Nariman Behravesh, Chief Economist, The Global Insight

The Information Technology Association of America (ITAA), the leading trade association for the IT industry, argued on March 30 that outsourcing of American jobs would increase but that it is ultimately beneficial to the American workers and the economy. In its latest

report entitled ‘The Impact of Offshore IT Software and Services Outsourcing on the U.S. Economy and the IT Industry,’ the organization argues that the focus of policymakers and the country should be to minimize the short-term effects on American workers displaced by the outsourcing.

The study which claims to have new information, says it can “conclusively” demonstrate that worldwide sourcing of computer software and services increases the number of U.S. jobs, improves real wages for American workers, and by pushing the U.S. economy to perform at a higher level, and has many other economic benefits.

Global Insight, an economic analysis, forecasting and financial information company, was commissioned by ITAA to conduct the study. The Global Insight research team was led by Global Insight Chief Economist Dr. Nariman Behravesh, with significant contributions from Nobel Prize winning economist Dr. Lawrence R. Klein, the founder of Wharton Econometric Forecasting Associates (WEFA), Inc. and a Global Insight associate.

“We have long held the position that global sourcing creates more jobs and higher real wages for American workers,” said ITAA President Harris N. Miller. “Now we have the data that prove it.” However, Miller said that while worldwide sourcing is expected to increase jobs and wages, much needs to be done to address the challenges of those workers displaced by this economic shift. The report offers recommendations on this front.

According to the study, between 2000 and 2003 job loss to offshore outsourcing-either domestic jobs eliminated or jobs created overseas instead of in the U.S.-totaled 104,000, or about 35,000 per year. The vast majority of job losses were created by other factors, such as the overall slowdown in the US and global economies and the bursting of the telcom and dotcom bubbles.

Some of the major findings the ITAA outlines from the study are:

* Worldwide sourcing of IT services and software increases total employment in the United States. This activity generated an additional 90,000 U.S. jobs in 2003; by 2008, the net new jobs will total 317,000;

* In the software and services area, the economy will create 516,000 jobs over the next five years in an environment with global sourcing but only 490,000 without it. Of these 516,000 new jobs, 272,000 will go offshore and 244,000 will remain onshore. Thus the U.S. IT workforce will continue to grow.

* Global sourcing actually adds to the take-home pay of average U.S. workers. With inflation kept low and productivity high, worldwide sourcing will increase real wages in the U.S. by 0.13 percent in 2003 climbing to 0.44 percent in 2008;

* The cost savings and use of offshore resources lower inflation, increase productivity, and lower interest rates. This boosts spending and increases economic activity. For immediate use - this report released today.

The ITAA/Global Insight study says it looks at extensive and comprehensive data and gave specific consideration to worldwide sourcing as it affects industrial productivity, employment, and trade. The results are broken down by industry and by state, so that elected officials can understand the positive benefits for their own constituents. The work is based on a first hand survey of 1000 businesses and econometric modeling using government and private data sources.