“How Many U.S. Jobs Might Be Offshorable?” by Alan Blinder, Princeton University CEPS Working Paper 142.

The research created quite a stir not just because of its magnitude but because it purports that high wage and high skill level jobs (such as scientists, engineers, editors, etc.) are as offshorable as jobs traditionally thought to be at risk of leaving the United States.

Professor Blinder could have labored harder to demonstrate the real economic significance of his findings. While solid data on offshoring is elusive, estimates suggest that roughly 300,000 American jobs have been sent overseas per year since 2001. But Blinder’s job losses will not happen all at once. Even at 40 million jobs lost over a decade, the offshoring of four million jobs per year (while over ten times the size of the current trend) is very small compared to the 2.4 million jobs which were destroyed per month in 2006 for reasons other than offshoring.

Technological improvements are blamed for making outsourcing more likely in today’s globalized world. Ironically, technological progress has been far more important than offshoring in causing job churning through history. For example, the mass layoffs at Kodak in 2004 were caused by the growth in digital photography and home printing sectors, which decreased the demand for film processing – a core Kodak business. The decline in the relative employment levels in American manufacturing has been a result of substantially higher worker productivity in that sector due to mechanization. Today's manufacturing worker produces nearly 400 percent more output per hour than did his counterpart fifty years ago, and manufacturing output has grown faster than overall output since then.

The threat of offshoring places far less pressure on today’s American workers than the arrival of faster micro-processors, more efficient grain combines, the internet, and so on. And as with technology, jobs are not “lost” due to offshoring, rather labor and capital are freed up to be applied to more highly valued (if unforeseen) uses. And it is the high-skilled workers who are best able to adjust. Tens of millions of Americans will be in different occupations in 2018 than they are today – many which do not yet exist. Who, even in 1990, knew that there would be over 500,000 webmasters in the United States today? At the turn of the 20th century who could have imagined that there would be over one million engineers, medical technicians, and mechanics but virtually no boilermakers, cobblers, blacksmiths or telegraph operators?

Professor Blinder does a fine job pointing out the very real and observable possible job losses due to international labor market competition. But he does readers a disservice by obfuscating the fact that producing more goods with fewer man hours is the road to progress, not danger, regardless of how this enhancement comes about.

Read more about AIER's Research Roundup