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April 2, 2004

Study: Offshore outsourcing will create 18,000 jobs in New York by 2008

New York State can expect more than 18,000 new jobs by 2008 as a result of information- technology job growth outside the United States, according to a new study commissioned by the Information Technology Association of America (ITAA).

“Global sourcing creates more jobs and higher real wages for American workers,” said ITAA President Harris N. Miller. “Far from being an economic tsunami that washes away domestic IT employment as some believe, global sourcing helps companies become more productive and competitive.”

Over the next four years an estimated 18,239 new net jobs will be created as a result of IT outsourcing in New York alone, the study said. The nation as a whole can expect 317,000 new net jobs by 2008, it found.

The study also found that only 2.8 percent of U.S. IT jobs loses over the past four years could be attributed to overseas outsourcing. Several other factors inside the U.S. were responsible for most IT job losses, including the end of the "dot-com" boom in 2000, and the 2001 recession.

“The benefits of global sourcing contribute significantly to real Gross Domestic Product in the United States, adding $33.6 billion in 2003,” the study said. “By 2008, real GDP is expected to be $124.2 billion higher than it would be in an environment in which offshore IT software and services outsourcing does not occur.”

Offshore outsourcing does displace some workers, the study noted. However, new economic activity spurred by offshore outsourcing created nearly 100,000 jobs nationwide last year, and the total number of new jobs created by outsourcing will be twice the number of jobs lost, the study said.

“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,” the study said. “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.”

In addition to a net increase in new jobs, outsourcing will also boost the average real wage of U.S. workers by making businesses more productive, according to the study. “With lower inflation and higher productivity, real wages were 0.13% higher in 2003 and are expected to be 0.44% higher in 2008.”

The study also found that demand for U.S. exports will grow by more than $6 billion by 2008 due to the lower prices of U.S.-produced goods and higher incomes in outsourcing destinations.

“The benefits of free trade—lower costs, higher labor productivity, and more efficient production—induce businesses to leverage the offshore resources,” the study said. “The use of offshore resources lowers costs, frees domestic resources to pursue other productive ends, yields high quality software and services, and increases labor productivity among end-users. These benefits flow through to lower prices, lower interest rates, and higher spending throughout the economy.”

The study also warned against legislation that would restrict offshore outsourcing. Lawmakers in New York have proposed legislation that would punish New York companies that move even one job out of state.

The study offered recommendations to help workers displaced by outsourcing, including retraining workers and encouraging other countries to remove trade barriers.

“To retain preeminence in global markets and respond to the growing needs for IT professionals in the United States, businesses, government, schools, and workers must recognize the competitive realities of global markets and respond to the challenges by improving competitive performance,” the study said.

For more information on the study, visit www.itaa.org