High-Tech Jobs Are Going Abroad! But That's Okay

Date: Sunday, November 02, 2003 12:41 PM

JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

Robert Reich, Secretary of Labor during the Clinton era, exemplifies
the elitist attitudes that are prevalent in Washington D.C. Reich's
recent op-ed attempts to make a case that it's OK if high-tech jobs
leave our country. In his opinion, it "makes no sense for us to try to
protect or preserve high-tech jobs in America or block efforts by
American companies to outsource."

Like many that are thunderstruck by the disease known as free-trade
fever, Reich thinks that the world is without limits, and that there
will never be a shortage of jobs:

There's no necessary limit to the number of high-tech jobs
around the world because there's no finite limit to the
ingenuity of the human mind. And there's no limit to human
needs that can be satisfied.

Reich sounds like a back up singer for a Washingtonian version of the
song, "Don't Worry, Be Happy" when he predicts that all the high-tech
jobs that have been lost since the year 2000 will come back within the
next 18 months. He doesn't offer any reasons why he thinks the jobs
will come back so we are probably supposed to accept his word as a
matter of faith.

Reich contradicts himself after he says all the jobs are coming back
because he followed by saying, "in the future, some of America's
high-tech workers will be found in laboratories but many more will act
like management consultants, strategists and troubleshooters." If the
jobs are coming back, the former high-tech workers shouldn't have to
get jobs as strategists, whatever that is.

http://www.washingtonpost.com/wp-dyn/articles/A49318-2003Oct31.html

washingtonpost.com

High-Tech Jobs Are Going Abroad! But That's Okay

By Robert B. Reich

Sunday, November 2, 2003; Page B03

CAMBRIDGE, Mass.

There's good news and not-so-good news in the American workplace. The
good news is that the economy is growing and businesses are spending
once again, on high technology. The Commerce Department reported last
Thursday a sharp pickup in spending on equipment and software in the
third quarter. Not so good is the news that high-tech jobs have not
come back, at least not so far.

Jobs in America's sprawling information-technology (or IT, as it known
in the info world) sector -- including everything from software
research, design and development to computer engineering -- are down 20
percent from late 2000. Salaries are down, too. In 2000, senior
software engineers earned $130,000. The same job now pays no more than
$100,000. Meanwhile, a lot of high-tech jobs are moving offshore. Is
that a cause for concern?

When I was labor secretary, I fought to preserve U.S. jobs. So you
might well assume that I would see the number of high-tech jobs moving
offshore as a troubling trend. And yet, I do not. I'll explain why in a
moment.

But lots of people are worried about it. Indeed, those anxieties seem
to be increasing:

On Sept. 30, Congress let the cap on H-1B visas issued to foreign
high-tech workers to shrink from 195,000 to its old level of 65,000.
The ostensible reason: to make sure more high-tech jobs go to
Americans.

Bills are pending in several state legislatures barring state
government projects from using offshore high-tech workers.

High-tech workers are organizing against foreign outsourcing. One
group of them -- the Organization for the Rights of American Workers --
has demonstrated outside conferences on "strategic outsourcing" in New
York and Boston.

The fear is understandable.

More than half of all Fortune 500 companies say they're outsourcing
software development or expanding their own development centers outside
the United States. Sixty-eight percent of more than 100 IT executives
who responded to a survey last spring by CIO magazine said their
offshore contracts will increase this year. By the end of 2004, 10
percent of all information-technology jobs at American IT companies and
5 percent in non-IT companies will move offshore, according to Gartner
Co., a research and analysis firm that specializes in high-technology
trends. And by 2015, according to a study by Forrester Research in
Cambridge, an estimated 3.3 million more American white-collar jobs
will shift to low-cost countries, mostly to India.

The trend isn't surprising. American companies are under intense
pressure to reduce costs, and foreigners can do a lot of high-tech jobs
more cheaply than they can be done here. Already India has more than
half a million IT professionals. It's adding 2 million college
graduates a year, many of whom are attracted to the burgeoning IT
sector. The starting salary of a software engineer in India is around
$5,000. Experienced engineers get between $10,000 to $15,000. Top IT
professionals there might earn up to $20,000.

