High-tech outsourcing led to US job gains of 90,000 in 2003: study
WASHINGTON (AFP) - A study contradicts the theory that outsourcing has hurt the US labor market, indicating that 90,000 net jobs were created in the United States as a consequence of moving high-tech work offshore.
The study by the economic research firm Global Insight for the Information Technology Association of America, a high-tech trade group, came amid a searing political debate on outsourcing and the sluggish US labor market.
"We have long held the position that global sourcing creates more jobs and higher real wages for American workers," said ITAA president Harris Miller.
"Now we have the data that prove it. Far from being an economic tsunami that washes away domestic IT employment as some believe, global sourcing helps companies become more productive and competitive."
But Miller noted that because job gains are uneven, the trend in outsourcing highlights a need for more government aid to retrain or assist laid-off white-collar workers.
The study confirmed other surveys showing a sharp rise in moving high-tech service jobs overseas. It projected offshore spending for computer software and services is expected to grow at a rate of almost 26 percent from some 10 billion dollars in 2003 to 31 billion in 2008.
The savings from the use of offshore resources are estimated to grow from 6.7 billion dollars to 20.9 billion, the report said.
On the issue of jobs, the study found that there is a net gain in the United States even as many functions are moved offshore.
"While global IT software and service outsourcing displaces some IT workers, total employment in the United States increases as the benefits ripple through the economy," the report said.
While 104,000 jobs in the sector were moved offshore last year, the study found that "the incremental economic activity that follows offshore IT outsourcing created over 90,000 net new jobs in 2003 and is expected to create 317,000 net new jobs in 2008."
Nariman Behravesh, chief economist at Global Insight who conducted the study along with Nobel laureate Lawrence Klein, said historical data show the benefits of free trade, including outsourcing.
"We know looking back at history that more jobs are created by free trade," Behravesh said, noting that while three million US manufacturing jobs were lost in the 1990s, 25 million other jobs were created.
"Offshore outsourcing has been going on for decades, and every time it happens, people wring their hands and say we'll become a nation of hamburger flippers. It didn't happen."
The findings also flew in the face of critics who say moving jobs offshore cuts wages for US workers.
"Offshore IT software and services outsourcing actually increases average real wages of US workers," the study indicated. "With lower inflation and higher productivity, real wages were 0.13 percent higher in 2003 and are expected to be 0.44 percent higher in 2008."
Global Insight also said that demand for US exports is expected to increase as a result of lower prices of US goods and services and higher incomes in the offshore outsourcing destinations.
The report said the lower costs from using offshore resources keeps inflation in check, increases productivity and keeps interest rates low.
"This boosts business and consumer spending and increases economic activity," the report said.
"The benefits of global sourcing contribute significantly to real gross domestic product in the United States, adding 33.6 billion dollars in 2003."
It added that overall GDP (news - web sites) is expected to be 124.2 billion dollars higher than without outsourcing.
The issue of outsourcing is a key issue in the US presidential race, with presumptive Democratic candidate John Kerry (news - web sites) accusing the White House of failing to stem the outsourcing of US jobs. Kerry has proposed a tax code change that he said would discourage the moving of jobs overseas.
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