McKinsey's offshoring seminar at this year's meeting of the World Economic Forum drew on the McKinsey Global Institute's recent perspective on offshoring and on New Horizons, an exhaustive, fact-based analysis of the impact of multinational company activity in developing economies. Both reports make the case that offshoring can be as beneficial to the U.S. as to destination countries.

At the session, Michael Patsalos-Fox, Director, Americas, reviewed the implications of offshoring for corporate strategy and outlined some of the tasks a company contemplating offshoring needs to complete, such as identifying critical risk management issues.

"The decision to offshore is not a knee-jerk reaction, but rather can be a daunting task that vastly increases management complexity, " Patsalos-Fox said. "I think that while executives understand the economic benefits outsourcing has on the global economy, many may be cautious about its implementation."

Diana Farrell, the director of MGI, cited a statistic from MGI’s analysis that the U.S. economy recovers $1.13 for every $1 that goes to an offshore location. As has historically been the case, repatriated corporate profits lead to investment and job creation.

When the discussion was opened to the floor, attendees zeroed in on a controversial topic that has increasingly become a focal point of the American presidential campaign as well: job losses. While Patsalos-Fox pointed out that only about 1 percent of all outsourced jobs have been offshored, he also emphasized that business leaders face tough decisions in remaining competitive in a global economy.

"Offshoring is part of a global wealth creation story," Farrell said. "Rather than trying to stop the wealth from being created, leaders should focus on its distribution and help workers who are disproportionately hit by making health care and pensions portable, and by providing retraining.”

She cited MGI estimates, based on proposals by other economists, that for just 4 to 5 percent of the savings from offshoring, firms could provide unemployment insurance for all full-time workers who lost their jobs as a result.

Attendees also were interested in the implications of offshoring for economies outside the U.S., since the debate plays differently among European executives. “There was much discussion of how structural reforms need to go much further and faster for Europe to maintain competitiveness,” noted Jürgen Kluge, in the head of McKinsey’s German office.

“There are anxieties about how Europe will cope with the growth in outsourcing and offshoring to Eastern Europe, India, and China,” Kluge continued. “The U.S. reaps the benefits of offshoring because offshore players buy most of their IT equipment from U.S. suppliers, and because the flexible U.S. labor market means the unemployed retrain and get new jobs at a higher wage. But Europe's situation is different. The offshore players are still going to buy U.S. equipment, and our inflexible labor markets mean we'll have more unemployed.”