Offshoring US Programmer Jobs

Offshoring is not a new threat to American jobs. Typically, manufacturing and call center jobs were being shipped overseas.  However, skilled jobs in high-paying fields such as accounting and computer programming have been moving offshore.  These jobs used to seem secure compared to low-skill jobs.  As the number of jobs being offshored continues to rise, should Americans be concerned? 

 One major reason why companies offshore jobs is because it lowers production costs.  Land, resources, and labor costs can all be decreased by offshoring.  There is a significant gap between the wages of computer programmers in the United States versus other countries (see Table 1).  Additionally, companies can save money on costs such as insurance and other benefits.  

Table 1 – Computer Programmer Wages Around the World
Country	Average Yearly Computer Programmer Wage
United States	$60,000 - $80,000
Israel	$15,000 – $38,000
Ireland	$23,000 - $34,000
Canada	$28,174
India	$5,880 - $11,000
China	$8,952
Source: Garner, http://www.kc.frb.org/publicat/econrev/PDF/3Q04Garn.pdf

The recent offshoring of computer programming jobs shows that some developing-country workers are gradually acquiring the human capital needed to be competitive in tasks requiring higher levels of skill and education. The number of highly educated workers has expanded in India and other developing countries, increasing the skills available for many IT tasks, such as routine programming and back-office operations. 

As other countries have started to deregulate some industries and liberalize their restrictions on international services trade, developing countries have adopted new technologies at a faster rate. As a result, telecommunications and transportation costs have tended to fall. Such factors have made some foreign countries much more attractive as a potential location for offshoring by U.S. companies.

Business process jobs that are being offshored are mostly white-collar, information-based jobs, such as billing and accounting, computer programming, and customer service jobs.  The reemployment prospects of recently displaced IT workers may be relatively good compared with displaced manufacturing workers, because they tend to be younger and better educated. Reemployment may still require costly job search and long-term earnings losses for some computer programmers whose specific skills are no longer needed domestically.  However, these individuals often possess more general computer skills that may improve their job prospects.

Some observers have also linked service-sector offshoring to U.S. immigration policy. One concern is that temporary foreign workers in the IT industry acquired skills and business contacts during their U.S. stay that facilitated offshoring when those workers returned to their home countries. When computer programmers and other technology workers were in short supply in the late 1990s, U.S. firms often temporarily hired skilled workers with H-1B visas. Increased temporary immigration in the late 1990s may have held down the wages of some skilled U.S. workers.

As offshoring continues to rise, policymakers should likely reevaluate current public policy surrounding the issues associated with it. 

Source:  http://www.kc.frb.org/publicat/econrev/PDF/3Q04Garn.pdf