Outsourcing, offshoring and productivity measurement in United States manufacturing


  • Susan HOUSEMAN

    1. W. E. Upjohn Institute for Employment Research, Kalamazoo, MI. This article is based on an earlier working paper avaiable at: http://www.upjohninstitute.org/publications/wp/06-130.pdf. I thank Mike Harper, Peter Meyer, Anne Polivka, Ken Ryder, Lisa Usher, Robert Yuskavage, and seminar participants at the Federal Reserve Bank of Chicago for comments on an earlier draft of this paper, and Mary Streitweisser and James Franklin for supplying detailed information on the construction of the BEA's input-output estimates and their use in productivity calculations. Lillian Vesic-Petroic provided excellent research assistance. Any remaining errors as well as the views expressed in this piece are my own.
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Productivity growth in a sector or economy is the economic basis for improvements in workers' wages. Recent growth of domestic and foreign outsourcing in developed economies greatly complicates the measurement and interpretation of this key economic indicator and may result in inflated and misleading increases in productivity statistics. In the context of United States manufacturing, this article points to several pieces of evidence that suggest these effects of outsourcing and offshoring on productivity measures are significant. These factors may help explain why wage growth for most United States workers has been relatively low in spite of high measured productivity growth.