eco203 journal week 2
Outsourcing GDP
Chase E. Jurgersen
ECO 203
Instructor Charles Fanning
December 7th, 2014
One thing I learned quickly from these videos is that labor is varied from country to country. Policies tend to drive the unemployment rate. A recent study by the University of California shows that approximately 14 million white-collar jobs are vulnerable to outsourcing overseas. We are not just talking about call centers who you can barely understand and get so aggravated by the end of the call you just agree and hang up. No, we are talking about architecture, IT, and even medical and legal services. These jobs are the ones that assist in funding our education, health and infrastructure. (Magnani, 2006) So while these are great things for a corporation, as they would make dramatically more money for the cheaper labor, they aren’t looking at the impacts on the economy of America. If 14 million American’s were to lose their jobs, do you think they would go out and buy unnecessary items, or spend what they are scrounging up for food for a new car? No. In the end I believe that these outsourcings of jobs will only hinder these companies long-term. Unless they are an international organization such as Ford or some other company that creates products around the globe, they should not be able to outsource jobs outside of our country. Outsourcing effects on the GDP makes it generally lower. While researching this issue, I found a multitude of articles referencing “phantom GDP.” Phantom GDP is reported gains that do not correspond to any actual production done in the US. The numbers in 2003 were $66 billion in phantom GDP. That is an insanely large number when you think about all that went either untaxed, jobs in America lost to create those, and local economies hurt by the loss of those production jobs. I cannot for the life of me find any updated calculations on the updates to phantom GDP, but I can only imagine that it has increased with the deficit and borrowing and
Chase E. Jurgersen
ECO 203
Instructor Charles Fanning
December 7th, 2014
One thing I learned quickly from these videos is that labor is varied from country to country. Policies tend to drive the unemployment rate. A recent study by the University of California shows that approximately 14 million white-collar jobs are vulnerable to outsourcing overseas. We are not just talking about call centers who you can barely understand and get so aggravated by the end of the call you just agree and hang up. No, we are talking about architecture, IT, and even medical and legal services. These jobs are the ones that assist in funding our education, health and infrastructure. (Magnani, 2006) So while these are great things for a corporation, as they would make dramatically more money for the cheaper labor, they aren’t looking at the impacts on the economy of America. If 14 million American’s were to lose their jobs, do you think they would go out and buy unnecessary items, or spend what they are scrounging up for food for a new car? No. In the end I believe that these outsourcings of jobs will only hinder these companies long-term. Unless they are an international organization such as Ford or some other company that creates products around the globe, they should not be able to outsource jobs outside of our country. Outsourcing effects on the GDP makes it generally lower. While researching this issue, I found a multitude of articles referencing “phantom GDP.” Phantom GDP is reported gains that do not correspond to any actual production done in the US. The numbers in 2003 were $66 billion in phantom GDP. That is an insanely large number when you think about all that went either untaxed, jobs in America lost to create those, and local economies hurt by the loss of those production jobs. I cannot for the life of me find any updated calculations on the updates to phantom GDP, but I can only imagine that it has increased with the deficit and borrowing and
References: Feenstra, R. C., & Hanson, G. H. (1999). The Impact Of Outsourcing And High-Technology Capital On Wages: Estimates For The United States, 1979-1990. Quarterly Journal of Economics. doi:10.1162/003355399556179 Harrison, A. E., & McMillan, M. S. (2006). Outsourcing Jobs? Multinationals and US Employment. Magnani, E. (2006). Technological diffusion, the diffusion of skill and the growth of outsourcing in US manufacturing. Economics of Innovation and New Technology. doi:10.1080/10438590600665120 McCarthy, I., & Anagnostou, A. (2004). The impact of outsourcing on the transaction costs and boundaries of manufacturing. International Journal of Production Economics. doi:10.1016/S0925-5273(03)00183-X