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Outsourcing study a welcome surprise in budget bill

By Lou Dobbs
Lou Dobbs

(CNN) -- Congressional authority to peek into citizens' tax returns wasn't the only clause hidden in the omnibus spending bill that recently passed. There's also a more welcome surprise for the American worker: a grant for a comprehensive study of the effects of outsourcing U.S. jobs to cheap, foreign labor markets.

So far, the government has simply lacked the data to determine offshore outsourcing's impact on the U.S. work force, said Republican Rep. Frank Wolf of Virginia. Wolf initiated the measure to grant $2 million to the independent, nonpartisan National Academy of Public Administration (NAPA) for the study.

The new study will provide a breakdown of how many jobs have gone abroad and from which industries. That analysis could have huge implications for future job creation, wage growth and the plight of the middle class.

"We're also looking to see what the implications are for our educational system," Wolf said. He noted that students might choose to avoid studying engineering and computer science for fear of not finding jobs when they graduate.

The government has tried before to gauge offshore outsourcing's impact on the U.S. work force, but it ran into difficulties. In January, the Labor Department's Bureau of Labor Statistics began an attempt to tally the job losses that result when American companies decide to shift employment overseas. The BLS planned to report its findings quarterly but found that employers were not providing enough information for the count to be meaningful.

After reporting a first-quarter estimate that only 4,633 workers had lost jobs due to overseas displacement -- a figure widely regarded as too low -- the BLS neglected to report a count for the second and third quarters. Instead, the Bureau said roughly 16,000 workers had lost their jobs due to relocation last quarter, which doesn't help explain which of those jobs went offshore.

Congress asked the Government Accountability Office this year to study why offshore outsourcing is a growing practice and what government data show about its impact. While the reasons more companies choose to outsource jobs abroad are clear, the GAO concluded in September, "government data provide limited information about the effects of services offshoring on U.S. employment levels and the U.S. economy." Yet the GAO didn't have any recommendations on how to improve that data, other than to wait and see what federal researchers come up with.

Private research groups and business and labor organizations have also looked at the effects of outsourcing. But many of these studies have been limited by their focus only on certain industries or regions.

One prominent national study, from the U.S.-China Economic and Security Review Commission, estimated that 406,000 U.S. jobs will be shifted offshore this year, a number well above the Labor Department's estimate. The number is likely even higher, the report's authors suggested, given that companies are reluctant to publicize job shifts abroad.

The commission, set up by congressional mandate, looked at three months of media reports and corporate research to extrapolate the job-loss figure for an entire year. This methodology left the study open to criticism that it lacked scientific rigor. The U.S. Chamber of Commerce often cites another national estimate of job losses, about half the U.S.-China commission figure. But the Chamber is also a vocal supporter of offshore outsourcing.

For the results of the new offshoring study to be meaningful, the researchers must overcome the data-gathering problems that have plagued the BLS. NAPA's methodology for the study is "still in the early stages of planning," said Bill Gadsby, vice president of academic studies at NAPA. The academy is working with the Commerce Department's Economics and Statistics Administration and will appoint an expert panel to oversee the study, Gadsby said.

If Congress thinks it can gain something from reading individual tax returns, imagine what it can discover from studying the impact of exporting jobs overseas.

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