When the going gets weird, the weird turn pro. - Hunter S. Thompson

30 December 2005

GAO Report on Offshoring

This was released while I was on a heavy business travel schedule, so I missed it, but better late than never.

The Government Accountability Office (GAO, formerly known as the General Accounting Office) has finally released a long-awaited report on the economic impact of offshoring: "Offshoring of Services: An Overview of the Issues."

From the abstract:
Analysts of the offshoring phenomenon have expressed a range of views about the likely impacts of offshoring on four broad areas. The differing views reflect several factors: the fact that services offshoring is a relatively recent development whose impact is not fully known, the limitations of available data on offshoring, and different theoretical expectations about how services offshoring will impact the U.S. economy.

(1) The average U.S. standard of living: Traditional economic theory generally predicts that offshoring will benefit U.S. living standards in the long run. However, some economists have argued that offshoring could harm U.S. long-term living standards under certain scenarios, such as if offshoring undermines U.S. technological leadership.

(2) Employment and job loss: While economic theory generally predicts that offshoring will have little effect on overall U.S. employment levels in the long-run, there is widespread recognition that pockets of workers will lose jobs due to offshoring, though there is disagreement about the expected magnitude of job loss and implications for displaced workers.

(3) Distribution of income: Some economists maintain that offshoring could increase income inequality in the U.S., while others argue that changes in the income distribution are driven primarily by factors other than offshoring, such as technological change.

(4) Security and consumer privacy: Experts express varying degrees of concern about the impact of services offshoring on the security of our national defense system and critical infrastructure--such as utilities and communication networks--as well as the privacy and security of consumers' financial and medical information.
There's nothing terribly new or groundbreaking in this reporting or analysis, to put it mildly, but it might serve as a decent basis for opening a policy dialogue on an issue that is going to be extremely significant to the American economy in the coming years.


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