Fisher Center for Real Estate and Urban Economics

This paper discusses the impact that globalization in general and offshoring in particular have on US employment and income. Most recent discussions of offshoring (defined here as the transfer of existing jobs to foreign locations) in the press and by politicians have focused on lost US employment. Economists, in contrast, generally believe that labor markets will adjust and create new jobs to replace the lost ones. The first part of this paper documents the empirical evidence that the US economy generally has replaced the jobs that have been lost to technological change and offshoring activity.

Stipulating that lost jobs will be replaced, the key question then concerns the quality of the jobs, specifically the wage rates, that will apply in a globalized world. The question must be posed carefully, however, since different meanings of globalization may lead to very different answers for the possible convergence of incomes. Finally, the paper considers whether national economic policy can influence the outcome, as an application of the New Trade Theory, with comparative advantage an endogenous variable.