issue. Princeton economist Alan Blinder has a slightly different view of the importance of offshoring in the presidential debate.

ALAN BLINDER: I think it's modestly relevant in our current economy and likely to become increasingly relevant.

YDSTIE: Before the financial crisis hit, Blinder thought offshoring would be the biggest economic issue of the next 20 years. That's because he estimates that over that period, a quarter of all the jobs in the United States will be vulnerable to offshoring because of advances in communications technology. That doesn't mean they'll all move overseas, but he says the victims won't be just call center and manufacturing workers. A big swath of jobs higher on the skills ladder will be threatened, he says.

BLINDER: These are people that if, you know, if you raised this question 15, 20 years ago: Are you vulnerable to competition from foreign labor, it would have been a far-fetched thought.

YDSTIE: But the answer is not to try to stop American companies from growing overseas, says Blinder.

BLINDER: I think to the extent it's a public policy issue, it's mostly whether the tax code should be encouraging this. There, I think, it's a lot easier to give an answer no. That's a long way from banning it.

YDSTIE: President Obama says he wants to close tax loopholes that create incentives for companies to move jobs overseas, but there's another complicated debate over how best to do that. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.