Has offshoring harmed U.S. IT workers? One researcher says 'no'

Offshoring's negative consequences offset by job gains, study says

The word "offshoring" might send shivers down the spine of IT pros who are unemployed or fearful of losing their jobs. But how much impact does offshoring - the outsourcing of IT functions to foreign countries - really have on employment prospects in the United States? Despite alarming forecasts from some analyst firms, one new study concludes that the impact is minimal.

“It is … difficult to ease offshoring fears because a lack of solid data makes it impossible to strongly refute consultants who have said that IT offshoring is already large and will soon get far larger,” writes Raymond Panko, professor of IT management at the University of Hawaii. “However, in the few cases where we should be able to measure offshoring job losses, there is no evidence that massive job losses have occurred.”

Panko’s 36-page report is titled IT Employment Prospects: Beyond the Dotcom Bubble, and was published in the European Journal of Information Systems. Despite being published in a European journal, the paper relies heavily on U.S. statistics, and covers various topics including the dot-com bubble’s impact on IT jobs, projected job growth rates for computer specialists, and the impact of offshoring.

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The word "offshoring" might send shivers down the spine of IT pros who are unemployed or fearful of losing their jobs. But how much impact does offshoring - the outsourcing of IT functions to foreign countries - really have on employment prospects in the United States? Despite alarming forecasts from some analyst firms, one new study concludes that the impact is minimal.

“It is … difficult to ease offshoring fears because a lack of solid data makes it impossible to strongly refute consultants who have said that IT offshoring is already large and will soon get far larger,” writes Raymond Panko, professor of IT management at the University of Hawaii. “However, in the few cases where we should be able to measure offshoring job losses, there is no evidence that massive job losses have occurred.”

Panko’s 36-page report is titled IT Employment Prospects: Beyond the Dotcom Bubble, and was published in the European Journal of Information Systems. Despite being published in a European journal, the paper relies heavily on U.S. statistics, and covers various topics including the dot-com bubble’s impact on IT jobs, projected job growth rates for computer specialists, and the impact of offshoring.

Back in 2002, Panko writes, Forrester predicted an average loss of 34,000 IT jobs per year through 2015 due to offshoring. In 2004, Panko adds, Gartner said that “5% of U.S. IT jobs had already been offshored and that 25% of IT jobs would be offshored in 2010.”

Despite these gloomy predictions, there is really little hard data that can either refute or confirm the Forrester and Gartner conclusions, Panko says.

“Quite simply, there is no good statistical data on job offshoring or even revenues for service companies outside of the United State,” he writes. “While this means that there is no way for Forrester, Gartner, and others to verify their numbers, it also means that there is no way for others to refute them in a comprehensive way.”

Panko reviewed data from the U.S. Bureau of Labor Statistics (BLS), which predicts that computer specialist jobs in America will increase by 25% through 2016, more than twice the rate of growth for all job types.

How is this possible if so many IT jobs are being offshored? Panko looked at data from BLS’ Mass Layoff Statistics http://www.bls.gov/MLS/ program, which tracks layoffs involving 50 or more jobs. Out of nearly 1 million layoffs tracked in 2004, only 16,197 were due to offshoring, he writes.

This accounts for all jobs, not just IT positions.

“The mass layoff statistics data is certainly not perfect,” Panko writes. “In particular, it ignores all offshoring that does not produce at least 50 layoffs. Still, if offshoring really is massive, it should show up strongly in the 2004 MLS data. It does not. So in the one data source in which the hypothesis that IT offshoring is massive can be tested at least roughly, there is no support for the idea that enormous numbers of IT jobs are being offshored. This does not mean that offshoring is negligible - only that it does not appear to be large compared to total employment or total IT employment.”