Fantatsic article in Foreign Affairs this month: The Outsourcing Bogeyman. Great hard nosed analytical take on this topic.
Here's Daniel's contribution to our list of what to do about outsourcing:
a. sit on our hands.
b. expand the scope of the Trade Adjustment Assistance program, which currently only helps manufacturers affected by import competition.
Another option would be to help firms purchase targeted insurance policies to offset the transition costs to workers directly affected by offshore outsourcing. Because the perception of possible unemployment is considerably greater than the actual likelihood of losing a job, insurance programs would impose a very small cost on firms while relieving a great deal of employee anxiety. McKinsey Global Institute estimates that such a scheme could be created for as little as four or five cents per dollar saved from offshore outsourcing. IBM recently announced the creation of a two-year, $25 million retraining fund for its employees who fear job losses from outsourcing. Having the private sector handle the problem without extensive government intervention would be an added bonus.