The Consequences of “Offshoring”
Six years ago, I wrote a book called The Causes & Consequences of Exporting Our Manufacturing Jobs. At the time, the U.S. was not experiencing an obvious crisis, and we couldn’t convince a publisher to print the book. Now, people acknowledge an economic crisis—but don’t seem to understand the root causes.
In just the past 10 years, the United States has lost 32% of its manufacturing jobs. In June of 1999, there were 17.3 million manufacturing employees in the United States. In June of 2009, there were just 11.8 million manufacturing employees (source: Bureau of Labor Statistics) despite the fact that the U.S. population has grown over that same time period (source: U.S. Census Bureau).
Although I have a book and blog on the causes of our industrial decline, I have not blogged on the consequences of this decline.
10 Consequences of Exporting Manufacturing Jobs
1. The industrial sector was largely responsible for both the economic prosperity of the United States and the jobs and spending power it created. It was industries such as automotive, electronics, pharmaceutical, furniture, etc. that provided millions of jobs for Americans. Without these jobs, people consume and invest less, so most other businesses are negatively affected.
2. The government has lost tax dollars from corporations and individual income taxes. With sky-rocketing unemployment and more uninsured families, the government needs more money than ever—but there are far fewer individuals and corporations contributing.
3. Products are easy to export—and can bring money into the United States. Services, on the other hand, are more difficult to export, so even if our service base grows, we cannot expect to gain the same global consumer base that manufacturing offers.
4. Without the industrial sector, decent opportunities for the unskilled or uneducated are scarce. The manufacturing base provided high-paying jobs to disadvantaged adults—and gave them a chance to prosper and care for their children.
5. With the exportation of our industrial jobs, we leave fewer future opportunities for our children. Unless our children become “super-specialized,” they will have few options in the U.S. marketplace.
6. Once we export these jobs, it’s difficult to bring them back. The nation loses expertise in industrial technologies.
7. When the labor costs rise in some of these “low-wage” countries, the cost advantage disappears.
8. Although the costs of production are much lower in other countries, the costs of poor quality, reliability, transportation, and inadequate safety have often eclipsed the labor savings.
9. The factories in low-wage countries often experience high rates of internal scrap and inefficiencies. These end up costing corporations millions of dollars, but much of the cost hidden by plant personnel and unaccounted for.
10. It took the United States decades to develop production and business systems for manufacturing. Now, the U.S. simply transfers our technology, knowledge, and secrets to low-cost foreign competitors.
We must make our industrial base more competitive, so we can keep jobs and wealth in the United States. If we do not make the necessary improvements, we leave little for our children other than massive debt. Is that the legacy we will choose to leave?