ILR School

Unemployment Through Layoffs and Offshore Outsourcing

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[Excerpt] Unemployment can come about in a number of ways, but the form of unemployment that policymakers have shown they are most concerned about involves workers who have involuntarily lost jobs through no fault of their own. Unemployment through layoffs ebbs and flows with the business cycle, but involuntary job loss is ever-present because firms displace workers for reasons other than temporarily weak demand. Employers also layoff employees for reasons specific to the firm or the industry in which the firm lies (e.g., corporate restructuring and seasonality). One means of restructuring work—namely, outsourcing—has spread from employers contracting out functions to other affiliated or nonaffiliated employers in the United States, to employers contracting out activities to affiliated or nonaffiliated employers located outside U.S. borders. The latter business practice is referred to as offshore outsourcing or offshoring. Until the eleventh postwar recession began in December 2007, offshoring had driven much of the interest in job loss and economic insecurity more generally. Some members of the public policy community have been suggesting that offshoring has contributed to the sluggish pace of job growth thus far in the recovery period since the recession’s end in June 2009. But, no database exists that provides anything approximating a complete count of workers separated from payrolls because their company relocated their functions beyond U.S. borders.  Starting in 2004, the U.S. Bureau of Labor Statistics (BLS) Mass Layoff Statistics program began to query firms in the private nonfarm sector that call long-lasting large-scale layoffs about whether these events involve the offshoring of work. In addition to excluding layoffs at small firms and in the public sector, the statistical series does not cover layoffs in which fewer than 50 employees are terminated. It thus is likely to understate layoffs associated with offshore outsourcing generally and with those involving white-collar workers in the service sector particularly (e.g., accounting clerks at financial services firms, radiologists at medical services providers). This report briefly reviews the various databases that provide information on layoffs. It then examines the trend in mass layoff activity generally before focusing on quarterly outsourcing data derived from the above-described BLS program on extended mass layoffs. In brief, mass layoff activity is up markedly which reflects the lingering impact of the 2007-2009 recession on the labor market. With regard to outsourcing—particularly of work moving offshore—the BLS series shows it is uncommon in extended mass layoffs and accounts for fairly few separated workers. Relocation of work most often occurs within the United States and within the same company. Most workers separated in extended mass layoffs involving domestic or offshore outsourcing had been employed by manufacturers. In extended mass layoffs associated with the movement of work offshore, jobs most often are shifted to Mexico and China.

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unemployment; layoffs; offshoring; outsourcing; job loss; Bureau of Labor Statistics


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