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When considering the level of outsourcing of production from the United States it appears as if many look at the wrong problems and reach the wrong conclusions.

The most common reason given for outsourcing is the low cost of labor in other countries. While it is true that the nominal hourly cost of labor in third world and developing countries is lower than that in the United States, this is the looking at the issue backwards. The real question is whether the cost of labor in regards to production is lower.

While I don't have the hard numbers to support the contention, I believe that the cost of production in the United States is lower than that in most of the world. The education levels, creativity and versatility of American workers are very high. The only other countries that might match our levels of education, creativity and versatility are other countries with similarly high hourly costs.

One example of which I've heard in a recent report on NPR was in regards to Asian workers. Where an Asian worker might readily be trained to operate a piece of machinery to produce something they are unlikely to quickly learn how to operate every piece of machinery in a given production environment. An American worker, on the other hand, is likely to be able to work with varying degrees of efficiency every operation on the factory floor.

Note that this is not intended to be a disparaging comment; it is simply a matter of culture. But it has an impact in overall productivity. A person that only knows their job and has limited knowledge of the responsibilities of those around them is limited by the slowest employee in the production chain. One who knows the jobs of those around them can pitch in to help if their neighbor falls behind. The worker that is stamping widgets can step over to help the next person in line if they're falling behind in assembling those widgets. This sort of dissemination of knowledge can increase everyone's productivity.

This doesn't inherently discount the productivity of foreign workers but it does tend to "level the playing field". If American workers are among the lowest cost producers, why are so many jobs being sent overseas is the real question.

When we look at the places that are losing jobs the fastest we start to see a disturbing trend. The state that appears to have the highest level of outsourcing seems to be California. They are closely followed by Texas and Massachusetts. Why are these states seeing such a great number of lost jobs while other states, for example many states in the South where Asian car manufacturers are setting up manufacturing plants, are seeing increases in employment?

Ultimately it appears as if the job losses are coming not directly from the costs of employees but from government interference in the marketplace.

The states that are seeing the greatest job losses are the ones with the largest regulatory burdens. Between clean air acts, minimum wage laws and often-exorbitant tax rates it appears as if these states are intentionally working to drive out industry.

Certainly it is necessary to protect workers from abuse and ensure we have as safe and clean an environment as possible. However, most of these laws are pre-emptive and unnecessary. They mandate how a business should operate and disallow options that might increase productivity while ensuring safety and cleanliness.

Before looking at what other countries are doing to attract our lucrative businesses, before castigating businesses for looking for more welcome operating environments, perhaps we should examine the actions we are taking to discourage businesses from operating within our borders.

Learn more about this author, Keith Hamburger.
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