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Ben Bernanke doesn't think so. In fact, the outspoken Federal Reserve Board governor downplayed the role that outsourcing has played in keeping hiring down. "Two-and-a-half years into the economic recovery, the pace of job creation in the United States has been distressingly slow," Bernanke said in a speech this morning at Duke University. But there is "little evidence to show that trade in general, or outsourcing abroad in particular, is a major source of net job loss."
To be sure, Bernanke acknowledged that businesses are offshoring jobs, including some highly skilled positions to cheap labor markets like China and India. And it's easy to see why. "Estimated average wages for software developers are $6 per hour in India, compared with $60 per hour in the United States," Bernanke said. "Similarly, average wages for telephone operators are estimated to be less than $1 per hour in India and about $12.50 per hour in the United States."
But he argued that many observers overestimate the overall impact of jobs lost to outsourcing. For example, he cited a recent Goldman Sachs study that found that U.S. manufacturers moved between 300,000 and 500,000 jobs abroad over the past three years. However, lost in this debate is the fact that foreign companies have, during this time, shifted some jobs to the United States, he said. For example, between 1997 and 2001, "employment of U.S. residents by affiliates of foreign companies operating within the United States increased by about 1.2 million jobs," he said.
Instead, Bernanke, like other economists, argues that the "single most important factor explaining lagging job creation is the astonishing gains in labor productivity that have been achieved in the U.S. economy in the past few years."
Of course, from the standpoint of American households, it really doesn't matter why jobs aren't being created by this economy. All that matters is that out-of-work Americans are having a hard time finding jobs. This explains why consumer confidence remains weak. A new survey of consumer confidence by the Conference Board found that sentiment fell from a reading of 88.5 in February to 88.3 this month. "The labor market not only continues to dampen consumers' present-day spirits, but it is also making them less optimistic about the short-term outlook," said Lynn Franco, director of the Conference Board's Consumer Research Center.
