Outsourcing: An Economic Perspective

Mar 23, 2004



Dr. Donald Boudreaux
Chair, Department of Economics
George Mason University

Click Here to listen to audio archive.

Dominating recent headlines are fears of American jobs being “outsourced” overseas.  Although the practice has long been prevalent among manufacturing industries, its more recent emergence among white-collar and service jobs seems to have driven even some ardent “free-traders” to reconsider their positions on globalization.

Proponents of outsourcing claim that it is the natural result of employers seeking to obtain the best product at the lowest price.  Wealth freed up by the gains in productivity can then be used to create jobs in other sectors.  Although there are temporary dislocations in the workforce, the process ultimately provides the nation with a higher standard of living.

Opponents of the outsourcing practice claim that the gains from sending jobs overseas are captured by large corporations and not shared widely. The loss of these high paying jobs raises unemployment and permanently lowers our standard of living.

In an effort to help Hill staffers sort through these claims, the Mercatus Center at George Mason University is sponsoring a seminar that will look at the situation through the eyes of an economist.  Although economists don’t have the answers to every problem, “thinking economically” can help staffers get a clearer idea of how to understand this issue.  Questions we will look at include:

  • On what scale and in what industries is outsourcing occurring?  What have been the net costs and benefits?
  • Does outsourcing make America richer or poorer?  What are its effects on our trading partners?
  • What may be the tradeoffs and consequences of different policy decisions?