Commentary

Orange County Register
August 26, 2004

They're Killing Jobs, Not Saving Them
By Ted Balaker

What if California could administer state services for free? Imagine the taxpayer refunds. Imagine what entrepreneurs would do with all that extra cash in hand. Wouldn't we welcome such a proposal as one of the greatest efficiency innovations ever?

Unfortunately, lawmakers would likely mislabel the proposal a threat to state jobs and promptly squash it.

The Democrat-controlled Senate just passed a bill that would forbid California from sending government work to foreign lands. Offshore outsourcing often saves governments money, but many in our Legislature - even in the face of record deficits - see no need to slim our beefy government.

So firm is their resistance to reform that Senate Democrats passed the outsourcing ban just as a study - commissioned by their Democratic Assembly colleagues - found that outsourcing would likely be good for job creation. The study, by the Public Policy Institute of California, suggests that outsourcing's productivity gains could increase living standards at home.

Unfortunately, state lawmakers muddy the issue by treating all jobs - whether government or private - the same. Forget all that nonsense about protecting life, liberty and the pursuit of happiness; today many lawmakers use government as a jobs program. So where most of us see efficiency gains that allow for private sector job creation, the political class sees job-killers.

But just how many jobs would be "killed"? Although specific figures are hard to come by, an anti-outsourcing group recently documented roughly $75 million worth of government work sent overseas by the 50 state legislatures. (Our Legislature can spend that much during a coffee break.) Although the report was intended to stir fears about the rise of offshore outsourcing, it actually revealed how infrequently states make use of the practice.

Still, dozens of state legislatures have decided to beat up on the tiny amount of offshoring done by governments. New Jersey sent about a dozen unemployment assistance call-center jobs overseas, but after politicians took turns registering their outrage, the jobs came back - costing taxpayers $100,000 per job. New Jersey could have doled out tens of thousands in severance pay and job training for each outsourced worker, and still delivered savings to taxpayers. Instead, lawmakers decided to ride the wave of outsourcing paranoia.

It's time for California to sober up, and remember that government exists to provide services, not jobs. Outsourcing - like technological advancement - allows governments to do things better and more efficiently. A wasteful private company will hurt itself by sinking into bankruptcy. However, a wasteful government will just keep sinking, dragging others down with it.

Only a wealthy nation can purchase the services of software engineers and orthodontists. But a fatter government slows the private sector because a society forced to pay for more government workers has less ability to pay others to make software or straighten teeth. The real threat to jobs isn't from foreigners, but from homegrown politicians who make it more inviting for companies to set up shop beyond California's borders.

If we choose to regard government as a jobs program, there will always be plenty of opportunities to "create" jobs by promoting wastefulness. California could expand upon the New Jersey model. After bringing government jobs back to American soil we could create even more jobs by, say, eliminating computers. For each destroyed computer we could employ dozens of human bookkeepers. Want to create more jobs for human scribes? Just dump every copier in every government office. Feel that? It's the unemployment rate shrinking.

Of course, each concession to inefficiency makes our state less competitive and makes future job growth - in areas that actually improve living standards - less likely.

The governors of Maryland and Massachusetts understand that a wasteful government hurts job growth. Each state recently endured the same crusade against the same manufactured bogeymen. However, when their frantic statehouses passed anti-outsourcing legislation, each governor coolly broke out his veto pen. Here's hoping our governor stays just as cool.

Ted Balaker is the Jacob's Fellow at Reason Foundation.