[Congressional Record Volume 150, Number 140 (Monday, December 20, 2004)]
[Senate]
[Pages S12089-S12092]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
OFFSHORE OUTSOURCING
Mr. LIEBERMAN. Mr. President, on December 15, 2004, my office
released a white paper entitled ``Data Dearth in Offshore Outsourcing:
Policymaking Requires Facts.'' This white paper is closely linked to a
previous white paper entitled ``Offshore Outsourcing and America's
Competitive Edge: Losing Out in the High Technology R&D and Services
Sectors.'' The latter was released by my office in May 2004. A summary
of that report appeared in the Record on May 21, 2004.
A key conclusion of the May paper was the absence of reliable data to
measure and assess the offshore outsourcing phenomenon. We do not have
good data on the offshoring problem, and the data we have are general
in nature. Estimates vary widely on the number of jobs moving overseas,
and the lack of reliable data contributes to incorrect conclusions
about the impacts of offshore outsourcing, which can result in flawed
policy responses. We need data to understand what we are facing so we
can chart a sure and steady course for the future. There is enough
anecdotal data about job losses to spark debate and, in some cases,
result in policies which may provide a short-term fix but which do not
produce longer term solutions to preserve U.S. innovation and ensure
U.S. competitiveness. Comprehensive and balanced data on both job gains
and job losses resulting from offshore outsourcing are essential. This
data must be assembled by U.S. Federal Government agencies, including
the Department of Commerce and the Department of Labor, where data-
gathering capabilities are extensive and research methodologies are
transparent.
The lack of data is critical because the issues raised in the May
white paper are so important. The white paper was designed to stimulate
a deeper review of the long-term implications for our policy responses
and to change the terms of the debate on offshore outsourcing. The
paper looked at rising global competition and the challenges posed to
America's competitive advantage. Globalization is our current and
future reality; there is no escaping it. The U.S. economy is
inextricably linked to the rest of the world; our fortunes rise and
fall depending on our performance with our trading partners and our
competitors. Our strength and success with China, India, and other
emerging markets is as important to future U.S. economic and national
security as the competition with Japan and Europe was to U.S. growth
over the last 50 years. The offshore outsourcing phenomenon is one of
the challenging manifestations of globalization.
The May white paper found that it was not just manufacturing jobs
that are subject to global outsourcing--where 2.7 million jobs have
disappeared since 2000--but service sector and high-end R&D jobs are
also being hit by offshore outsourcing. And it is not just call
centers, data entry facilities, and other entry-level service jobs that
are impacted by offshore outsourcing. Higher skill professional jobs--
from engineering, computer chip design to nanotechnology R&D--are
beginning to go overseas, and with these jobs, we may be losing key
parts of the talent and technology which fueled the record growth and
prosperity of the 1990s. Fundamental changes are facing us, as key
components of our innovation infrastructure--knowledge, capital, labor,
technology and facilities--are increasingly mobile. Offshore
outsourcing of labor, capital, and technology not only hurts workers
but threatens our knowledge-based economy. If engineering, design, R&D,
and services follow manufacturing abroad, U.S. competitiveness is
weakened, and our economic prosperity and national security are
threatened.
What is at stake is the ability of the United States to remain a
global leader in innovation, to maintain good-paying jobs, and to
expand our global market share. We must rethink long-term strategies on
competitiveness, innovation, R&D, trade policy, and enforcement, as
well as education and investments in human capital. However, we cannot
begin to develop effective solutions until we have an understanding of
the scope of the offshore outsourcing phenomenon. The need for data on
offshore outsourcing is paramount.
Lord Kelvin, the 19th century Belfast-born physicist said:
When you can measure what you are speaking about and
express it in numbers, you know something about it; but when
you cannot measure it, when you cannot express it in numbers,
your knowledge is of the meager and unsatisfactory kind.
That was in a May 3, 1883 lecture to the Institute of Civil
Engineers.
By improving U.S. Government data collection, we can ensure that our
knowledge of offshore outsourcing is neither meager nor unsatisfactory,
but informed and balanced. With improved data and analysis, we will
build constructive and lasting solutions to address the challenges
posed by offshore outsourcing.
