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Report Finds Outsourcing Will Create New U.S. Jobs

A technology group says savings from labor costs will allow firms to increase positions in many industry centers.

March 30, 2004|From Associated Press

SAN JOSE — Outsourcing white-collar jobs to low-wage countries such as India and China has thrown some Americans out of work, but a new report set for release today predicts that the trend will ultimately lower inflation, create jobs and boost productivity in the United States.

In its survey, the Information Technology Assn. of America acknowledges that the migration of tech work to low-paid foreigners has eliminated 104,000 American jobs so far. That accounts for nearly 3% of the positions in the U.S. tech industry.

Software engineers have been particularly hard hit. Researchers at Global Insight Inc., which prepared the report for the ITAA, predicted that demand for U.S. software engineers would shrink through 2008.

But ITAA leaders emphasized that outsourcing has damaged the job market far less than the dot-com meltdown that began in 2000. Altogether, Internet start-ups, telecom companies and other companies eliminated as many as 268,000 positions.

"The myth is that we've started this long decline into the midnight of the technology workforce," ITAA President Harris Miller said. "This report shows that, assuming the recovery continues, the number of IT jobs will actually increase."

U.S. programmers earn an average of $60,000. Indian programmers earn about one-sixth as much and Chinese engineers even less.

Outsourcing dramatically reduces labor costs, allowing companies to sell goods including software and tax-preparation services at lower costs or higher profit margins. Greater profits theoretically allow companies to buy new equipment, build laboratories and make other investments that can create jobs -- even in expensive Silicon Valley and other U.S. tech hubs.

Savings from outsourcing allowed companies to create 90,000 new jobs in 2003, with more than 10% of them in California, researchers said. The report predicts that in 2008, outsourcing will create 317,000 jobs, including 34,000 in California.

Companies spent $10 billion last year to outsource jobs in fields including medical transcription and nanotechnology research. The ITAA predicted that companies would spend $31 billion in 2008.

Democratic presidential candidate John F. Kerry introduced economic proposals Friday that he said would reduce the sting for outsourced workers. More than two dozen states are considering bans on outsourcing government contracts.

Such legislation would be protectionist and unwise, according to the ITAA, whose 500 members include Microsoft Corp. and Hewlett-Packard Co.

But Cynthia Kroll, senior regional economist at UC Berkeley, said policymakers could not afford to ignore outsourcing.

"If [research and development] is coming out of India, will the next wave of growth bypass us entirely?" Kroll asked. "We need to pay attention to what India and China and these other countries are doing to get these new rounds of investment."

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