Economist: Offshore IT Outsourcing Should Boost U.S. Economy

Politicians and labor leaders looking to block the export of IT jobs to low-wage countries such as India are "the last surviving members of the flat earth society," says the chief economist of a Big Five consulting firm that offers offshore outsourcing services.

In a new position paper that's drawing fire from labor activists, Deloitte Consulting's Carl Steidtmann argues that U.S. companies that ship IT work to India and other emerging countries will be more competitive, grow faster, and have more money to invest in research and development. All of this, Steidtmann says, will ultimately lead to more, higher-paying jobs in the United States. "Restrictive employment laws in Europe go a long way towards explaining why Europe consistently runs a higher rate of unemployment when contrasted with the U.S. or Britain," Steidtmann says.

Steidtmann also maintains that because, historically, work that has been exported has typically been replaced by higher-level economic activity in another sector, the same will hold true for IT. "How much better off would the U.S. be today if we had saved all those farm jobs a century ago?," he asks. "Just imagine what the economy would look like today if 70% of all American workers were still tilling the soil."

Labor advocates say it's ludicrous to liken IT jobs to agricultural work. "We're talking about exporting what is the cornerstone of the new economy--IT talent," says Marcus Courtney, the top organizer at the Washington Alliance of Technology Workers, an IT labor advocacy group that's affiliated with the Communications Workers of America. Courtney said his "blood boiled" when he saw the report.

In an interview, Steidtmann concedes that he doesn't know what "the next big thing" is that will replace IT jobs. "It's very difficult to predict how technology will develop," he says. He also admits that offshore outsourcing will cause "a painful transition" for U.S.-based IT workers who lose their jobs to overseas workers.

But Steidtmann further argues that legislative constraints on outsourcing could lead to protectionism that will do more harm than good to the U.S. economy. "The more the U.S. does to limit the importation of services, the more difficult if will become to export them, which in turn will destroy jobs," says Steidtmann, noting that the country runs a large services surplus with the rest of the world. Deloitte operates an offshore services center in Mumbai, India.