I would like to thank Sara E. Hagigh of my staff and Mary Jane Bolle
of the Congressional Research Service for their hard work in
researching and preparing this report.
Mr. President, I ask unanimous consent to have excerpts from the
white paper printed in the Congressional Record.
The material follows:
Excerpt 1, Summary of White Paper
The issue of offshore outsourcing has been at the center of
many key political and public debates over the last few
years. The term ``outsourcing'' has become part of our
everyday lexicon, gracing the covers of news magazines,
television broadcasts, and playing a central role in
Congressional debates during an election year. Most Americans
are aware of the issue of offshore outsourcing, but few of us
have an understanding of the full dimensions of the problem.
To develop a better understanding of offshore outsourcing,
my office released a white paper in May 2004 entitled
``Offshore
[[Page S12090]]
Outsourcing and America's Competitive Edge: Losing Out in the
High Technology R&D and Services Sectors.'' The white paper
found that it is not only manufacturing jobs that are being
outsourced overseas, where 2.7 million jobs have disappeared
since 2000. Offshore outsourcing has also begun to hit high-
end services and R&D jobs, and there is evidence that it is
not just call centers, data entry and other entry-level
service jobs that are impacted by offshoring. We are
beginning to send higher skill professional jobs overseas--
including engineering, computer chip design and
nanotechnology R&D, and with these jobs, we may be losing the
talent and technology that created the growth of the 1990s.
The white paper concluded that offshore outsourcing of high-
end services and R&D jobs could threaten our innovation
infrastructure, and therefore our economic prosperity, and
our national security.
A key conclusion of the white paper was the absence of
reliable data to measure and assess the offshore outsourcing
phenomenon. Estimates vary widely on the number of jobs
moving overseas, and the lack of reliable data contributes to
incorrect conclusions about the impacts of offshore
outsourcing. The result is flawed and ineffective policy
responses. In order to develop effective policies to address
the many facets of the offshore outsourcing challenge--
including investments in education and human capital, greater
investments in Federal, industrial, and services R&D, and
better enforcement of our trade agreements--we must have
better, more reliable data.
This paper provides a review and assessment of Federal data
on offshore outsourcing:
1. It begins by identifying a series of questions that
would produce useful data to measure offshore outsourcing.
These questions address information about job ``losses'' as
well as job ``gains'' from offshore outsourcing so we can
arrive at a balanced assessment of the impacts of offshore
outsourcing.
2. The report then surveys ten existing U.S. government
data sets, from the Departments of Labor and Commerce,
measuring aspects of offshore outsourcing. The report
enumerates strengths and weaknesses of each of the ten data
sets in measuring offshore outsourcing and identifies which
federal agency data best answer the questions posed in Table
1 of the report--Useful Data to Measure Offshore Outsourcing.
The report also contains Table 2 (Aspects of Offshore
Outsourcing Potentially Measurable with Existing Data), Table
3 (Legislative Recommendations for Improving Federal Agency
Data on Offshore Outsourcing), Appendix A (Federal Agency
Data's Strengths and Weaknesses for Measuring Offshore
Outsourcing) and Appendix B (Major U.S. trading partners).
3. Finally, the report makes five legislative
recommendations for improving Federal agency data to provide
a more useful measure of offshore outsourcing. The five
recommendations (summarized in Table 3, Legislative
Recommendations for Improving Federal Agency Data on Offshore
Outsourcing) are:
a. Extend the Trade Adjustment Assistance Program;
b. Require the Office of Trade Adjustment Assistance to
report data;
c. Require Bureau of Labor Statistics to make changes to
Mass Layoff data program;
d. Require the Commerce Department to publish annual
multipliers; and
e. Link Bureau of Economic Analysis and Bureau of Labor
Statistics data sets.
This report represents a beginning, not the end. We must
develop reliable and comprehensive data-gathering
capabilities at U.S. government agencies to measure
employment and economic effects of offshore outsourcing.
Without a better understanding of the scope of the problem,
effective policy solutions to offshore outsourcing cannot be
developed.
