Romney, for his part, says Obama is lying about his record, and points out that Obama has been “outsourcing a good deal of American jobs himself … [b]y putting money into energy companies — solar and wind energy companies that end up making their products outside the United States.”
Both campaigns are missing the point. The fact is, outsourcing is not a zero-sum game—one foreign worker replaces one American worker. The empirical evidence shows that when companies outsource, they tend to grow and expand—and create more jobs here in the U.S.
In 2007, Matthew Slaughter, an economist at Dartmouth’s Tuck School of Business, did a comprehensive study of the hiring practices of 2,500 U.S.-based multinational companies between 1991 and 2001. As the Wall Street Journal explains:
Mr. Slaughter found that while employment in foreign affiliates rose by 2.8 million jobs, employment in U.S. parent firms rose even more smartly — by some 5.5 million jobs. For every one job outsourced abroad, multinationals created nearly two jobs in the U.S.It turns out that when U.S. firms hired lower-cost labor at foreign subsidiaries overseas, their parent companies hired even more people in the U.S. to support expanded operations. Those new U.S. jobs were higher-skilled and better-paying—filled by scientists, engineers, marketing professionals, and others hired to meet the new demand created by their foreign subsidiaries.
As the Journal puts it:
Simply put, focusing on substitution to India results in counting the number of jobs lost but ignoring the greater number of jobs created. The cost-savings and gains in foreign-market access spur growth in companywide activities — both abroad and in the U.S. Higher sales in foreign affiliates appear to raise, not lower, domestic employment in the parent company.Don’t expect to see that in a campaign ad anytime soon.
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