Jobs Typically Offshored
What started simply with overseas call centers, offshoring now extends to programming, troubleshooting, systems maintenance, and an assortment of other business functions. North American companies send thousands of IT jobs to countries with emerging economies such as India, China, Ireland, and Eastern Europe, and the media is quick to report these large migrations to overseas locales.
With all the recent media coverage on offshoring in the software industry, many American workers find themselves asking, “Is my job next?” Ever since the dot-com crash at the turn of the millennium, there has certainly been a decline in the IT workforce at nearly all levels of employment. The Economic Policy Institute reports that a decline of 154,000 US software jobs from 2000 to 2004 was mirrored by a rise of 150,000 export-related software workers in India. This news, coupled with the abundance of articles on software companies taking their business overseas in increasing numbers, has led many to believe that no job is safe from offshoring.
All Jobs Are Not Created Equal
While such trends have taken their toll on many American jobs, domestic software companies have by no means offshored all occupations equally. For fear of unemployment, many individuals overstate the effects that offshoring has on their sector of the IT industry when, in fact, there is little proof that offshoring is the main contributor to a loss of jobs. Conversely, massive layoffs experienced by others are largely due to offshoring.
The latter category is generally comprised of computer professionals that perform simple tasks relative to the rest of the software industry, and as a result have experienced persistent job losses since the economic boom of the late nineties. Data entry keyers are just one example of this trend. According to the Institute for International Economics, they have lost over 143,000 jobs from 1999 to 2002 alone, representing 52 percent of the total decline in employment in the software industry during that period.
Similarly, computer programmers lost over 71,000 jobs during that same span. Although programming can be difficult in comparison to other jobs in the industry, companies are able to automate or offshore an increasing number of tasks as they become routine and standardized. As a result, the level of skill and ingenuity needed to perform these tasks lowers, increasing their susceptibility to offshoring.
It is difficult for economists to determine whether this job loss is the result of the dot-com bust at the turn of the millennium, or if offshoring is also to blame. The U.S. Department of Commerce estimates that imports of services – a category that encompasses U.S. outsourcing of call centers, data entry, and other low skill jobs – hit $77 billion in 2003, up $8 billion from 2002. Domestic companies, therefore, are purchasing an increasing amount of IT services in these areas from offshore businesses. This fact, along with the sharp decline in employment for US workers in the software industry that perform simple tasks, leads most analysts to conclude that software companies are offshoring low-skill jobs at a much higher rate than others in the software industry.
Who is Safe?
What jobs are safe from offshoring? Studies find that specialists and other advanced software positions are less likely to see their jobs go overseas. ZDNet reports that the proportion of specialists in the U.S. IT workforce has increased from 38 percent in 1983 to 74 percent in 2003. In addition, high-paying IT occupations have generally expanded since 1999, the only major exception being management positions.
Least vulnerable are jobs that require face-to-face contact with customers. The design phase in any software project generally needs personal contact between the vendor and customer in order to develop a satisfactory product. As a result, some analysts predict that only coding and testing will disappear overseas. Overall, since many domestic companies rely on specialized software to do business, such jobs involving face-to-face interactions are not likely to move offshore.
Employees in occupations that are susceptible to offshoring are taking steps to avoid losing their jobs to overseas labor. The CIO Network suggests several such steps, which include:
Interestingly, many of these steps tend to move individuals toward specialist and advanced software positions, as well as those positions that require face-to-face contact with customers.
Overall, once a person's labor is simple enough to be described on a spec sheet, it matters little whether the contract is filled in India or Indiana; the only relevant issue is cost. Low skilled tasks are obvious candidates for offshoring, but as technology advances some specialist and advanced software workers may find that their jobs, too, can become routine and easily defined by a contract. Employees in these areas can only hope to constantly improve their skills and become valuable enough that their company cannot afford to contract their labor out to overseas workers.