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De-mythifying the Heritage Foundation’s 10 Jobs Myths

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The Heritage Foundation has posted a series of "myths" to refute the idea that sending American jobs off-shore is harmful to our economy.

  • Many "facts" used in rebuttal are red herrings rather than relevant responses.
  • Some of their myths are "straw men," arguments couched in terms that allow the Foundation folks to defeat them more easily (although they don’t do well at that).
  • Some are apparently pulled out of thin air, as they do not even resemble the views of opponents to off-shoring.
  • And they use irrelevant and misleading statistics going back as far as 15 years, making the data far from representative of the real situation during the current job off-shoring boom.

Let’s look at the details (printable version on my site):

 

# Heritage Myth #1: America is losing jobs.
Fact: More Americans are employed than ever before.

The Heritage "fact" is not a rebuttal and is in fact the first red herring. Those are two unrelated statements, along the lines of: "Myth: Global warming is increasing. Fact: My heating bill is higher than ever this winter."

Both can be true, because there’s no connection.

There are indeed more workers in the economy than ever before, but more are unemployed, more can find only temporary work, more have taken jobs at lower wages, and millions more have quit looking for work.

# Heritage Myth #2: The low unemployment rate excludes many discouraged workers.
Fact: Unemployment is dropping, despite a surging labor force.

Their "fact" is not a rebuttal, it’s another red herring – these are two independent statements.

Then, calling a fact a myth, as they do here, doesn’t change reality: the fact is that the number of workers not looking for work, many because they have given up on being able to find jobs, has risen by more than 5 million during this administration. They are excluded from the unemployment rate.

# Heritage Myth #3: Outsourcing will cause a net loss of 3.3 million jobs.
Fact: Outsourcing has little net impact, and represents less than 1 percent of gross job turnover.

Their "fact" is a "slider" seriously misrepresenting the situation. Here’s their support for the claim:

Over the past decade, America has lost an average of 7.71 million jobs every quarter. The most alarmist prediction of jobs lost to outsourcing, by Forrester Research, estimates that 3.3 million service jobs will be outsourced between 2000 and 2015—an average of 55,000 jobs outsourced per quarter, or only 0.71 percent of all jobs lost per quarter

But the two data points aren’t related (never mind that the job picture over the last four years is far different from what it was during the preceding years).

The BLS data they quote refers to "job churn." BLS data tells us that today nearly a million people leave their jobs each week, and each week nearly a million people are hired (plus or minus). This is normal, the "musical chairs" game that goes on all the time – it has little if anything to do with the issue of off-shoring jobs.

# Heritage Myth #4: Free trade, free labor, and free capital harm the U.S. economy.
Fact: Economic freedom is necessary for economic growth, new jobs, and higher living standards.

I’m not sure what they’re getting at with their "rah-rah" here. Maybe they’re talking about laissez-faire off-shoring of manufacturing and just about anything else that can be moved?

If this is another "free trade" vs. protectionism argument, it’s completely off point (yes, another red herring). Off-shoring jobs is not trade in any form.

Off-shoring jobs is labor arbitrage, pure and simple.

When they send jobs out of the country, companies are simply trying to get labor at the lowest possible cost. That’s why jobs that left the U. S. to go to Mexico with NAFTA are now moving to China.

The benefits in the Heritage "fact" do exist, but they accrue to the countries that get the jobs, not to the U. S.

# Heritage Myth #5: A job outsourced is a job lost.
Fact: Outsourcing means efficiency.

This Heritage "fact," too, is not a rebuttal. Again, it’s an example of poor logic, as both statements could be true (neither is true in all circumstances).

And if the outsourcing sends jobs overseas, efficiency is at the expense of American workers.

[SIDEBAR:] This seems like a good time to address an issue of terminology that is confusing the debate on jobs: "outsourcing" as contrasted to "off-shoring."

"Outsourcing" is a generic term that had different connotations in the past than it does today. In the past, a company might decide that they didn’t want to do their bookkeeping, programming, customer support or clinical trials themselves and would hire an outside firm to do it for them. These jobs were "outsourced" to companies within the United States, often local, and helped the domestic economy grow.

However, having the work done in China, India, Indonesia or Ireland is not the same thing – it helps the economies of those countries grow.

"Off-shoring jobs" is a better description because it doesn’t mask what is really happening.

# Heritage Myth #6: Outsourcing is a one-way street.
Fact: Outsourcing works both ways.

First, we need to know what they’re talking about: "The number of jobs coming from other countries to the U.S. (jobs “insourced”) is growing at a faster rate than jobs lost overseas."

They base that statement on a source that’s a bit difficult to pin down, but claims: "Over the last 15 years, manufacturing "insourced" jobs grew by 82% – at an annual rate of 5.5%; and manufacturing "outsourced" jobs grew by 23% – at an annual rate of 1.5%."

One problem with this is that it covers the last 15 years, and totally submerges what has happened with off-shored jobs during the more recent, and more relevant, four years since the economy started tanking.

Then, making comparisons using percentages isn’t always informative, and can be used to mask what is really happening. There could be an order of magnitude difference between insourcing and off-shoring numbers (maybe not, but I couldn’t find the data). [Increasing a base of 100 to 182 is an "increase of 82%"; increasing a base of 1000 to 1230 is "only an increase of 23%" but it is nearly triple the first quantity.]

And, digging a bit deeper, I found that most of those insourced jobs were with manufacturers who opened plants in the U.S. to be closer to their markets.

That is profoundly different from off-shoring jobs to overseas factories, then shipping the products back here.

