Offshoring Debate Lacks Hard Numbers

“There is fire under the smoke in that it’s true there is significant outsourcing in the services economy that was not that significant in the past,” he said. “What we’re finding is those who are trying to make this a binary argument of just exporting jobs versus trade really are not looking at the full and in-depth problem.”

A Little Irony

It is ironic that numbers sparked the debate in the first place. In a November 2002 Forrester report, analyst John McCarthy predicted 3.3 million U.S. service jobs would head overseas by 2017, with IT leading the way. Since then, those numbers have taken on the status of urban legend, said Catherine Mann, a senior fellow at the Institute for International Economics.

“They were the first ones to come out with a number and that’s why I call it urban legend,” she said. “So, if we think that offshoring is a big reason for why we see unemployment today, then what Forrester says is going to happen doesn’t match with what’s happening today. To the extent that some press releases from companies give numbers, that’s the source of some information, but I wouldn’t want to add those up and imply anything by them.”

According to Hebert, IT offshoring’s biggest impact is on consultants, not employees. Some contractors he knows have slashed rates just to get work. An Oracle consultant friend, for example, will now gladly take $33/hour for the same work he did for $100/hour not so long ago.

“From my standpoint, the No.1 impact on the market that’s very visible is the market for consultants,” Hebert said. “It’s a lot harder to see how much impact has been on actual employee job loss in IT. What happens in a lot of cases is, while some jobs may get eliminated from pushing functions offshore, in almost all cases we’ve seen the employees are not let go, they are reassigned or given opportunities to find something else in the company. And there hasn’t been very much job loss in the IT sector.”

Shifting Sands

What also clouds the numbers is the ability of white-collar IT workers to retool more rapidly than those in other groups such as manufacturing, said IIE’s Mann. These workers find it easier to take advantage of the 400,000 new jobs created quarterly, on average, by the U.S. economy. Because of this, they may not show up anywhere as being displaced by an overseas worker.

And, while IT outsourcing is a fact of life today, McCurdy agrees that basing the debate on Forrester’s numbers is folly. Too many factors yet unseen will shape the trend going forward and will probably end up helping the U.S. economy and IT, not hurting it.

“We still are the most innovative, creative society,” he said. “We have the most innovative, creative entrepreneurial workers in the world.”

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