Study: Government data limited on offshoring

New report from Congress reveals little on extent of shipping IT and other services work abroad, as debate on the trend heats up.

Ed Frauenheim
Ed Frauenheim Former Staff Writer, News
Ed Frauenheim covers employment trends, specializing in outsourcing, training and pay issues.
2 min read
A new report from Congress' research arm about "offshoring" sheds little light about the controversial practice of sending services work abroad.

In fact, the study's main conclusion is that government data offer limited insight into the extent of offshoring and its effects.

In a report released Wednesday, the Government Accountability Office said imports of business, professional and technical services increased by 76.8 percent, from $21.2 billion in 1997 to $37.5 billion in 2002. On the other hand, the report said, in 2002, U.S. investments in developing countries that supply offshore services were small, compared with those in developed countries, and most services produced abroad are sold primarily to non-U.S. markets.

"U.S. government data provide some insight into the extent of services offshoring by the private sector, but they do not provide a complete picture of the business transactions that the term 'offshoring' can encompass," the report said.

The GAO said it would issue additional reports on offshoring. Rep. Jay Inslee, D-Wash., said further reports are urgently needed.

"The GAO study is a welcome first step in understanding the disturbing trend of sending our high-paying jobs overseas," Inslee said in a statement Thursday. "I remain concerned that this report is conspicuously incomplete and does not adequately explore some important outsourcing issues, such as the domestic consequences of sending our jobs abroad. If we lack data, as GAO suggests, then it is imperative that we push (for) further studies that will fill the gap between raw numbers and public policy."

Offshoring, generally defined as shipping services work such as computer programming to lower-cost countries, has sparked a heated debate in the past year or two. Defenders of offshoring say it ultimately benefits the U.S. economy and U.S. workers, and that protectionist measures would result in lower economic growth and higher unemployment.

Critics respond that offshoring costs U.S. workers jobs and threatens the country's long-term technology leadership. A tally of U.S. jobs "offshored" since 2000 has passed 250,000. That number, reported by labor group WashTech, is based on media accounts.

Still, the exact scale of offshoring and how fast it will expand in the coming years has been somewhat murky.

The GAO said the total dollar value of the federal government's offshore services contracts increased from 1999 through 2003, but "the trend in the dollar value shows little change, relative to all federal services contracts." The report also said no comprehensive data or studies show the extent of services offshoring by state governments.

So-called Mass Layoff Statistics data from the Department of Labor show that layoffs attributable to overseas relocation represent a small fraction of total job losses, the GAO said. But, it added, that research program identifies only a portion of total layoffs, because it does not cover organizations with fewer than 50 employees.

Other government data show greater-than-average job declines since 2001, in occupations and industries commonly associated with offshoring, the GAO said. But other factors, such as the recent recession, may contribute to these declines, the report said.