By 2004, predicts another Gartner study, more than 40 percent of companies will have already shipped some tech-related work overseas or will be testing the idea. Many of those jobs are moving to India, where costs for employee salaries can be significantly reduced. Other countries stand to benefit as well. And, while the tech industry seems to be the most widely discussed thus far, other white collar types of jobs are also at risk.
RON HIRA, A post-doctoral fellow at Columbia University’s Center for Science, Policy and Outcomes, has testified before the House of Representatives’ Committee on Small Business on this issue. NEWSWEEK’s Laura Fording asked Hira, a soon-to-be assistant professor of public policy at Rochester Institute of Technology, for his take on what’s happening:
NEWSWEEK: How rapidly is offshore outsourcing expected to grow? There has been quite a bit of press about it in recent weeks.
Ron Hira: Six months ago, I didn’t think that things were moving that fast. But I’ve been tracking some of the announcements by major U.S. technology companies and almost daily, it seems, they are talking about moving work overseas to cut costs. Forrester [Research Inc.] came out with a study that said that 3.3 million white collar jobs will go overseas by 2015. It’s hard to forecast out one year, let alone 12, so I’m a bit wary of real numbers. But I do recognize that it is real, and is gaining momentum every day.
Is cost savings driving the trend?
Cost is one thing driving it, but I think there is another aspect: businesses follow what other businesses do. So as more businesses do it, more will be sucked in to thinking it’s the right move.
What kind of jobs do you think will be most affected by it?
I know most about information technology [IT] jobs and engineering-type jobs, because that’s my specialization. The first moves overseas were call centers, where people handle customer requests or complaints. Or technical support. I know there’s been talk about doing tax returns and processing claims forms and other types of white-collar work abroad. Companies are also considering offshore outsourcing for routine kinds of things that have been done in back offices for years. They’re thinking: “Why do it in Fairfax, Va. when we can do it cheaper somewhere else?” But you can imagine that multinational [corporations] that already have a presence overseas will have occupations that move over more rapidly. My cousins in India tell me that the job market in India has never been so good–the IT market is in a frenzy right now. I’m most concerned about research and development. If you have more and more high level research and development being done abroad, what are then the ramifications here?
What does this shifting of jobs overseas mean for the U.S. economy?
We really don’t know. One of the problems is that the rhetoric on one side has been somewhat alarmist: “These shops will leave and we won’t be able to do anything about it.” It’s probably not entirely correct but there is some truth to what they say. On the other side, companies don’t really want people to know what’s going on. Policy makers seem to be at a loss at what to do. They may say that this an irreversible trend, it’s just global capitalism at work, free trade. I think it’s a bit of a red herring. This is not all beneficial to the U.S. economy, as some seem to be arguing.
How could this potentially affect workers in these jobs?
Lots of workers, in lots of occupations, will be displaced. Economists may say that these people will find other work. But the jobs they find may pay significantly lower wages. Or they may have given up trying to find an IT job. What’s dysfunctional about policy-making in the United States is that the Washington elite have been pushing the idea that we have a shortage of scientists and engineers.
What is being done to address these concerns at the federal level?
There has been legislation introduced to reform temporary visa programs to try to curb some of the abuses. Many of the companies that are very good at offshore outsourcing have actually utilized these visa programs to move work offshore more rapidly. Some companies bring workers in on these visas, train them, and then send them back to their country to replace American workers who trained them. And the American workers, in order to get their severance pay, basically have to do the training.
If more research and development and other jobs that demand highly-skilled workers go overseas, won’t it have significant long-term implications?
There’s a perception, and I think it’s a correct one, that technology has been the driver of economic growth and change, and if you are not on the cutting edge, if you don’t have a large number of people working in technology, you have to wonder about your military capabilities going forward. There’s also a lot of discussion about intellectual property and security concerns associated with sending work overseas. But companies have to decide whether it’s worth the risk and whether those countries have the right kind of intellectual property [laws] and enforcment.
Should college students steer clear of IT, computer science and engineering degrees?
Let’s hope not. But there are a lot of engineers who are not recommending these degrees for their children, or nephews or cousins or friends. The risk involved is too great–it’s better to go into a safer occupation. These are our best and brightest so they can pretty much go into any occupation they choose. But when your best and brightest are out of work, you have to start wondering what’s going on.
Have you spoken with a lot of IT workers? What are their responses?
What’s interesting about IT people and engineers is that they tend to have a libertarian streak, ideologically. They believe in meritocracy. They’ve made it through engineering school–many of the others failed–and they’ve made it on their own merit. So some view any government intervention or unions in a negative way. Then you have a number of other people who are just outraged. And then have others who say, “What do we do about this? How do we move forward?” I would say fear is another big reaction. There is a lot of insecurity out there. You go to local IEEE [Institute of Electrical and Electronics Engineers] meetings and the first topic of discussion is jobs.
What do you think the long range consequences of all this will be?
It’s really a hard call. If we can come up with some smart policy, this can be a positive on both ends. The United States does have a vested interest in seeing other countries grow and seeing other people get good jobs, but we can’t abandon people here. Whether or not we lose our prowess depends a lot on what companies and policymakers do.
