Outsourcing Helps U.S. Economy, Says Trade Group

MANHASSET, N.Y. — Global outsourcing of U.S software and IT services has benefitted the domestic economy by improving wages, encouraging investment and spending, and ultimately by increasing the number of jobs, according to a study by the Information Technology Association of America.

The ITAA study, conducted by Global Insight, an economic analysis, forecasting, and financial information company, painted a positive picture of global outsourcing of U.S. technology jobs—a stark contrast to a number of reports over the past few years which criticize global outsourcing as detrimental to the economy.

"Global sourcing not the end of U.S. IT industry—it is good for the U.S.," said Harris Miller, president of ITAA, during a conference call and webcast announcing the study’s findings Monday (Oct. 31). "It is still an issue that confuses a lot of people, leads to a lot of hyperbole."The study concluded that global outsourcing generated a net increase of U.S. jobs in 2005 of 257,042, and is expected to create a net number of 337,625 new jobs by 2010.

Global Insight chief economist Nariman Behravesh conceded that global outsourcing does result in job losses and is initially difficult on those displaced, particularly in IT. However, he added that almost three-quarters of the 111,828 IT jobs lost between March 2001 and Sept. 2003 were due to factors other than outsourcing, including the telecom and dot-com busts.

"There is a lag between the time workers get let go and the time they’re rehired," said Behravesh during the call. "In time, offshoring creates more jobs than it destroys."

Behravesh added that the U.S. economy benefits from global outsourcing because they help increase the U.S. Gross Domestic Product by $68.7 million in 2005. By 2010, he expects outsourcing to increase GDP by $147.4 million.

For corporations, Behravesh said outsourcing helps them lower costs and improves profits, which he added are often reinvested in new products and services. Consumers benefit because outsourcing helps lower software and service costs, encouraging them to spend more.

Both Behravesh and Miller called for increased emphasis on education and retraining to help workers displaced by global outsourcing, with government assistance. They also called for higher support of basic research and development and encouraged deployment of a more diverse workforce with higher numbers of female and minority workers.