DATE: January 3, 2005

An expert in international trade from the UW Business School has urged Washington state lawmakers not to enact policy that would dissuade the exporting of white-collar jobs to foreign countries, a cost-saving practice known as offshoring.

Testifying recently before the Washington legislature's commerce committee, associate professor of finance Kathy Dewenter argued that critics of offshoring have used election-year sound-bites and a grudging economic recovery to exaggerate its impact on the American knowledge worker to a cataclysm. "My first policy recommendation," she advised, "is to do nothing."

Dewenter argued that offshoring affects around 100,000 jobs a year in the U.S., which amounts to less than 0.1 percent of the total workforce: "To put it in perspective, 15 million jobs a year are destroyed due to productivity shifts, changes in tastes, business cycles. And then way down the list, you have outsourcing."

Though the trend may look insignificant statistically, Dewenter acknowledges the deep impact offshoring can have on those who are displaced. And the tech-heavy Northwest economy is especially vulnerable to job exportation. Her solution? That both the public and private sector reinvest some of the economic gains to be realized by offshoring's efficiencies into the retraining and development of displaced workers.

For instance, Dewenter said that the existing Trade Adjustment Assistant program, enacted to retrain manufacturing workers displaced by international trade, should be expanded to assist white-collar workers displaced by offshoring. And corporations looking for a competitive advantage in the labor market should begin offering retraining and insurance for employees at risk of losing their jobs to outsourcing. She cited IBM, which recently announced a $25 million fund to retrain at-risk employees so they can be rehired in a different capacity.

"The most reasonable policy response at the public level would be to make sure that trade adjustment assistance is available to displaced workers," Dewenter said. "At the same time, the private-sector response should develop on its own. In industries where workers are at risk, the companies that provide this kind of insurance will be offering a more attractive employment package and attract the best workers. The government should stay out of it."

Dewenter is the faculty director of the UW Business School Global Business Center, which is leading a school-wide effort to investigate offshoring and its effects on economies both at home and abroad. The knowledge gathered will be uploaded to the School's international business curriculum.

"The fear of offshoring may die down a little now that the election is over, and especially if the economy picks up," Dewenter said. "But the issue is certainly not going away."