Lou Dobbs and “Ignorant so and so’s”

I was thinking of a topic to discuss for today's blog and remembered watching a video last quarter in my Personnel Econ class about the United States and outsourcing. The video was from "Lou Dobbs Tonight" on CNN and talked about how outsourcing is terrible for America and has been hurting the domestic job market. It particularly highlights Nielsen, the world’s leading marketing and media information company. Nielsen has a 1.2 billion dollar outsourcing contract over the next 10 years (for both technological and operational labor) with TaTa Consultancy Services (an outsourcing company, among other things).

So, how much do you think outsourcing has affected our economy and the amount of jobs in the U.S.? More importantly, is it "un-American"? When I was first posed with these questions in my Personnel Econ class last quarter, I thought America was losing a lot of jobs and our economy has really been affected (or would be heavily affected).

However, to my chagrin the Bureau of Labor Statistics (in 2004) reported that only 1.9% of jobs lost in mass layoffs were associated with out-sourcing or movement of jobs to other countries.

So, unlike the video stated, Lou Dobbs may be the “ignorant so-and-so”. Outsourcing as of 2004, hasn’t even accounted for 2% of mass job layoffs in the United States. Economically, outsourcing is just another form of free trade and comparative advantage (the ability to produce a product most efficiently given all the other products that could be produced). If a firm can go elsewhere for simple data entry and basic programming - and the firm is profit maximizing - they should do so. Policies aimed at preventing trade, like outsourcing, would lower the standard of living for both Americans and the citizens of developing countries and can make firms inefficient and face higher production costs. Overall, an open market trading system is generally viewed by the economic world as a positive contribution to economic prosperity.

Glad Lou Dobbs left CNN,

Your aspiring Economist

Post-script – Watch Lou Dobbs:
http://www.youtube.com/watch?v=96Yo5Fi4sTk&feature=related

Post-post script - The Politics and Economics of Offshore
Outsourcing (American Enterprise Institute for Public Policy Research):

http://www.aei.org/docLib/20051208_WP122.pdf