WASHINGTON -- More IT jobs will be created offshore than onshore over the next five years, but the overall U.S. economy will get a boost from the cost savings that offshore outsourcing yields.
That's the conclusion of a controversial report released last week by the Information Technology Association of America, a high-tech trade group that's lobbying Congress in favor of offshoring. The firm that conducted the research on behalf of the ITAA, Waltham, Mass.-based Global Insight Inc., found that while wages and jobs will increase in the economy overall, the outlook for IT workers may be less positive.
"Some workers may have to take a job that pays less than their [current jobs]," and some IT workers will face "wage compression" as a result of overseas competition, said Nariman Behravesh, chief economist at Global Insight.
But the report's conclusion in support of offshore outsourcing drew much skepticism. Richard Ellis, the principal researcher on an IT workforce report completed for the Commission on Professionals in Science and Technology last fall, said the Arlington, Va.-based ITAA "has been a consistent mouthpiece for the industry" and its studies "have a consistent tendency to reach predictable conclusions."
John Steadman, president of the Institute of Electrical and Electronics Engineers-USA, said the report assumes that the savings from offshore outsourcing will be used to create new jobs in the U.S. And it's "not absolutely clear that will happen," he said, adding that companies can "invest overseas, and the new jobs get created elsewhere and do not help U.S. workers."
The economists who conducted the research said history has demonstrated that free trade raises the standard of living in the U.S.
Lawrence Klein, one of the report's authors and a 1980 Nobel Laureate in economics, said that when the U.S. stopped making TV sets, "people thought that was a disaster." But those workers moved on to other jobs, he said.
"The American way has always been to move to higher value-added," meaning better-paying work, Klein said.
The economy will experience more growth with offshore development than without it, the report concludes. IT employment will grow over the next five years, adding 516,000 jobs in the software and services sector. But 272,000 of those jobs will go offshore, with 244,000 remaining in the U.S.
White-Collar Losses
The offshoring of high-paying white-collar jobs has raised particular concern. When overseas manufacturing led to the loss of textile jobs, there was a shift in the U.S. to more productive, higher-paying jobs, according to Lee Price, research director at the Washington-based Economic Policy Institute. But "the opposite is happening [with] computer software offshoring," he said.
"This trend to offshore productive jobs in the U.S. economy is making us less productive and not stimulating the economy," said Price. "We are giving up some of the most productive jobs in our economy."
Gauging the impact of offshore development on IT wages in the U.S. can be difficult in view of the economic downturn. Bob Moore, a Los Angeles-based high-tech recruiter, said programming jobs that were paying $90,000 to $100,000 before the downturn are now paying $70,000 to $80,000. But he said it's unclear how much of that should be attributed to the weak economy vs. offshoring.
Nate Viall, a Des Moines-based recruiter who specializes in finding candidates for IBM iSeries application development, said in his latest quarterly study, which was released last week, salaries for managers in that niche were up 4.4% from 2003. The average salary was $89,200.
He said these developers have fared well because they specialize in a system that's in wide use with small and midsize businesses that aren't doing a lot of offshoring.
But Viall expressed concern that displaced workers may be inclined to retrain for iSeries development and in turn drive down wages for his recruits. "It could have that potential," he said.