Study Claims IT Job Gains Offset Offshoring Pain
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WASHINGTON -- The offshoring of United States technology jobs will actually increase the number of American information tech jobs over the next decade, according to a new study released Tuesday by the Information Technology Association of America (ITAA).
"We think this study will change the entire debate on offshoring," ITAA President Harris Miller said at a press conference at the National Press Club here. "We have long held the position that global sourcing creates more jobs and higher real wages for American workers. Now we have the data to prove it."
The ITAA study predicts that the software and services sectors will create 516,000 jobs over the next five years in an environment with global sourcing. Without global sourcing, it predicts only 490,000 new jobs in the sector. Of those 516,000 new jobs, 272,000 will go offshore with the rest remaining in the U.S., the study said. That works out to a net of about 244,000 new jobs in the U.S., according to the study's findings.
The study comes at time when the offshoring issue is turning into a hot button political topic as high-paying IT jobs in the U.S. are displaced by lower-paid IT workers in countries such as India and China. Some members of Congress are urging legislation to penalize American companies for sending IT jobs overseas.
"Far from being an economic tsunami that washes away domestic IT employment as some believe, global sourcing helps companies become more productive and competitive," Miller countered.
Miller said the use of cheaper foreign labor creates cost savings for U.S. companies and leads to lower inflation, increased productivity and lower interest rates. Those factors, in turn, prompt American companies to invest in research and development and to hire more workers, the study asserted.
The study was conducted by Global Insight, an economic analysis, forecasting and financial information company headed by Dr. Nariman Behravesh. Dr. Lawrence Klein, the 1980 winner of the Nobel Laureate in economics, also contributed to the study.
"Despite all the discussion about giant sucking sounds [regarding jobs shipped to cheaper labor countries as a result of the North American Free Trade Agreement], we know looking back into history that more jobs are created than not as a result of free trade," said Behravesh, who, despite his professional and academic credentials, may be best known as the host of the PBS television series, Inside the Global Economy.
"There's a tendency to blame offshore outsourcing for all our labor problems in the U.S. economy. We think it is a very small share."
Behravesh said most of the recent U.S. IT job losses can be blamed on the recession, the dot com bust that followed the hiring binges of the late 1990's, and productivity gains by the IT industry.
The study said most of the IT jobs moving offshore tend to be narrower in scope, more repetitive in nature and are most likely to be automated eventually. This would include coding, testing and systems maintenance jobs, which require less customer interaction, the study said.
However, jobs that require frequent customer interaction in order to capture business processes and extend operational effectiveness are least likely to move offshore.
"There's no question there is dislocation and no question there are times under certain circumstances that some workers who lose a job may have to take a job that pays less than their old job," Behravesh said. "Especially in the IT sector, we suspect there has been, and will be, wage compression."
He added that blaming offshoring for a slow economy is a traditional reaction.
"Offshore outsourcing has been going on for decades. It has been going on in factories, not in IT and IT services, but it has been going on for decades," Behravesh said. "Every time it happens, of course, people wring their hands and worry that we will become a nation of hamburger flippers. Didn't happen."
Miller said despite the projected gains in jobs and wages through offshoring, "much needs to be done" to help displaced IT workers.
"Their pain is real, their discomfort is real, their sense of loss is real. Most IT workers in this country have never experienced a recession, they've never experienced an economic cycle," Miller said. "They came from an unbelievable boom just four or five years ago when students fresh out of college were getting free BMWs as signing bonuses to a situation today where unemployment for IT workers is 5 to 6 percent."
He urged Congress to consider IT and other service sector workers eligible for government assistance when their jobs are displaced by foreign operations. He recommended skills training, with compensation during the training, and job search and relocation allowances.
Nevertheless, Behravesh contended, there is no turning back on free trade.
"Look at the 1990's: we lost three million manufacturing jobs but generated net new jobs of about 25 million," he said. "Free trade was going in that decade and we lost a lot of jobs, but we created a lot more jobs than we destroyed. This is just one more kind of free trade. People say it is not, but it is."