IT outsourcing results in net US job growth
March 30, 2004 -- Global Insight, Inc. announced today the release of a new study, "The Impact of Offshore IT Software and Services Outsourcing on the US Economy and the IT Industry," commissioned by The Information Technology Association of America (ITAA), the leading trade association for the IT industry. According to the study, US offshoreoutsourcing of computer software and services to grow at 26% annually.
The Global Insight research team was led by chief economist Dr. Nariman Behravesh, who is recognized as one of the world's most accurate economic forecasters. Nobel Prize winning economist Dr. Lawrence R. Klein, the founder of WEFA and a Global Insight associate, made significant contributions to the Study.
The in-depth study found that global sourcing of computer oftware and services, while displacing some IT workers, actually benefits the U.S. economy and increases the number of U.S. jobs. According to Study findings, the U.S. economy has much to gain from global sourcing and an environment of free trade, open markets and robust competition.
Benefits include job creation, higher real wages, higher real GDP growth, contained inflation and expanded exports resulting in increased economic activity.
According to the study, U.S. spending for offshore outsourcing of computer software and services is expected to grow at a compound annual rate of almost 26%, increasing from approximately $10 billion in 2003 to $31 billion in 2008.
During the same period, total savings from the use of offshore resources will grow from $6.7 billion to $20.9 billion. Using offshore resources lowers costs and boosts productivity. As a result, inflation is lower, interest rates are lower, and economic activity is higher. The increased economic activity creates a wide range of new jobs, both in IT and other industries.
While there are some dislocations that affect both industries and regions, the overall economy adjusts so that offshore IT outsourcing actually creates new jobs. Over 90,000 net new jobs were created in the U.S. through 2003. The number of net new jobs is projected to grow by 317,000 in 2008. The impact on U.S. jobs does vary by industry sector, with the major beneficiaries for the next five years being construction, transportation and utilities, education and health services, wholesale trade, and financial services.
"The benefits of free trade clearly provide a boost to the U.S. economy," stated Dr. Behravesh. "Using offshore resources reduces costs, dampens inflation, lowers interest rates, increases spending and creates additional jobs. The challenge is to help displaced workers transition to other productive activities," he concluded.
The study estimates the total number of new jobs by state, by examining each state's industry employment concentration and its forecasted industrial growth. The results of the Study indicate states that are larger and more economically diverse will gain the most new jobs through sheer size such as California, Texas, Florida, New York, Illinois, Ohio, Pennsylvania and Michigan. However, the states that will lead in terms of expected growth in the number of new jobs will be Kansas, Nevada, Washington, Arizona, North Carolina, Colorado, South Carolina, Iowa and Georgia, according to the Study.
"We have long held the position that worldwide sourcing creates more jobs and higher real wages for American workers," said ITAA President Harris N. Miller. "Now we have the data that prove it. This research replaces fear with sound economic analysis, allowing for an informed approach to the global marketplace."
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