Outsourcing High-Tech Jobs, p. 2
Growing job losses
The U.S. branch of the world's largest technical professional society, the Institute of Electrical and Electronics Engineers, sounded an alarm about job losses to outsourcing in March, 2004. The IEEE, a prestigious 30-year-old public-interest group that counts more than 225,000 American electrical electronics, computer and software engineers as members, concluded that "The offshoring of high wage jobs from the United States to lower cost overseas locations is currently contributing to unprecedented levels of unemployment among American electrical, electronics and computer engineers."
"American high-tech firms shed 560,000 jobs between 2001 and 2003, and expect to lose another 234,000 in 2004," said the IEEE report. "The Commerce Department reports that the number of U.S. IT workers employed in all industries has declined by 8 percent since 2000. Although initially concentrated in the manufacturing sector and in low-skilled jobs, the Commerce Department says that 'recent job losses have been widespread across most IT-goods and services producing industries, and across all IT skill levels.' Some jobs are expected to return with a stronger economy, but the majority are probably gone for good." Continued offshoring of high-tech work threatens to weaken our leadership in technology and innovation, and has serious implications for national security and the privacy of sensitive information warned the IEEE. It puts a downward pressure on wages that will likely "discourage many of America's best and brightest young people from pursuing careers in science and engineering." (IEEE-USA 2004-1)
Even the ITAA industry study admitted that more than half the 516,000 new jobs it claims will be created in the software and services area over the next five years will go offshore. We'll see a net loss of IT software and services through 2008, and U.S. workers will have 20,000 fewer new IT jobs than we would without outsourcing, acknowledged the ITAA. It claims that displaced IT workers will get jobs in the growing fields that benefit from outsourcing -- like, say, manufacturing. The claim that we gained over 3,000 manufacturing jobs in 2003 and are slated to gain another 25,000 by 2008 is mind-boggling, given the fact that for 25 years manufacturing jobs have been in a freefall. In February, 2004 the Congressional Budget Office confirmed that we've lost 14.3 million manufacturing jobs in the past 4 years, partly because of low-wage foreign competition. (ITAA, CBO)
The good news is that real (inflation-adjusted) spending on IT software, which fell after 2000 in the dot-com bust, recovered and has now outstripped its previous peak, says the Economic Policy Institute. But the bad news is that in July, 2004, jobs in software and related industries were still 377,500 short of their mid-2001 peak. In September the nation still had 585,000 fewer jobs than when Bush took office, and the Bureau of Labor statistics said half that loss was in software-related industries. Computer programmers are suffering jobless rates that soared from 2% to 9.5% over the last four years, and for software engineers, unemployment doubled from 2000 to 2004, says the BLS. (EPI 2004-1, 2004-2). The San Jose, California metropolitan area has lost a third of its computer systems design jobs since 2001. (McMillion)
Where did the jobs go? Some jobs were lost to rising productivity. But Goldman Sachs estimates that between 400,000 and 600,000 professional services and information sector jobs were moved overseas -- accounting for half of the total jobs lost over the past few years. About one in four IT workers surveyed by WashTech said their company had moved jobs overseas, and one in five said they'd either trained a replacement worker or knew someone who had done so. WashTech's Job tracker documents some 366,753 jobs offshored since January, 2000 by major companies like GE, EDS, Accenture, IBM, Computer Sciences Corp. Dell, MCI and Oracle, costing an estimated 175,082 workers their jobs. (AFL-CIO 2004-2, WashTech 2003, WashTech 2005)
Pressure on paychecks
Is the IEEE right that those who are still working are paid less? The ITAA did some blatant fudging when it claimed a sunny wage picture for IT workers. Its own charts (chart on p. 4) actually show wage increases for the past three years of just 0.01% a year, and that's after-tax wages -- in other words, after including gains from the huge Bush tax cuts that threw the federal budget from surplus into deficit almost overnight. The ITAA report projected that wage increases will take off in the future, yet the main author of the study, Global Insight chief economist Nariman Behravesh, admitted in a press conference that information technology workers will experience "wage compression." (ITAA, Thibodeau 2004-1, Hayes)
The ITAA's claim that "offshoring will do everything but whiten teeth and freshen breath" was greeted with skepticism by ComputerWorld's Frank Hayes, who called it "a comforting bedtime story." Hayes reminded readers that "this report is driven by politics every bit as much as the ITAA's wildly optimistic job-growth estimates of a few years ago" when it was lobbying for more visas for foreign workers.
Government (BLS) figures from October show that over the past year workers' real, inflation-adjusted weekly wages dropped by .4% and hourly earnings fell by .7%. In information industries and professional and business services the drop in hourly pay was greater, down 1.1% and .7% respectively. Throughout the economy, New York Times columnist Bob Herbert pointed out, the typical household's income fell $1500 behind inflation from 2000-2003, despite an impressive 12% rise in productivity. Real hourly wages of young college graduates have been falling since 2001. Former labor secretary Robert Reich says senior software engineers saw their paychecks cut by $30,000 between 2000 and 2003. (Hayes, EPI, Herbert, BLS, Reich)
Last modified September 07, 2005 02:26 PM