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August 2005, Vol. 128, No.8
Restructuring information technology: is offshoring a concern?
Robert W. Bednarzik
The immunity from global competition that U.S. white-collar workers have enjoyed for so long has seemingly started to vanish. There is an increasing concern the next great wave of globalization will come in services—in particular, white-collar services. Numerous articles have described the concerns of computer programmers, software engineers, and other workers in the information technology (IT) field—about losing their jobs as companies move service jobs overseas to take advantage of lower labor costs. This article discusses restructuring in the IT sector in the United States and the number and likelihood of IT jobs moving offshore.
Historically, the U.S. economy and labor market have been marked by change. In the latter part of the 17th and into the 18th centuries, many workers began moving off farms to factories as the ‘industrial revolution’ began to take hold. Factory pay was higher, and farming techniques were improving and getting more mechanized. Buoyed by an increasing standard of living, growing labor force participation of women, and expanding technology, the U.S. economy and labor force continued to evolve in the 20th century. In terms of job growth, jobs producing goods were continually outpaced by jobs providing a service. This trend continued, even in many factory jobs. Often referred to as economic restructuring, these shifts reflect the continued pressures on farms, factories, and companies to remain competitive.
Much like these past shifts, the U.S. economy and labor market seem to be reinventing themselves again. Service-based companies are hiring workers in other countries to do work previously done by their domestic staff, and manufacturers have been locating plants offshore for the past 25 years.1 Now, companies in the IT sector, typically thought of as a high-wage sector, are relocating jobs to other countries. Declining communication costs has opened up the path for them to take increased advantage of lower wages abroad in countries such as India and China. This has raised the issue’s visibility because of the apparent shift in ‘job losers’ from international trade: from blue to white collar. For example, a recent article explored this phenomenon—listing computer programmers, call-center operators, and travel agents as examples of professionals whose jobs might be performed in India or other countries with large numbers of highly educated workers but with relatively low labor costs.2 However, no one has been able to pinpoint precisely how many white-collar jobs have moved overseas. What is fact and what is fiction with regard to offshoring? What do we know and what do we need to know to get a firm grasp of this phenomenon? This article reviews and examines the evidence, including recent trends in the labor market, to answer these questions.
This excerpt is from an article published in the August 2005 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 An estimated 5 million factory jobs were lost. See Griff Witte, "As Income Gap Widens, Uncertainty Spreads," The Washington Post, Sept. 20, 2004, p. A01.
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Productivity growth in high-tech manufacturing industries—Mar. 2002.
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High technology employment: another view.—July 1991.
High technology today and tomorrow: small slice of employment.—Nov. 1983.
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