Is There a Job Shortage?


In the last two years, hundreds of articles and news segments have discussed a recent job shortage in the software industry. The majority of Americans seem to concur with these findings, having heard or personally experienced stories about IT professionals losing their jobs to offshoring and being forced to change careers or work for lower pay. But do these stories accurately reflect the current state of the software industry’s job market, or is the media exaggerating the effects of offshoring? Is there really a job shortage? While a number of workers located in America have lost their jobs to offshoring, some experts argue that not all job losses are indicative of a job shortage in the American IT sector.


True Causes of Job Loss Unclear

When considering which workers have lost their jobs since the turn of the millennium, most statistics distinguish these individuals by their occupation but few mention anything about their characteristics or origin. The Institute for International Economics caution that, if the definition of a US job is one held by an American citizen or permanent resident, then any job shortage analysis must account for oscillations in the number of temporary foreign workers. For example, the absolute level of employment in programming decreased by over 70,000 workers since the dot-com bubble burst in 2000, but figures from the Department of Homeland Security show that the number of foreign workers on temporary work permits in computer related occupations declined from 148,000 in 2000 to a mere 75,000 in 2002. This means almost 75,000 foreign computer-related professionals stopped working in the US during that period.

In addition, the Department reports that the number workers in the software industry from India declined from 103,000 to 47,000 over the course of those three years. While their precise occupation cannot be determined, these figures suggest that some of the 70,000 US-located programming jobs lost were not held by US citizens, but instead by temporary work from overseas. Theoretically, such a decrease in foreign workers could help alleviate the effects of the dot-com crash on domestic workers by opening up jobs for US citizens.

Although many job losses can be attributed to a decline in foreign workers on temporary work permits, there are still many unaccounted for. According to the McKinsey Quarterly, any job losses must be seen as part of an ongoing process of economic restructuring, a process with which the U.S. economy is well acquainted. Even when the economy is on the rise, mass layoffs are much higher than the predictions for the number of job losses due to offshoring. Any number of things – technological advances, economic recessions, consumer demand shifts, business reorganization, and public policy – can cause these layoffs, a typical form of restructuring. In fact, the Organization for Economic Cooperation and Development, a Paris-based think tank commonly referred to as the OECD, say that the flight of jobs from the United States accounts for only one percent of all layoffs in the US.


An Economy in Transition

Backlashes against offshoring are largely due to the fact that new jobs have yet to replace all those lost, and most Americans experiencing this apparent job shortage have a difficult time chalking their unemployment up to a reorganization of US businesses. Global offshoring advisors at NeoIT suggest that, in the short term, the offshoring trend is creating imbalances between jobs lost and created. Nevertheless, in the long term they predict that new jobs will fill the void left by lost IT jobs, just as manufacturing jobs were replaced in earlier periods of US economic restructuring.

Indeed, although some estimate that upwards of 200,000 IT jobs have moved abroad as of July 2003, the US is no stranger to offshoring. The OECD contends that, with the world’s most dynamic economy and reemployment rates almost twice that of any other country, America should be able to cope with this economic reorganization as it has in the past. Consequently, those that have lost their jobs due to offshoring and restructuring may have a difficult time finding opening in their old occupation but are likely to see new jobs created.

Surprising news by analysts such as Evalueserve, a company that interviewed economist and offshoring experts across the globe, do forecast a labor shortage in the near future. Statistics from the US Congressional Budget Office and US Bureau of Labor Statistics show that the US will see a domestic labor shortage of 5.6 million workers by 2010 due to an aging workforce and slow population growth. According to Evalueserve’s report, this labor shortage could cost the county’s economy over $2 trillion if companies do not address the issue soon, and offer offshoring as merely one way to ward off the looming economic crisis.

Overall, the US may indeed be suffering the effects of job shortage, but by most estimates these effects are short-term. Whereas many unemployed workers tend to attribute this job shortage to offshoring, most analysts suggest that it is instead due largely to economic restructuring and cyclical job turnover. Regardless, in the next ten years the US economy will need more – not fewer – workers. Offshoring, therefore, may prove to be America’s solution to an oncoming labor shortage as opposed to the problem behind the country’s short-term job shortage.