PPI: U.S. Must Adapt, Innovate to Overcome Offshoring Woes

Anxiety over offshoring is an increasingly prevalent issue among Americans and a hot button issue for the upcoming presidential election. With concerns looming from all sectors, it can be difficult to assess which ones hold the most validity. According to a new report from the Progressive Policy Institute (PPI), the real threat to offshoring is it could alter the occupational distribution of the economy and, particularly, squeeze the middle class.

Understanding The Offshoring Challenge does not attempt to solve the complex issue of offshoring, according to PPI. Rather, it seeks to describe the phenomenon and its causes, to put it into proper prospective, and to define the economic stakes for Americans and policymakers. The main issues causing the angst, according to the report's author, Rob Atkinson, are the loss of particular jobs and its impact on specific individuals, and the weak nature of the U.S. employment market.

Atkinson, the vice president of PPI, tries to resolve several myths regarding offshoring that are often misunderstood by the public. Both optimists and pessimists are making claims and arguments based on erroneous assumptions and faulty analysis, he contends, with one side focused on the interests of workers and the other on the interests of consumers.

Three main factors are driving the trend, the report argues, including:

• An increasing share of work is now digitized or conducted through telecommunications, making distance no longer an issue;
• Many developing nations have produced the infrastructure, skilled workforces and business climates to become attractive locations for this work; and,
• Wages in low-cost developing nations that on average are 20 percent of U.S. rates allow companies to reduce their costs.

Throughout the report, Atkinson analyzes trends of the past, comparing offshoring with other issues that caused concern for the workforce. For example, similar fears occurred in the late 1950s and 1960s when automated factories began replacing human tasks and companies moved operations to the lower-cost southeastern states, which in turn increased unemployment in the north.

Of the many opinions that have emerged regarding how to handle offshoring, Atkinson argues for the need for the country to adapt and innovate: create new public policies to help firms become more productive and workers more skilled. In particular, he calls upon policymakers to enhance the nation’s ability to specialize in innovative high-value-added work, get tough about practices by other countries that distort free trade, and boost aid to workers and communities hurt by global competition.

Understanding The Offshoring Challenge is available from PPI at http://www.ppionline.org.