Tuesday, March 30, 2004


Finally, some numbers on offshoring. This garbled text (sorry) comes from The Associated Press:

Outsourcing technology jobs strengthens U.S. economy, study says

AP Business Writer

SAN JOSE, Calif. (AP) — Outsourcing white-collar jobs to low-wage countries
such as India and China has thrown some Americans out of work, but a new report
predicts that the trend will ultimately lower inflation, create jobs and boost
productivity in the United States.

The Information Technology Association of America, in a survey set for release
Tuesday, acknowledges that the migration of tech jobs to low-paid foreigners
has eliminated 104,000 American jobs so far, nearly 3 percent of the positions
in the U.S. tech industry.

Software engineers have been particularly hard hit. Researchers at Global
Insight Inc., which prepared the report for the ITAA, predicted that demand for
U.S. software engineers would shrink through 2008.

But ITAA leaders emphasized that outsourcing has damaged the job market far
less than the dot-com meltdown of early 2000, when Internet startups, telecom
companies and other companies eliminated as many as 268,000 positions.

“The myth is that we’ve started this long decline into the midnight of the
technology work force,” ITAA president Harris Miller said. “This report shows
that, assuming the recovery continues, the number of IT jobs will actually

Indian programmers earn roughly one-sixth the $60,000 U.S. average, and Chinese
engineers earn even less.

Outsourcing dramatically reduces labor costs, allowing companies to sell goods
ranging from software to tax-preparation services at lower costs or higher
profit margins. Greater profits theoretically allow companies to buy new
equipment, build laboratories and conduct scientific experiments — even in
expensive Silicon Valley and other U.S. tech hubs.

Savings from outsourcing allowed companies to create 90,000 new jobs in 2003,
with more than one in 10 of them in Silicon Valley or elsewhere in California,
researchers said. The report predicts that in 2008, outsourcing will create
317,000 jobs — 34,000 in California.

Companies spent $10 billion last year to outsource jobs ranging from medical
transcription to nanotechnology research. The ITAA predicted the companies
would spend $31 billion in 2008.

Democratic presidential candidate John Kerry introduced economic proposals
Friday that he said would reduce the sting for outsourced workers. More than
two dozen states are considering bans on outsourcing government contracts.
Such legislation would be “protectionist” and “unwise,” according to the ITAA,
whose 500 members include Microsoft Corp., Hewlett-Packard Corp. and

But Cynthia Kroll, senior regional economist at the University of California,
Berkeley, said policy makers can’t afford to ignore outsourcing.

“If R&D is coming out of India, will the next wave of growth bypass us
entirely?” Kroll asked. “We need to pay attention to what India and China and
these other countries are doing to get these new rounds of investment.”

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