Driving jobs offshore: the crushing burden of government regulation plays a key role in the ongoing exodus of American jobs.(Economy)

Why thousands of American jobs disappearing, only to reappear overseas? Since early 2001, the economy has shed nearly three million jobs, many of them well-paid positions in manufacturing and the hi-tech sector. Initial estimates from the Labor Department suggest that 15 percent of those jobs have materialized in low-wage countries such as China, India, Mexico and the Philippines.

The Bush administration, parroting a refrain favored by many Establishment economists, insists that most of the job losses reflect dramatic increases in productivity. In other words, fewer employees are needed to do the available work. This analysis does provide a plausible explanation for at least a portion of the job losses in the manufacturing sector.

However, as the October 5 New York Times correctly observed, "lately the work sent abroad has climbed way up the skills ladder to include workers like aeronautical engineers, software designers and stock analysts as China, Russia and India, with big stocks of educated workers, merge rapidly into the global labor market." This phenomenon, sometimes called "downward harmonization," was famously described by Ross Perot as the "giant sucking sound." But jobs aren't merely being "sucked" offshore because of lower wages abroad; they're also being pushed abroad by insupportable levels of domestic regulation here.

Regulatory Assault

Last September, Briggs & Stratton Company did something unusual: It tried to beat back a regulatory assault that would have cost tens of thousands of Americans their jobs. The Wisconsin-based company manufactures small engines, such as those found in lawn mowers and generators.

The California state government proposed a new pollution standard requiring small-engine manufacturers to put catalytic converters on their motors beginning in 2008. "We could not do that economically here," protested Briggs & Stratton senior vice president Thomas Savage, warning that retooling to meet the standard would probably result in outsourcing the work overseas.

That warning caught the ear of Senator Herbert Kohl of Wisconsin, Briggs & Stratton's home state. Although Kohl is a liberal Democrat, he also relies heavily on the support of blue-collar, industrial voters in a state where the manufacturing base has radically eroded over the past decade. Accordingly, Kohl suddenly displayed an atypical skepticism regarding the value of environmental regulation. "In this economy in which 2.5 million manufacturing jobs have been lost, including 75,000 in Wisconsin, regulations that will force more jobs overseas need additional scrutiny," Kohl declared.