In the first case, we get the benefits of the jobs. In the second, the benefits go to the countries where the jobs were sent.

This one isn’t a red herring – it’s a red whale.

# Heritage Myth #7: American manufacturing jobs are moving to poor nations, especially China.
Fact: Nations are losing manufacturing jobs worldwide, even China.

The Heritage Foundation "fact" is not a rebuttal, and does not refute #7. Even if other countries are losing manufacturing jobs, that has no connection with whether American jobs are moving to poorer nations or not – it’s not a dependent relationship.

And this doesn’t address the high-paying service jobs (programming, R & D, analysis, clinical drug trials) that are now leaving for India faster than ever.

# Heritage Myth #8: Only greedy corporations benefit from outsourcing.
Fact: Everyone benefits from outsourcing.

Both are false, with #8 apparently a straw man set up so they could insert the unfounded claim.

I’ve never heard any job off-shoring opponents claiming that "only greedy corporations" benefit because it’s clear that the countries which get the jobs benefit tremendously.

And the Heritage Foundation "fact" is false on the face of it – just ask the millions put out of work or shuffled into lower-paying jobs by job off-shoring.

# Heritage Myth #9: The government can protect American workers from outsourcing.
Fact: Protectionism is isolationism and has a history of failure.

This is starting to get tiresome, but once again, their "fact" is not a rebuttal.

Government policies can protect and improve the job-creation environment in the U. S. and nobody has suggested that international trade be shut down.

# Heritage Myth #10: Unemployment benefits should be extended beyond 26 weeks.
Fact: Jobless benefits are already working

Once again, their "fact" does not address their "myth."

Benefits are indeed working – for 26 weeks. But we already knew that, so how exactly does it help us decide whether benefits should be extended or not? The "fact" neither supports nor refutes the "myth."

It is a fact that at midnight December 31, 2003 another 500,000 unemployed ran out of unemployment benefits. At midnight March 31, 20004, the number grew to 1,100,000 long-term unemployed American workers who had lost their benefits. The Foundation claims that extending benefits "would have little impact." Any guesses as to what this 1.1 million would say?

That’s my take on the Heritage Foundation’s myths.

My experience has been that claims and conclusions from the Heritage Foundation are not to be taken at face value. This whole exercise illustrates why.

But I do agree with their conclusion:

"America’s workers deserve a more informative, less partisan debate on outsourcing." [Heritage Foundation]

It’s just that the Heritage Foundation is not the place to find it.

(Printable version on my site – click on the printer icon on the right)

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About Hal

  • http://www.foliage.com/~marks Mark Saleski

    the heritage list is definitely a case of statistics smoodging and bad logic.

    another symptom of the sad state of our political discourse.

  • http://www.bhwblog.com bhw

    Does anyone know if someone whose unemployment benefits have run out, but who is still looking for work, is counted in the unemployment rate?

    Generally speaking, who is and isn’t counted as unemployed for this computation?

  • http://macaronies.blogspot.com Mac Diva

    Uh, oh. This entry has been researched and contains empirical information, not some clueless clown’s personal opinion. Don’t be surprised if you are accused of “making up facts,” Hal-:).

    I am unclear on why the Heritage Foundation would come up with these myths. Is it their position that outsourcing is good because whatever American business does is good? Or, do they believe outsourcing is good in and of itself?

  • The Dude

    Unemployment doesn’t matter to the Dude here. I live in California, where Gov. Arnold Schwarzenegger had promised every citizen a fantastic job. So my future is looking bright! Oh, I hope he didn’t mean a fantastic hand-job.

  • http://www.tude.com/ Hal Pawluk

    “Does anyone know if someone whose unemployment benefits have run out, but who is still looking for work, is counted in the unemployment rate”

    There’s really no way of knowing.

    The unemployment numbers are derived from a sample of 60,000 households. If the people whose benefits ran out aren’t in any of those households, they have no effect on the unemployment numbers one way or the other.

    For a person to count as “unemployed” they have to be out of work, and available and looking for work (and in one of the surveyed households). Some of those whose benefits ran out will look for work, some won’t.

    The unemployment stat is derived as part of the government’s monthly Current Population Survey, so it is not all that accurate.

    The employment part of this survey, for instance, indicates that gobs of jobs have been created in the last few years. The equivalent “Establishment” survey tells us something closer to the truth. The difference is because while the “Population” survey covers a sample of about 70,000 workers then makes projections, the “Establishment” survey covers businesses with 40,000,000 employees and produces much more accurate projections.

    It’s not a science.

  • http://www.tude.com/ Hal Pawluk

    “I am unclear on why the Heritage Foundation would come up with these myths.”

    To protect George W. Bush, and their reputation (smirk, smirk).

    They brag about Bush’s economic and foreign policies being “from the Heritage Foundation’s playbook” so everything that’s happening has to be for the best.

    The deeper reason is big business and rich, direct investors in the stock market. This includes a lot of very rich politicians (most of the 535 on the Hill) and members of the think tanks and political organizations we keep hearing from.

    The neocons claim they came up with the concept of “the investor class” (or at least for pushing it to the fore, link not handy at the moment but available if subpoenaed :-). The claim is that around 60% of the US population is in this class, and that things like tax cuts for the rich are “good for the investor class” (my House Rep David Dreier told me exactly that).

    What they don’t tell you is that while 60% may be peripherally involved in the stock market through IRAs and mutual funds, the benefits largely go to direct investors in the stock market. That’s only about 20% of the population, a number that has hardly changed over the last 50 years, when it was about 18%.

    It’s a con. (I’ll probably blog something more on this at some point.)