Take This Job and Ship It: 286,000 PennsylvaniaJobs Highly Susceptible to Being Offshored, New Analysis Shows

April 15, 2008

Take This Job and Ship It: 286,000 PennsylvaniaJobs Highly Susceptible to Being Offshored, New Analysis Shows

Presidential Candidates Asked for Their Policy Solutions to Counter the Increasing Trend of U.S.Job Offshoring and its Downward Pressure on U.S.Wage Levels

WASHINGTON, D.C. –   New data showing that more than a quarter million jobs Pennsylvania workers now hold are highly vulnerable to offshoring within the next 10 to 20 years highlight the need for new trade and tax policies, Public Citizen said today.

According to a new analysis from the Economic Policy Institute (EPI):

  • 286,000 Pennsylvania jobs are “highly offshorable”;
  • 755,000 Pennsylvania jobs are “offshorable”;
  • A combined 1,041,000 Pennsylvania jobs – or 18 percent of the state’s total workforce of 5.7 million – are vulnerable to offshoring.

“Offshoring” is the term businesses coined to describe their practice of sending work now performed in the United States to other countries.

“For many years, white-collar workers have watched as blue-collar workers’ jobs have been shipped to China and Mexico,” said Leo Gerard, president of the United Steelworkers. “Now it is white-collar workers whose jobs are being targeted for offshoring. Pennsylvania workers need to wake up and join together to demand concrete solutions from our presidential candidates before their only option is a job at Wal-Mart.”

On a national basis, the EPI data show that the workers most vulnerable to offshoring are those with a four-year college degree and that those jobs pay $8,000, or 14 percent, more per year than nonoffshorable jobs. Table 1 below includes the full Pennsylvania findings.

“The wide-scale export of U.S. jobs is not inevitable, but rather is a result of our current failed trade agreements, which provide expansive new protections for U.S. firms to ship investment and jobs offshore,” said Lori Wallach, director of Public Citizen’s Global Trade Watch division. “The presidential candidates must provide American workers with a plan for changing our trade policy to aggressively address the offshoring of U.S. jobs that is only going to increase in the future.”

To address the offshoring problem, Public Citizen recommends a number of steps:

  • Prohibit the offshoring of work related to state and federal government procurement contracts, so that taxpayer money is recirculated in the economy to create jobs in the United States.
  • Prohibit the offshoring of jobs that involve handling sensitive data, such as consumer health and tax records, to countries that do not provide adequate privacy protections for consumers’ confidential data. U.S. federal consumer privacy protections do not prevent sensitive medical and financial data from being offshored. In contrast, the European Union forbids such work from being sent to any country that does not have equal protections and means for consumer redress.
  • Remove investment, procurement and service sector provisions in current U.S. trade agreements that promote the offshoring of jobs.
  • Replace the now-defunct “fast track” trade negotiating authority with a new modern trade negotiating system that better addresses widespread public concerns over job loss, the ballooning trade deficit, declining living standards and increased income inequality.
  • Change existing tax policies that incentivize offshoring. U.S. tax policies favor offshoring by allowing U.S. firms to avoid American taxes on their offshore activities and to shift accounting of profits to offshore shell corporations.

The trend for businesses to export U.S. jobs is intensifying due to a number of factors. Trade pacts such as the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) established new investor protections that remove many risks and costs previously associated with relocating production to low-wage nations, and limit how and if the United States can regulate offshoring, in the service sectors.

The pacts cut offshore production costs by forbidding developing countries from imposing common “performance requirements” on foreign investors, such as requiring foreign firms to transfer technology, train local workers or use domestic inputs. The pacts also forbid the United States from requiring that outsourced government work be done by U.S. workers. The pacts establish international enforcement tribunals to adjudicate disputes, removing the risk that U.S. firms will have to rely on local courts. U.S. manufacturing job losses jumped after Congress approved China’s entry into the WTO in 2000, and these investor protections began encouraging relocation to China.

While the loss of more than 222,000 Pennsylvania manufacturing jobs since NAFTA and WTO went into effect has featured prominently in the state’s Democratic presidential primary, the candidates have not addressed the downward pressure on all American workers’ wages caused by such labor arbitrage or the projections for increased offshoring of professional and high-wage service sector jobs.

“Some people argue that more education – rather than a different trade policy – is how America will prosper in the future. While more education and skills are desirable for many reasons, research shows that the workers whose jobs are most vulnerable to offshoring have a college education, and their jobs pay more,” said Todd Tucker, research director at Public Citizen’s Global Trade Watch division. “Even if these jobs are not actually offshored, they will still be subject to competition from lower-wage workers abroad and, consequently, the earnings in these occupations will lessen.”

The entry in recent years of hundreds of millions of highly skilled but extremely low-wage workers from China, Vietnam and the former Eastern bloc into the global labor pool created the prospect of labor arbitrage between U.S. workers and workers offshore who earn less per day than U.S. workers make per hour. The creation of new and efficient communications technologies made numerous service sector jobs newly offshorable. Business interests worked to establish the trade, tax and extremely lax regulatory regimes that would allow them to exploit these political and technological developments to implement a “low-road” business strategy of securing profitable access to low-wage workers overseas.

A surprising array of jobs are at risk of offshoring, not just computer programmers and call centers, but actuaries and accountants, editors and writers, drafters and graphic designers, underwriters and financial analysts, even scientists and mathematicians. Most jobs done in front of a computer are vulnerable to offshoring. (For more information about the top 100 job categories most vulnerable to offshoring, please see: https://www.citizen.org/trade/offshoring/articles.cfm?ID=17454.)

In his seminal 2007 work, Princeton economist and former Federal Reserve Vice Chairman Alan Blinder examined the tasks performed by Americans in hundreds of occupations and ranked those jobs on an “offshorabilty index,” identifying the jobs most vulnerable to offshoring. While many blue-collar or production jobs have long been recognized as offshorable, Blinder’s methodology allowed for an analysis of what workplace tasks in the service sectors, including high-paying jobs, were also vulnerable to being offshored. Particularly vulnerable are jobs that do not require on-site presence, so that the tasks involved can be accomplished by phone and especially over the Internet.

The new Pennsylvania analysis conducted by EPI applies Blinder’s methodology and assumptions to run the occupational categories and job numbers for Pennsylvania. Blinder was attempting to estimate the number of jobs that were potentially offshorable. He found that 29 to 38 million American jobs could be offshored nationwide in the foreseeable future, although Blinder believes only a small portion of these jobs will actually be offshored.

 

Figure 1: Share of PennsylvaniaWorkforce in Occupations that are Potentially Offshorable, 2008

Category

Pennsylvania

 

Percentage of jobs

Offshorable

18.3

Highly offshorable

5.0

Offshorable

13.3

Non-offshorable

81.7

Non-offshorable

4.3

Highly non-offshorable

77.4

Total

100.0

 

Number of jobs,

Offshorable

1,041,000

Highly offshorable

  286,000

Offshorable

755,000

Non-offshorable

4,652,000

Non-offshorable

   245,000

Highly non-offshorable

4,407,000

Total

5,693,000

Source: Economic   Policy Institute

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