||We analyze the effects of low-skill offshoring on welfare. In the context of a matching model with different possible equilibria, we discuss two alternative policies that could potentially outweigh the negative welfare effects of offshoring, namely, a change of the unemployment bene. ts and the . exibilization of the labor market. Our calibrations for the German economy suggest that the . exibilization of the labor market can bring low-skill workers to pre-offshoring welfare levels by slightly reducing the vacancy costs, something that cannot be accomplished by meddling with the unemployment bene. ts scheme. In addition, we . find that a full compensation can be achieved by an upgrading of low-skill workers, its size depending on the type of equilibrium involved. In sum, our analysis gives support to . exibilization and upgrading by education as best therapies for offshoring.