Offshoring and Employment

Offshoring and Employment

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Authors:
OECD
Publication Date :
13 July 2007
Pages :
220
ISBN :
9789264030947 (PDF) ; 9789264030923 (print)
DOI :
10.1787/9789264030947-en

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Offshoring—the transfer of an industrial activity abroad—has become a fact of life for business. But it is also perceived as a threat by a large segment of the general public. And much of the public concern centers on employment, especially the potential loss of domestic jobs. This groundbreaking report provides new insights into the phenomenon of offshoring. First, the report defines offshoring in detail, allowing readers to see the many ways that industrial activity—both in manufacturing and in services—can be transferred abroad. The report then describes the wide-ranging effects that offshoring can have on domestic employment—the positive, as well as the negative. Finally, this ground-breaking report outlines the public policy implications of offshoring. It suggests ways to limit the downside of offshoring while helping to build trust between the various stakeholders working to address this issue.
Also available in: French
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  • Mark
  • Executive Summary
    This report does not look at the employment consequences of globalisation, but it examines one particular aspect of globalisation, which is offshoring. In Chapter 1, offshoring is defined as the total or partial transfer of an industrial activity (manufacturing or services) abroad, either to an existing or new affiliate, or through subcontracting to non-affiliated companies. The portion of the activity sent offshore that had been intended for the domestic market is then imported.
  • Introduction
    The impact of offshoring on the labour market has become one of the major issues of concern to policymakers and public opinion. The phenomenon of offshoring as such is not really new, but it still arouses just as much debate and concern, essentially for three reasons.
  • Defining offshoring
    This chapter provides an in-depth definition of offshoring, outlining the many different ways that industrial activity – in either manufacturing or services – can be shifted abroad. For a given corporate group, distinction is made between the two major types of offshoring: i) relocation through the corporation’s own affiliates; and ii) international subcontracting to non-affiliated enterprises. In both cases, the portion of the operations sent offshore that had previously been intended to satisfy domestic demand is subsequently imported.
  • How offshoring affects employment
    This chapter considers the major variables that determine how offshoring affects domestic employment, and it distinguishes between the short-term and medium-term effects on employment. While the short-term effects of offshoring are often negative, in the longerterm the effects can be positive, depending on the interaction between production, direct investment and international trade flows. The chief motivations for offshoring are also briefly presented along with the latest developments in the theoretical debate regarding trade, offshoring and employment.
  • Problems of measurement
    This chapter explains the difficulties encountered in quantifying the impact of offshoring on employment, and why there are no direct measurements. Numerous indicators are presented that can be used to indirectly measure the impact on employment, as well as alternative approaches used in the past and their primary limitations.
  • Preliminary results
    This chapter presents some preliminary results on the affect of offshoring on employment for a limited number of OECD countries, with in-depth looks at the United States and France. The results are based on sector-specific industrial data, detailing the extent of offshoring within various industrial sectors, the imported share of offshoring production for each of the sectors, as well as employment changes. The impact of outsourcing abroad on employment is measured in manufacturing as well as services, and the positive effects of offshoring on domestic economies are also discussed.
  • Policy responses
    This chapter outlines how OECD countries are addressing the phenomenon of offshoring, be it via existing or new regulations and policy measures. Some measures to be taken into consideration in order to facilitate adjustments to offshoring are presented at the end of the chapter.
  • Conclusions
    The foregoing analysis has demonstrated the complexity of the phenomenon of offshoring while illustrating the difficulties involved in measuring its impact on employment. In this regard, to evaluate offshoring’s positive and negative effects on employment, three difficulties can be distinguished. The first of these involves the lack of regular, official surveys in most of the OECD countries. The data needed for these evaluations cannot be taken from other existing data, either because those data are confidential and thus not accessible, or because the data are not collected by a large number of countries (e.g. intra-firm trade). Even when confidential data by firm or by establishment can be accessed, it is very difficult to gauge the indirect employment effects that offshoring firms may have on their competitors that do not engage in offshoring, as well as on their own subcontractors.
  • Annex 1
  • Annex 2
  • Annex 3
  • Annex 4
  • Annex 5
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