This is the fifth major white paper in a recent series on
U.S. economic growth my office has released. The four
previous papers are:
1. ``Offshore Outsourcing and America's Competitive Edge:
Losing Out in the High Technology R&D and Services Sectors,''
May 11, 2004.
2. ``Making America Stronger: A Report with Legislative
Recommendations on Restoration of U.S. Manufacturing,''
September 2003.
3. ``National Security Aspects of the Global Migration of
the U.S. Semiconductor Industry,'' June 2003.
4. ``Broadband: A 21st Century Technology and Productivity
Strategy,'' May 2002.
Excerpt 2, Data We Would Like To Have: Useful Data To Measure Offshore
Outsourcing
In a perfect world, data on offshore outsourcing and its
impact on the U.S. economy would be available to answer
questions about job losses from offshore outsourcing and
counterbalancing job gains. An assessment of the impact of
offshore outsourcing on U.S. employment levels and the
overall economy must balance both job gains and job losses.
Table 1 on p. 12 sets out these questions together with
short-hand answers on where the data can be found to respond
to each question. This report will then analyze and assess
all Federal agency data on offshore outsourcing.
In prioritizing data needs, it would be most important to
have data to answer the questions in Part A and Part B of
Table 1--a total of 10 questions. Part A includes 6 questions
on job losses from offshore outsourcing and Part B poses 4
questions on counterbalancing job gains. If data were
available to answer all of the questions in Parts A and B in
Table 1, the result would be a reasonably good picture of the
positive and negative effects of offshore outsourcing on the
U.S. economy, as well as on industries, States, and
localities, and their workers. After data in Parts A and B
are gathered, it would be useful to have the data in Part C
of Table 1, which address 7 specific questions including the
role of visa programs in offshoring operations and the impact
of offshore outsourcing on career choices of U.S. students.
Table 1 shows that almost no data are being made available
at this time to provide answers to any of the questions in
Table 1. Much of the data is either unpublished or not being
collected. Some data relating to U.S. exports and U.S.
foreign direct investment (both foreign and domestic) are
gathered by the Department of Commerce, but for the more
detailed questions relating to offshore outsourcing (listed
in Part C of Table 1), no U.S. government agency collects the
data. The unavailability of basic data to answer the
questions in Parts A and B (job losses and job gains from
offshore outsourcing) is in sharp contrast to the
comprehensive data that were available to answer similar
questions related to Mexico and Canada under the North
American Free Trade Agreement (NAFTA). These data were
available between 1994 and 2003 but are no longer being
published.
Excerpt 3, Recommendations
The next section outlines five legislative recommendations
that might be taken to produce data that would offer some
estimates of the extent and nature of offshore outsourcing.
These recommendations range from amending existing
legislation to increasing Federal agency reporting
requirements.
recommendation 1: extend the trade adjustment assistance (taa) program
One recommendation is to extend the TAA program to cover
two groups of workers not presently covered who lose their
jobs to offshore outsourcing: a) all service sector workers;
and b) workers producing ``articles'' who are currently not
covered under Sec. 113 of Title I of the Trade Act of 2002
(P.L. 107-210). Sec. 113 provides TAA benefits to workers if
they lose their jobs due to shifts in production to certain
countries, primarily countries with which the United States
has a trade agreement or a trade preference program (see
footnote 29 for a list of these 72 countries).
On the first issue of covering all displaced service sector
workers, there are a number of benefits in making this change
to the legislation authorizing the TAA program. Aside from
issues of equality in having the Trade Adjustment Assistance
Program cover all workers who lose their jobs to offshore
outsourcing, extending the program would result in data
covering virtually the complete range of jobs lost to
offshore outsourcing. From these data, analysts could
estimate the effects of offshore outsourcing on the Nation as
a whole, on individual industries, and on States and
localities. One drawback of expanding the TAA program to
provide benefits to services workers whose jobs are lost to
offshore outsourcing is that the program would cost more. No
estimate has been made on additional costs to the TAA program
resulting from covering services workers who lose their jobs
due to offshore outsourcing.
