New Brookings Analysis on Offshoring and Imports

Here is a summary of a recent analysis of the job impacts of offshoring, imports, and productivity growth. As we suspected, productivity, our long courted friend, has dealt the greatest blow to employment. I wouldn't let offshoring off the hook just quite yet.

Until the end of 2003, the United States had been experiencing a "jobless" recovery, with employment stagnating at levels well below those in 2000. A widespread perception has arisen that a major culprit behind the dearth of jobs was the growing practice of U.S. firms to relocate part of their domestic operations to lower-wage countries abroad. "Offshoring" presumably caused a reduction in U.S. output and a corresponding loss of jobs.

In fact, after the 2001 recession, U.S. domestic production rose substantially, but output per worker—productivity—jumped so sharply that instead of rising, employment declined. That is the real cause of the jobless recovery. Had GDP growth been accompanied by a continuation of earlier rates of productivity growth, there would have been some 2 million more private sector jobs than there were at the end of 2003.

When firms send work overseas, those goods or services come back in the form of imports. But a careful look at U.S. import data—especially for service imports, where most offshoring growth occurred—indicates that while the total number of jobs affected by offshoring had increased, that number was still small relative to the millions of jobs affected by the productivity surprise.

Download the brief here.