Job loss abroad gaining speed

`Offshoring' from U.S. cuts employers' labor tab

Outflow by 2005 put at 830,000

Noisy debate increases it, trend analysis firm says

May 18, 2004|By COX NEWS SERVICE

ORLANDO, Fla. - The "offshoring" of U.S. service jobs to low-wage countries is growing faster than previously thought, a leading research firm reported yesterday.

Forrester Research Inc., a technology trend analysis firm, estimates that 830,000 U.S. service jobs will be lost by 2005, a 41 percent increase from a projection of 588,000 jobs it made in November 2002.

"It's happening more quickly than we anticipated" because employers are finding they can significantly reduce labor costs by sending jobs to low-wage countries, particularly India, said Forrester Vice President Stephanie Moore.

In a highly competitive global marketplace, "everybody is trying to do more with less," she said. "There's a lot of pressure on budgets."

Because offshoring is growing so quickly, Forrester nudged up its estimate that U.S. companies will send 3.3 million service jobs offshore by 2015, saying the figure likely will hit 3.4 million. At that point, total U.S. wages lost because of offshoring would exceed $151 billion annually.

In part, offshoring is gaining momentum because of media coverage, Moore said. In the past year, a number of unemployed U.S. workers have staged protests and otherwise called attention to offshoring. The noisy debate is spurring employers to take a closer look at offshoring to cut costs, she said.

"There has been so much press about this in the last 12 months or so that ... it has really created a new awareness of the value of outsourcing," Moore said. "It has become a lot more mainstream."

Forrester, a Cambridge, Mass., firm that provides advice to companies planning to offshore jobs, released its study at the start of the four-day GigaWorld IT Forum, a conference for companies involved in information technology.

Even as the controversy has grown, reliable data on offshoring have remained elusive. No federal agency, such as the Bureau of Labor Statistics or Commerce Department, collects statistics on how many jobs U.S. employers are creating overseas.

While U.S. companies have been using foreign suppliers to make manufactured goods for decades, only recently have advances in telecommunications and high-speed Internet service allowed them to offshore high-tech service work. While an American computer programmer might make $60,000, his Indian counterpart might make $20,000.

So far, offshoring has been used most commonly by companies involved in computing. But it also has been growing in other sophisticated service areas, such as radiology, architecture and tax preparation.

Forrester said the offshored jobs also will include those in legal services, design, sales and management. The biggest losses will involve routine office work, such as typing and filing.

A minority of companies is responsible for most of the jobs being shifted overseas.

For the new study, Forrester surveyed 139 North American companies in April and found that 58 percent said they do not use offshore labor and have no plans to do so.

Thirty-six percent said they are preparing to begin offshoring, or at least are seriously investigating the practice.

Only 6 percent said they already are offshoring whenever possible. Those companies also plan to step up the practice.

"The bulk of the growth in jobs going offshore during the next 18 months will come from existing experimenters moving into the committed stage," the report concluded.

As the offshoring issue has gained media attention, politicians have also begun to take notice.

Many federal and state lawmakers have been pushing to prohibit or severely restrict government agencies from contracting with firms that use offshore workers. In March, the Senate overwhelmingly approved a measure to block most civilian federal agencies from using contractors working outside the United States.

At the request of Rep. Adam Smith, a Washington Democrat, the General Accounting Office is conducting a study of offshoring.

The agency had planned to release its findings this spring, but was forced to delay its report until early fall because of the difficulty of gathering data.

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