Legislation has been introduced in the 108th Congress to
extend the TAA program to cover service sector workers.
Senator Lieberman co-sponsored ``The Services Workers
Fairness Act'' (S. 2143), introduced by Senator Durbin, to
ensure that services workers losing their jobs to offshoring
are eligible for TAA benefits. Senator Lieberman also
supported an amendment to the Senate version of the Foreign
Sales Corporation-Extraterritorial Income Act bill (S. 1637)
introduced by Senators Wyden, Coleman, and Rockefeller to
extend the TAA program to cover services workers. While
the amendment failed to pass, Congress must continue
efforts to extend TAA benefits to all Americans who lose
their jobs due to offshoring, including services workers.
The second change to the TAA program would extend the TAA
program to cover workers producing articles whose job
relocates to any country. This provision was included in the
Senate-passed version of the TAA reauthorization, included in
the Trade Act of 2002, however it was yielded in the
Conference committee [See Trade Act of 2002, Conference
Report 107-624, July 26, 2002, p. 122.]. Under existing law,
TAA benefits go to workers who lose jobs when their firms
have shifted production to a country which: a) has a free
trade agreement with the United States; b) is a beneficiary
country under the Andean Trade Preference Act, the African
Growth and Opportunity Act, or the Caribbean Basin Economic
Recovery Act; or c) is likely to be an increase in imports to
the United States of articles like or directly competitive
with those the job loser produced. (Sec. 113, P.L. 107-210).
A review of the Department of Labor-Employment and Training
Agency's website on the TAA program shows that there are 72
countries that meet these requirements for shifts in
production (see footnote 29 of this report for the list of
countries). Yet, there are 148 members of the World Trade
Organization, and important trading partners and
[[Page S12091]]
key outsourcing destinations--like China and India--are not
on the list for shifts in production. This is a significant
limitation in the TAA program. At a minimum, the list of
eligible countries for production shifts should be expanded
to include all WTO members--currently 148 countries.
recommendation 2: require the office of trade adjustment assistance to
report data
A second recommendation is to require the Office of Trade
Adjustment Assistance to report data which it is already
collecting on applications for TAA certification. A database
for such reported data could include the following categories
of information for certified workers: Name of company,
location of business, products produced and North American
Industry Classification System (NAICS) industry code, place
to which production has shifted, or from which new imports
are being sourced, reason for the offshore outsourcing
(imports or production shift) and number of workers affected.
Publishing data of this type would not be new for the TAA
Office. Under the NAFTA-TAA program the office made available
data on certifications: a) By number of workers affected; b)
by industry code; c) by State and locality of the job losers;
and d) by country source of the job loss (i.e., the country
which was the source of imports or the target of the
production shift). These data are potentially the best, most
complete data available because: a) They are a direct count
of the estimated number of workers potentially affected by
the various offshore outsourcing events; and b) they are
required, not voluntary, on the part of applicants for
certification.
Despite these benefits, TAA data are an imperfect measure
of the total jobs lost to offshore outsourcing. They do not
measure service-producing jobs outsourced offshore (with a
few minor exceptions), and they do not measure all goods-
producing jobs outsourced offshore. Other imperfections are
that: a) They measure potential, not actual job loss, some of
which may not actually have occurred; and b) they fail to
measure tertiary jobs lost (e.g., independent service sector
jobs which support goods-production operations outsourced
offshore, such as those in stores in areas hit by closures).
recommendation 3: require bls to make changes in mass layoff data
program
Three requirements could improve data being reported by the
Bureau of Labor Statistics on the Extended Mass Layoffs
Associated with Domestic and Overseas Relocations Survey: 1)
Reduce survey size to businesses with 25 layoffs; 2)
disaggregate (separate into component parts) data on movement
of work; and 3) report data annually instead of quarterly.
(1) Reduce Survey Size to Businesses With 25 Layoffs. The
Extended Mass Layoff Survey, which contains a question on
movement of work, could be conducted on businesses which lay
off 25 or more workers instead of businesses which lay off 50
or more workers as is currently the case. A reduction in the
size of the companies surveyed would capture more layoff
events and increase the share of offshore outsourcing
instances reported.
