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Outsourcing High-Tech Jobs, p. 3

Continued from p. 2

The future of outsourcing

The future doesn't look good for American workers. Forrester Research predicted half a million computer services jobs would move to other countries over the next 11 years. The Gartner research firm forecasted that 1 out of 10 jobs at information technology companies will move to emerging markets, and 1 out of 20 jobs in internal information systems would move overseas by the end of 2004. Recently Reuters, Veritas Software, Google and Accenture announced they were offshoring thousands more jobs. Deloitte Research says the 100 biggest financial services firms will move two million jobs to low-wage countries over the next five years, and 42 global telecom firms will send some 275,000 jobs off-shore. University of California-Berkeley says that overall, the jobs of one out of ten workers -- totaling 14 million jobs - - are at risk of being outsourced. (Yamamoto and Frauenheim, Deloitte, Morello, Bardhan, Rai 2004-1)

 "This is no longer about a few low-wage or manufacturing jobs," warns Business Outlook Editor Kathleen Madigan. "One out of three jobs is at risk. As soon as work can be made routine -- whether it's reading an X-ray or creating blueprints -- the job can potentially be outsourced." (Mandel)

Where did the jobs go?

Right now, the destination of choice for computer-related work is India, which gained at least 102,000 jobs over the past four years doing software  work for U.S. firms. Sales to the U.S. account for 70 percent of the Indian IT industry's income, said, and India expected "a surge in order flows post-election, with several mega deals in the offing."  In just one month of last year, a U.C. Berkeley study found that U.S. firms advertised over 25,000   new outsourcing-related jobs in India. (EPI,, Bardhan)

Can the U.S. export its way out of this?

The Bush team boasts that the U.S. still benefits from trade because its exports to other countries are going up. But that's like saying the San Francisco 49ers were having a good season because they made a couple of field goals. The overall picture is of trade deficits that grew to an all-time record of $617 billion in 2004 for both goods and services -- roughly double the deficit the U.S. had when Bush was first elected. The monthly trade deficit is still widening, to an unprecedented $61 billion a month in February. For every $2 in goods and services we sell abroad, we buy $3 from other nations. ( US Census Bureau 2005-1, 2005-2)

What about the trade advantage the U.S. always had in services, including computer programming, banking, engineering and management? It's been cut nearly in half since 1997. By February, 2005 the U.S. was importing  $2.3 billion more in services than it did a year earlier, outrunning a modest growth in exports by $400 million. At that rate, the American advantage in services could quickly disappear, says Barron's. ( U.S. Census Bureau 2005-3, Erati) The real situation could be even worse -- two government researchers estimate that major countries under-report service imports from India by 83%. (Kozlow and Borga). High-Tech is a key to the slippage. U.S. trade in advanced technology took a U-turn from a $32 billion surplus as recently as 1997 (and a modest surplus in 2000) to a $37 billion deficit in 2004. In 2004 the U.S. also experienced its first-ever combined deficit in technology goods and services. (McMillion)

The U.S. government is outsourcing too

While governments like Singapore make efforts to support local industry, the Bush team is jumping on the outsourcing bandwagon It's cutting in-house software development in favor of off-the-shelf packages from companies that outsource, says Federal Computer Week.   As a result, last year the U.S. imported $2.5 billion more in government services than it sold abroad. (US Census Bureau 2005-3) The Congressional Research Service warns of security risks because defense is "one of the most heavily outsourced of activities in the federal government." That could be one reason why the Bush Administration earned a "D" for computer security from a key Congressional subcommittee. Nonetheless, Asia Times reports that the Pentagon is outsourcing the CAD (computer-aided design) for its next generation F35 fighters to an Indian company in collaboration with Dell. (French, Committee on Government Reform Subcommittee, Bhattacharjee)

What about training and R&D Investment?

George Bush, like the Clinton Administration before him, exhorts workers to be "the best in the world"   by getting the skills to do   high-end work that can't be outsourced. There are two problems with this. One is that the Bush Administration is actually cutting investment in education and skill development, as our nation's schools continue to deteriorate. He tried to cut more than $1 billion from worker training over the last three years.  The programs he does support too often go to companies as tax breaks -- including outsourcing companies -- rather than to workers themselves. IT workers   aren't even eligible for the training benefits blue-collar workers get when they suffer trade-related layoffs. (Bush-Cheney '04,, Yamamoto)

 Public school funding is crippled by Bush priorities that favor tax cuts and semi-private charter schools. Detroit schools, for example, are struggling with massive budget shortfalls, teacher layoffs and school closings, and teachers often have to buy supplies out of their own pockets. Moreover, "the K-12 system does a good job of weeding out any students interested in math and science," commented Intel CEO Craig Barrett. "We prepare them to be lawyers and consultants, instead." Tuition hikes have put higher education out of reach for many students. (Yamamoto)

The other problem is that technical training alone won't stop the job hemorrhage. As one CIO at Trimble Navigation,   a California software company, commented, "The very jobs we're training students to do are the ones we're exporting." General Motors now outsources its entire IT process to companies like IBM and Hewlett-Packard, which outsource abroad. "There is no job that is America's God-given right anymore," Carly Fiorina famously testified when she was chairperson of H-P. (Yamamoto, Ricciuti 2004-1, Drezner) the government isn't investing in new opportunities either. The National Science Foundation reported that between 2001 and 2002, U.S. investment in industrial R&D plummeted a record $7.7 billion, or 3.9 percent. In 2003, our nation's investment in R&D in all fields   grew just 1%, compared to   average annual growth of 5.8 % between 1994 and 2000. (National Science Foundation)

It could get worse. The Bush government now plans to chop off a fifth of the Pentagon's budget for basic science and technology research, and slash National Science Foundation education programs. Even Senator Christopher "Kit" Bond (R-MO) warned that this damages efforts to attract minority students into science, "at a time when the United States can't keep relying on foreign students." For 2006 Bush would deprive NSF of  one-third the funding required by the NSF Authorization law he signed in 2002, after trying to cut its 2005 budget by $100 million. His 2006 budget also axes altogether the Advanced Technology Program that funded high-risk private-sector technology R&D. (Pillsbury) In December, the Bush team deep-sixed a Congress-mandated bipartisan study by leading technologists and industrialists about how to re-energize U.S. competitiveness. That prompted New York Times columnist Thomas L. Friedman to characterize him as "an industrial-age presidency, catering to a pre-industrial ideological base. . ." The president's 2005 budget also slashed virtually all research not focused on weapons development and homeland security. (Friedman, American Association for the Advancement of Science, Ricciuti 2004-1, Yamamoto)

Bush seems to have forgotten that the innovations that made the U.S. a technology leader and propelled the nation into the Information Society -- whether it's the Internet, satellites or the computer itself -- were heavily promoted, organized and funded by the federal government.

The fact is, there is less incentive for students to go into high-tech fields, and many are not. The number of U.S. undergraduates signing up for computer science or engineering programs dropped 18 percent in 2003, revealed a survey by   Computer Research Association. The U.S. is now number three in the world, and falling farther behind number one (India) and number two (China), in terms of Computer Science graduates. (Yamamoto)

->Continued on p. 4: Wishful thinking

Created by nbrigham
Last modified September 07, 2005 02:26 PM

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