Protectionism's the wrong response to outsourcing

OUTSOURCING is an issue that is generating a lot of debate in the Pacific Northwest, often in response to stories about job cuts and fears that workers will get left out in the cold. However, much of what we read and hear about outsourcing is based on misinformation, no information, or just plain politics.

In a state where one in three jobs is supported by international trade, it is vital this issue be discussed in the context of real information rather than hysteria and anecdotes. Let's look at some of the real facts.

First, every major national study confirms that outsourcing creates more jobs than it destroys in the U.S. That's because outsourcing lowers costs for consumers and businesses, raises productivity, increases business investment in new products and industries, and thereby boosts economic growth that creates more new jobs. A recent McKinsey & Company study showed that roughly six new jobs are created for every five lost to outsourcing, and the new jobs are generally higher-paying.

Second, outsourcing is a vital tool for Washington-based companies to remain competitive in the international marketplace and to keep the state economy competitive globally. The viability of companies based here depends on their ability to remain cost-competitive in an increasingly dynamic and unforgiving global economy. Far more jobs in this state depend on our companies remaining competitive than can ever be affected by outsourcing.

Third, virtually every major national economic study of the impact of outsourcing on domestic employment concludes that it affects a very small number of jobs compared with the number of jobs being created every day in the U.S. economy and compared with the number of jobs created by growing export markets.

Nationwide data supports the concept that global outsourcing is healthy for the national economy and for the competitive edge of employers. That said, we cannot ignore the fact that outsourcing causes job and social dislocation for some Washington workers. The new jobs created through outsourcing and a more globally competitive economy may not be in the same location or industry as jobs lost. It's cold comfort to tell those dislocated workers that the U.S. economy is better off in the long run.

What then should be the response?

First, protectionism and placing restrictions on outsourcing are the wrong moves. That's the proverbial throwing out the baby with the bath water. It will alienate foreign allies and customers and discourage global investment in Washington. It will also drive up the cost of state government by restricting market access and imposing unnecessary regulatory costs.

The answer is better adjustment assistance, helping with retraining and employment assistance for those who do lose their jobs so that they can move on to the higher-skilled, higher-paying jobs of the 21st century rather than trying to hold on to the lower-skilled, low-paying jobs of the past. This may be the job of both the state and federal government, but also of large companies that need to begin to recognize their social responsibility in helping find new jobs for those in their companies who lose their jobs to outsourcing. IBM has started such a program.

Washington also needs an objective and thorough study on the impacts of outsourcing on private and public sector employment. An abundance of national data supports the concept that global outsourcing is a positive tool for the national economy. Data that analyzes the impact of outsourcing at the state level will help demystify the issue and foster a productive public debate.

In the longer run, better education is the only real answer to building the better jobs of the future. We have to ensure that our workforce has the skills that the future job market will demand. The only sustainable competitive advantage in today's dynamic global economy is knowledge and this means investing more in education and research.

Unfortunately, we are failing on this score today. And as we fail to invest in our knowledge-based, competitive advantage for the future, the siren call of protectionism will become all the more seductive to our political leaders.

George F. Russell Jr. is chairman emeritus of Russell Investment Group, headquartered in Tacoma.