Rich Smith explains, in a Fool.com article
, how outsourcing results in more domestic jobs using an example of DVD players. Outsourcing essentially reduces price of the products and Law of demand and supply indicates that this should cause demand for those products to increase. This results in creation of more jobs in storing, selling, merchandising and transporting these products. It also creates more demand for complimentary products resulting in more jobs. For example, reduced price for DVD players create more demand for movies, albums and so on. Read the whole article.
Update: A study done by Public Policy Institute of California, and commissioned by California Assembly says that outsourcing has benefitted California by creating more jobs
.Daniel W. Drezner has more analysis on the California study.
See how a US county is wooing firms in Bangalore to establish and create jobs here.Mises blog post points out how US engineers are taking control of outsourcing and earning handsomely