Study claims offshoring helps US economy

Outsourcing of US IT jobs to foreign workers is good for the US economy and will result in the creation of twice as many jobs as...

Outsourcing of US IT jobs to foreign workers is good for the US economy and will result in the creation of twice as many jobs as are displaced, a study claims.

Offshore outsourcing, which the study calls "global sourcing", created 90,000 more jobs in 2003 than it sent outside the US, according to a study conducted by economic analysis firm Global Insight and released by the Information Technology Association of America.

It also said offshore sourcing reducess costs to US companies, allowing them to spend money on new US workers, plus it increases the efficiency of the US economy and results in higher wages and increased exports.

The study estimated that 104,000 US software and services jobs were moved overseas in 2003, but 90,000 more jobs were created as a result of the cost savings associated with offshore outsourcing. It also estimated that in 2008, 317,000 new US jobs will be created as a result from the savings and efficiencies created by offshore outsourcing.

IT worker groups have taken a different view on offshore outsourcing, and the US Congress has been looking at legislation to limit offshore outsourcing.

A representative of the Institute of Electrical and Electronics Engineers-USA (IEEE-USA), which has questioned the benefits of offshore outsourcing in the past, said it was too early to comment.

"Their interest is in profits," said Ron Hira, chairman of the IEEE-USA's research and development committee. "They don't feel a responsibility to their workforce."

The unemployment rate for electrical and computer hardware engineers was near 7% in late 2003, partly because of offshore outsourcing, the IEEE-USA claimed.

However, the study suggested that other factors, including the dotcom bust and recent recession, have contributed more heavily to IT job losses. Of the 372,000 IT software and services jobs lost since 2000, less than a third can be pinned on outsourcing, it claimed.

The study predicted that total savings from the use of offshoring are estimated to grow from $6.7bn to $20.9bn between 2003 and 2008. "The cost savings and use of offshore resources lower inflation, increase productivity, and lower interest rates," the study said. "This boosts business and consumer spending and increases economic activity."

It recommended against "protectionist legislation or regulations as a result of the political pressures being created by this economic transition", and that the US government should take action to help displaced IT workers and encourage students to enter IT.

"Offshore IT software and services outsourcing is rapidly creating a new competitive reality for employers, employees, government agencies, and academia," the study said. "The analysis presented here finds that the US economy has much to gain from global sourcing and an environment of free trade, open markets, and robust competition."

Grant Gross writes for IDG News Service

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