Americans Concerned About Outsourcing Overseas

Unemployment in the US would improve more rapidly if American companies stopped sending jobs overseas. That conclusion may be naive, but it it real nonetheless.

A new Gallup poll says. “One in four Americans say the best way to create more jobs in the U.S. is to keep manufacturing in this country and stop sending work overseas.” These same people think that business taxes and a lack of help for small business are part of the reason that the job market has not rebounded.

Those polled clearly know little about business. The outsourcing of jobs overseas may seem repugnant, but it has been critical to the ability of American companies to maintain profits as the wages of US employees have risen. The signature example of the trend is IBM (NYSE: IBM). It has sent tens of thousands of jobs to India, an action that current and laid-off workers at the tech firm have fought and attempted to expose. IBM is one of the most successful companies in America and has done very well by its shareholders. Patriotism would have undermined a great deal of that success.

The tax reduction matter is also one which many Americans will not acknowledge is complex. The federal government can lower business taxes which may make US companies more profitable. The action is also likely to hurt Treasury receipts and increase the deficit. Taxes may be regressive, but it is hard to make the case that low taxes will automatically cause new hiring and capital expenditures. Too many American firms learned during the recession that austerity works.

The other major complaint of those polled by Gallup is that small businesses do not receive enough aid. The government has set up incentives for banks to provide more capital to this sector. Banks have reacted by saying that small business loans carry too much risk. Many companies with a few employees and a few customers are especially vulnerable to a fragile economy.

The arguments about why America cannot create jobs will go on until unemployment drops back toward a “normal” 5% or 6%. All along the way, corporate and bank profits will be weighed against the job market and profits will usually win.

Methodology: Results for this Gallup poll are based on telephone interviews conducted March 25-27, 2011, with a random sample of 1,027 adults, aged 18 and older, living in the continental U.S., selected using random-digit-dial sampling.

Douglas A. McIntyre