BLS officials estimate that expanding the Mass Layoff
Survey to layoffs of 25 workers or more would allow the
program to identify more than double the number of potential
layoff events requiring a telephone interview. BLS officials
estimate that such an expansion in the MLS survey program
will require $3.3 million in additional funds, including 3
full time equivalent employees. Of this total, $2.7 million
would go to States for the MLS employer interview and related
activity. The remaining $600,000 would support BLS data
collection, analysis, and publication activities.
Reducing the size of the business surveyed in the Extended
Mass Layoff Survey does not alter the weaknesses of such data
and survey methods, namely that the survey is voluntary and
the quality of results depends on who in the organization
responds to the survey and their knowledge of the causes of
jobs going offshore. BLS officials also raised concerns about
extra reporting burdens by reducing the size of business
surveyed.
(2) Disaggregate Data on Movement of Work. BLS could be
required to disaggregate (separate into component parts) and
report separately detailed data on the two categories of
``movement of work''--movement of work to another location
inside the United States versus movement of work to another
location outside the United States. Detailed data to be
reported could include distribution of layoffs by industry or
region of the country affected by the layoff.
Many believe that disaggregating the data is the only way
to make the data on movement of work useful. In its current
form, data on offshore outsourcing are imbedded in data on
movement of work within the United States, thus the data are
not useful for measuring offshore outsourcing except for a
few summary numbers.
Even with greater data disaggregation, the Extended Mass
Layoff Survey remains voluntary. It is widely believed that
companies are reluctant to reveal data on offshore
outsourcing, although BLS reports a better than 90 percent
response rate in the Extended Mass Layoff Survey in each of
the first three quarters of 2004. As previously noted, the
quality of survey responses depends on the company contact
person who may not readily have answers about whether the
``movement of work'' is to an offshore location or to another
location in the United States. Companies will likely argue
that providing this level of detail presents additional
burdens, both from a personnel and a financial point of view.
(3) Report Data Annually. The Department of Labor-Bureau of
Labor Statistics could be required to report the Extended
Mass Layoff Survey data annually instead of quarterly. Annual
reporting would enable more detail to be published, since
privacy rules prohibit the reporting of survey data which
represents a sample size of fewer than three businesses.
Annual reporting of data would not solve the survey's
limitations, namely that reporting is voluntary, results
depend on who responds to the survey, and the additional
reporting burdens placed on businesses. However, we could
gain very helpful data if this recommendation was
implemented.
Recommendation 4: Require DOC to Publish Annual Multipliers
The Department of Commerce should be required to publish
annual ``multipliers'' showing for goods and services
separately and combined, the number of jobs supporting a
billion dollars worth of exports in each category. The
product of the multipliers and the value of exports can then
yield an estimate of the total number of U.S. jobs producing
for export. Comparing the number of workers producing for
export across years yields an estimate of job ``gains'' from
exports over time. These job gain estimates could provide an
important context for estimates of job losses and are
necessary to provide a full assessment of the effects of
offshore outsourcing.
Some updating of the model used to prepare the job gains
from trade estimates would likely be required in order to
produce these data on an annual basis.
Recommendation 5: Link BEA and BLS Data Sets
The Department of Commerce-Bureau of Economic Analysis and
the Department of Labor-Bureau of Labor Statistics should be
required to link their data sets, which could provide
synergies. BEA could link its data on multinational
corporations with relevant BLS data--including occupational
data and movement of work data in the Extended Mass Layoff
Survey. Both BEA and BLS would be required to be transparent
regarding their data collection methodologies. While there
may be some value in sharing data and identifying greater
detail on wages, occupation and skill level of jobs going
overseas, there is no certainty that providing these data
links will improve the quality of data on offshore
outsourcing. Such data linkages may be more valuable after
BEA and BLS improve their individual agency's data collection
on offshore outsourcing, by implementing the recommendations
in this report and any other suggestions to be developed.
However, data linkages could provide important additional
perspectives.
