Opportunities and Pitfalls in the Offshoring of California Services Jobs Testimony to the Joint Legislative Audit Committee on Offshore Outsourcing of White-Collar Jobs, Sacramento, May 19, 2004 Cynthia A. Kroll, Senior Regional Economist Fisher Center for Real Estate and Urban Economics Haas School of Business, University of California, Berkeley Offshore and Outsourcing--A Clarification of Terms An offshore activity is one that is done on foreign soil. An outsourced activity involves the purchase of a good or service used in the production process from an outside vendor. Outsourcing may occur within the domestic market, between foreign and domestic markets (in either direction), or entirely offshore, between a US foreign branch and a foreign arms-length provider. These alternatives are illustrated in Figure 1. Figure 1Forms of Offshore and Outsourced ProductionDomestic Foreign Producion ProductionWithin Firm Domestic Branch Offshore Branch /SubsidiaryAcross Firms Domestic Offshore Outsourcing Outsourcing California firms have been engaged in all four types of production for decades. Current policy discussions focus on the shaded squares--offshore branches/subsidiaries and offshore outsourcing by California firms. In fact, the production process tends to be much more complex, with domestic outsourcing and domestic branches out-of-state also affecting the California employment base--in positive as well as negative ways. White Collar ...