U.S. tech job gain or drain?
Two reports carry different messages: One predicts offshoring boom; the other applauds foreign investment.
A report Tuesday from a business group concluded that "insourcing"--when foreign-based companies invest in the United States--is creating a growing number of U.S. jobs, including technology positions. But research firm IDC on Monday predicted that the worldwide market for "offshore" information technology services will more than double between 2003 and 2008 to $17 billion, suggesting U.S. techies will lose jobs to countries such as India and the Philippines.
Taken together, the reports raise questions of how healthy U.S. trade policies are to technology workers. The issue of whether shipping work offshore is beneficial to the country is a focus of the U.S. presidential race; while President Bush's top economic adviser has defended offshoring, Democratic challenger John Kerry has promised to change tax rules to stem the practice.
The insourcing report, which says U.S. subsidiaries of foreign companies employed more than 5.4 million workers in 2002, distracts from the question of what should be done to help tech workers hurt by offshoring, said Ron Hira, a public policy professor at the Rochester Institute of Technology. Hira, who chairs the career and work force policy committee of the IEEE-USA (the U.S. wing of the Institute of Electrical and Electronics Engineers), said the focus should be on solving the problems created by outsourcing, rather than on how multinational companies create jobs here or how the United States must remain "competitive." Businesses' "arguments aren't designed for solutions," Hira said. "They don't feel any responsibility for the workers that are displaced."
IEEE-USA has warned that the offshore trend threatens the nation's tech leadership and has contributed to high unemployment among U.S. techies. Industry leaders counter that offshoring ultimately benefits the U.S. economy and U.S. workers, and that protectionist measures would result in lower economic growth and higher unemployment.
The number of U.S. jobs that have been lost overseas, or will head abroad in the future, is not precisely clear. Forrester Research projects that more than 3 million U.S. services jobs will go offshore between 2000 and 2015.
IDC's report on offshore IT services did not discuss job numbers. But the study indicates that more and new kinds of technology jobs are likely to move from "onshore" markets such as the United States and Western Europe to places including China, Central Europe and Eastern Europe.
"Customers' continued need to look to offshore as a resource from which to procure IT services as part of their overall sourcing requirements is not only growing as a share of the total IT services market, but is expanding from traditional IT services, such as application development and maintenance, to areas traditionally limited to being delivered locally," David Tapper, director of outsourcing, utility and offshore services research at IDC, said in a statement. "These services range from application and infrastructure management to IT consulting."
Liberal trade and investment policies enable such services to be provided relatively cheaply by overseas workers, which can knock U.S. technology professionals out of jobs. But such policies are important for encouraging foreign companies to invest and hire in the United States, according to a report released Tuesday by the Organization for International Investment, a group representing U.S. subsidiaries of foreign companies.
The study, written by Dartmouth professor Matthew Slaughter, found that over the last year the United States lost its place as the top destination for international investment. "The challenge for policy-makers is to ensure the United States remains a competitive location for investment," Slaughter said in a statement.
According to the report, the average annual compensation at insourcing companies was $56,667--more than 31 percent above the annual compensation in the rest of the U.S. private sector. One insourcing company mentioned in the report was Germany-based semiconductor maker Infineon Technologies. This year, Infineon picked its Richmond, Va., site for a $1 billion investment in additional manufacturing capacity, according to the report. In April, Infineon Richmond employed approximately 1,750 workers, and the expansion is projected to lead to 800 more jobs over the next 18 months, the report said.