The U.S. government needs to address recent growth in offshore outsourcing with new ideas, including wage-loss insurance paid for by companies that use offshore outsourcing, and a bipartisan commission focused on ways the U.S. can remain competitive despite lower wages offered by other nations, U.S. Senator Joe Lieberman said Tuesday.
Lieberman, a Democrat from Connecticut, also advocated an overhaul of worker retraining and education programs offered by the U.S. government and a variety of tax incentives for companies for research and development and for making products in the U.S., during an event organized by the nonpartisan New America Foundation. Lieberman’s remarks were based on a legislative white paper he unveiled on Tuesday.
Lieberman, the Democratic Party’s 2000 vice-presidential candidate, said U.S. politicians should stop blaming others for jobs lost to offshore outsourcing and instead focus on how the U.S. can better compete. “The American economy is failing to adapt to fundamental changes and to growing competition in the global economy,” he said. “We are not just losing jobs. We may be losing critical parts of our innovation infrastructure, and with it, our competitive edge in the global marketplace.”
Large companies doing most of the offshore outsourcing should pay for wage-loss insurance, Lieberman said. Small companies that don’t send jobs offshore shouldn’t help pay unemployment insurance for the workers laid off by large corporations, he said.
Lieberman, who was briefly a candidate for the 2004 presidency, called offshore outsourcing “the tip of an economic iceberg” that could spell trouble for the U.S. if not addressed. In his white paper, he tried to carve out a compromise between the “do-nothing” politicians who argue offshore outsourcing is good for the economy and the “do-everything” politicians trying to put up trade barriers. A summary of the white paper is here.
Under the “do-nothing” approach, high-paying jobs will continue to move overseas, Lieberman said. The average annual salary for a U.S. software programmer is about $64,000, while programmers in India, China, Poland and some other countries make under $10,000 a year, he said. Meanwhile, U.S. corporate spending on research and development outside the U.S. rose from $4.6 billion in 1986 to $17.5 billion in 2000. Lieberman called the offshore outsourcing of R&D “stunning.”
Lieberman also noted that nearly 45% of bachelor’s degrees in China are engineering degrees, while only about 5% of degrees in the U.S. are engineering degrees. The U.S. can’t blame China for those statistics, he said. “There’s nothing unfair about that,” he said.
He advocated incentive grants and scholarships for U.S. students to study science, technology and engineering.
On the other hand, lawmakers who want to pass protectionist legislation risk retaliation from countries at a time when the U.S. economy needs those foreign markets, Lieberman said. He called on the U.S. government to lodge complaints when countries violate trade agreements, such as the Chinese government’s support of its semiconductor industry, but he also advocated free trade.
“Trying to hide behind a wall won’t work,” he said. “Trying to rig the game won’t work.”
Among Lieberman’s proposals:
Create a bipartisan commission removed from political infighting that would address ways for the U.S. to compete in the global economy, including ways to create new high-wage jobs. He called on whichever presidential candidate wins in November to create the commission as one of his first official acts. The U.S. needs an “injection of bipartisan political will” to solve its global competitiveness problems, he said.
Require that companies provide a three-month notice to workers who lose their jobs because of offshore outsourcing.
Increase federal funding for research and development, including early-stage R&D.
Encourage corporate R&D through an expanded tax credit for industry collaboration with universities on science and technology research, and making the current R&D tax credit permanent.
Reduce the federal budget deficit.
Track and collect reliable data on the volume and nature of jobs moving overseas.
The Electronic Industries Alliance (EIA), a partnership of high-technology trade associations, supports most of Lieberman’s proposals, said EIA president Dave McCurdy, who spoke at the event after Lieberman. The EIA’s own report on technology innovation, released May 5, also emphasizes visa reform and easing government regulations on corporations, McCurdy said.
The patchwork of state taxes and other regulations add to the cost of doing business in the U.S., McCurdy said. “What can we do in this country to reduce the burdens on business?” McCurdy said. “We need some real federal leadership.”
While Lieberman didn’t focus on visa issues and regulations Tuesday, EIA wants the visa process to be streamlined, visa laws to be strengthened to prevent abuse, and for foreign master’s and doctorate graduates from U.S. universities to be exempted from the cap on H1-B visas, often used to hire technology workers.
The U.S. needs to stop the “reverse brain drain” of those graduates leaving the country, McCurdy said.
