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.

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.”

Mass layoffs account for only about 5% of total U.S. job losses each year, so these numbers likely only account for a fraction of job losses due to offshoring. But focusing on job losses alone ignores job gains, and the phenomenon of inshoring, in which U.S. companies gain jobs from overseas.

The Massachusetts-based hardware company NEI, for example, says companies in the EMEA (Europe, Middle East and Africa) region are outsourcing their manufacturing to NEI’s facility because the struggles of the U.S. dollar is making it cost-effective to do so.

“Even in a healthy economy, there always are both massive job losses and massive job gains,” Panko notes. “Even when the employment rate holds steady, 18.7 million people [in the United States] lose their jobs each year; but there are even more hires. Large IT job losses are not a problem unless there are not also large job gains.”

With that in mind, let’s take a look at some of the IT jobs expected to accumulate gains between 2006 and 2016, according to U.S. Bureau of Labor Statistics data cited by Panko.

Jobs for network systems and data communications analysts are expected to grow 53.4%. Expected growth for software application engineers is 44.6%, while computer systems analysts, database administrators, system software engineers, and network and computer systems administrators can all expect job growth rates between 27% and 29%.

There’s bad news for computer programmers, however. Jobs in this area are expected to decline 4% from 2006 to 2016, the only computer specialist that will see nationwide job losses, according to Panko.

“In software development … continuing rapid growth is expected in jobs that require higher-level skills,” he writes. “The same is not true for lower-level computer support professionals and plain vanilla programmers.”

I want to hear from you – what do you think about Panko’s research? Are you worried about the impact of offshoring, or have you lost your job due to offshoring? Feel free to post comments below or send me an e-mail at jbrodkin@nww.com.

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