Thursday, November 11, 2004

Offshoring, Impact on US Jobs & Economy - Part II

posted by ShyK at 16:52

This entry is part 2 of my rants on this subject. The part 1 can be found at ...

The numbers say that approx 2% of IT Spending will be/was diverted to Offshore. Does that really reconcile with what we “know” – Every one of us knows somebody who has lost a job or may be one of us has lost his/her job. Is the 2% really a BS then?

Not really – for we do not account for the fact that Y2K and the dot com boom substantially increased the jobs available. There was bound to be a slump once these jobs were gone. We also do not account for the fact that at least some of the people who lost jobs (in 2003) have since gained jobs. Lets see what the numbers have to say…Let me refer you to the IT Workforce Study – 2004 conducted by Information Technology Association of America which is based out of Arlington, VA.

I quote - “The U.S. IT workforce gained population in the last year, moving up two percent from 10,312,650 in 2003 to 10,526,289 in 2004."

Ugh Ugh… 2% seems to be a recurring phenomenon. But seriously - the disconnect between the job losses and the number of jobs increased comes from two factors –

  • Though the number of jobs have increased, the number of “programming” level jobs have decreased (these are the ones that get Bangalorized)
  • Though the workforce size has increased, the demand for (new) IT workers continues to drop.

My interpretation of these facts is that though programmer level jobs may have reduced there is still a big market for jobs that can not or are not being offshored. And if the US IT workforce manages to reposit itself to take on these jobs – the impact felt would be much lesser. But wait, I am getting ahead of myself. That is the subject for my next post

For the moment let’s see what these (purpoted) job losses really mean to the US Economy. Economists claim that since offshoring gets tasks done cheaper – they would lead to a productivity growth for the US economy as a whole.

I quote – “... Just as for IT hardware, globally integrated production of IT software and services will reduce these prices and make tailoring of business-specific packages affordable, which will promote further diffusion of IT use and transformation throughout the US economy”

And then there are others who claim that every Dollar invested in offshoring actually returns more than a dollar to the US Economy.

I quote – “A recent study by the McKinsey Global Institute, an economics think tank, calculated that for every dollar spent on a business process that is outsourced to India, the U.S. economy gains at least $1.12. The largest chunk -- 58 cents -- goes back to the original employer, but there are many other benefits"

Or on a more frivolous note an article from the New York Times about an offshore center – “All the computers are from Compaq, the basic software is from Microsoft, the phones are from Lucent, the air-conditioning is by Carrier, and even the bottled water is by Coca-Cola”

Additional Reading

- to be continued -

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