Excerpt 4, Conclusion
If all of these legislative recommendations are followed,
Congress would have available more accurate data on the
phenomenon of offshore outsourcing. This could include better
estimates of how many jobs--both goods-producing jobs and
services producing jobs--are being outsourced to other
countries. From the Trade Adjustment Assistance database,
that would be equivalent to the data available between 1994
and 2002 under NAFTA. Data would be available for the United
States as a whole and by State, on how many jobs were being
``lost'' by industry, by city, by cause (imports or
production shifts), and by country to which jobs were being
transferred. Congress would also have available estimates on
U.S. jobs ``created'' to balance jobs lost to offshore
outsourcing. These new jobs would represent U.S. jobs
supporting new exports and U.S. jobs supported by new foreign
direct investment in the United States.
These data, providing U.S. government estimates of the
magnitude of job ``losses'' from offshore outsourcing and
counterbalancing job ``gains'' from new exports and foreign
direct investment in the United States, could assist Congress
in making a variety of informed policy decisions. In a
narrower sense, these policy decisions would help displaced
workers become employed in new jobs or help critical U.S.
industries maintain a presence in the United States. In a
broader sense, the data would help Congress make more
informed decisions which could affect both the short-range
and long-term economic health and welfare of the United
States, its industries, and its citizens.
[[Page S12092]]
TABLE 1.--USEFUL DATA TO MEASURE OFFSHORE OUTSOURCING
[Table prepared by Congressional Research Service]
------------------------------------------------------------------------
Location where answers can be
Question found
------------------------------------------------------------------------
A. Questions about job ``losses'' from
offshore outsourcing:
1. How many business operations are Unpublished Trade Adjustment
moving offshore?. Assistance (TAA) data for
covered countries; minimal
data available in Bureau of
Labor Statistics (BLS) Mass
Layoff Survey.
2. What industries are affected?.... Unpublished TAA data.
3. From what states and localities Unpublished TAA data.
are they moving?.
4. To which countries are businesses Unpublished TAA data.
shifting production?.
5. How many workers are affected, by Unpublished TAA data.
state, by industry, by cause
(imports vs. production shift) and
by country to which the plant is
relocating or from which imports
are arriving?.
6. What is the re-employment BLS worker displacement
experience of those workers surveys (some useful
displaced by offshore outsourcing estimates).
(level and new wages and type of
new jobs)?.
B. Questions about counterbalancing job
``gains'' from offshore outsourcing:
1. How much are exports increasing?. Available Department of
Commerce export data; Census
& BEA data.
2. What is the extent of job gains Unpublished DOC jobs
associated with increased exports?. multiplier.
3. What is the extent of new foreign Available DOC-BEA data.
direct investment in the United
States?.
4. What is the extent of job Available BEA data.
``gains'' from foreign direct
investment in the United States?.
C. Additional questions for which data
on offshore outsourcing would be useful
include:
[The first six questions on the list,
plus the question on re-employment
prospects of dislocated workers (Pt. A,
question 6), were developed by Dr. Ron
Hira, P.E., Assistant Professor, Public
Policy, Rochester Institute of
Technology]
1. What are the number and types of No data are available.
jobs moving offshore by occupation,
skill level, and wages?.
2. What are the number and types of Some BEA data are available by
jobs created overseas by U.S.-owned affiliates, employment data
companies for the purpose of are not.
exporting to U.S. markets compared
to those created to serve foreign
markets?.
3. What are the numbers and types of Some BEA data are available by
jobs created in the United States affiliates, employment data
by foreign-owned companies for the are not.
purpose of selling in the U.S.
market compared to those created to
produce exports for overseas
market?.
4. What are the companies' near-term No data are available.
and long-range plans for relocating
facilities and transferring jobs to
overseas locations?.
5. What is the impact of offshore No data are available.
outsourcing on academic and career
choices by American students?.
6. What is the role of H-1B and L-1 No data are available.
temporary visa programs on offshore
operations by U.S. and foreign
companies?.
7. How many and what types of No data are available.
research and development jobs are
being sent offshore?.
------------------------------------------------------------------------
____________________