Meanwhile, it's become far easier to coordinate such work from
headquarters back in America. Overseas cable costs have fallen as much
as 80 percent since 1999. With digitization and high-speed data
networks, an Indian office park can seem right next door. Matthew
Slaughter, associate professor of business administration at Dartmouth
College, says information-technology work "will move faster [than
manufacturing] because it's easier to ship work across phone lines and
put consultants on airplanes than it is to ship bulky raw materials
across borders and build factories and deal with tariffs and
transportation."

With such ease of communicating, the squeeze on H1-B visas will do
little to keep IT jobs out of the hands of non-Americans. "It doesn't
make a difference for firms whose business model has people largely
working offshore," Moksha Technologies Chairman Pawan Kumar told the
Press Trust of India. "It . . . will make firms drive business where
the technology workers are." Guatam Sinha, head of the Indian
human-resource firm TVA Infotech, agrees. "In fact, lots of techies are
coming back to India." India exported $9.6 billion worth of software
last year. Such exports are expected to grow 26 percent this fiscal
year.

So why don't I believe the outsourcing of high-tech work is something
to lose sleep over?

First, the number of high-tech jobs outsourced abroad still accounts
for a tiny proportion of America's 10-million-strong IT workforce. When
the U.S. economy fully bounces back from recession (as it almost surely
will within the next 18 months), a large portion of high-tech jobs that
were lost after 2000 will come back in some form.

Second, even as the number of outsourced jobs increases, the overall
percent of high-tech jobs going abroad is likely to remain relatively
small. That's because outsourcing increases the possibilities of loss
or theft of intellectual property, as well as sabotage, cyberterrorism,
abuse by hackers, and organized crime. Granted, not much of this has
happened yet. But as more IT is shipped abroad, the risks escalate.
Smart companies will continue to keep their core IT functions in-house,
and at home.

Outsourcing also poses quality-control problems. The more complex the
job order and specs, the more difficult it is to get it exactly right
over large distances with subcontractors from a different culture. In a
Gartner survey of 900 big U.S. companies that outsource IT work
offshore, a majority complained of difficulty in communicating and
meeting deadlines. So it's unlikely that very complex engineering and
design can be done more efficiently abroad.

As smart U.S. companies outsource their more standard high-tech work,
they're simultaneously shifting their in-house IT employees to more
innovative, higher value-added functions, such as invention, creation,
integration, key R&D and basic architecture. These core creative
activities are at the heart of these companies' competitive futures.
They know they have to nourish them.

The third and most basic reason why high-tech work won't shift abroad
is that high technology isn't a sector like manufacturing or an
industry like telecommunications. High-tech work entails the process of
innovating. It's about discovering and solving problems. There's no
necessary limit to the number of high-tech jobs around the world
because there's no finite limit to the ingenuity of the human mind. And
there's no limit to human needs that can be satisfied.

Hence, even as the supply of workers around the world capable of
high-tech innovation increases, the demand for innovative people is
increasing at an even faster pace. Recessions temporarily slow such
demand, of course, but the long-term trend is toward greater rewards to
people who are at or near the frontiers of information technology -- as
well as biotechnology, nanotechnology and new-materials technologies.
Bigger pay packages are also in store for the professionals (lawyers,
bankers, venture capitalists, advertisers, marketers and managers) who
cluster around high-tech workers and who support innovative
enterprises.

In the future, some of America's high-tech workers will be found in
laboratories but many more will act like management consultants,
strategists and troubleshooters. They'll have intimate understandings
of particular businesses so they can devise new solutions that meet
those businesses' needs. They'll help decide which high-tech work can
most efficiently be outsourced, and they'll coordinate work that goes
offshore with work done in-house.

Don't get me wrong. None of this is an argument for complacency. It's
crucial that America continues to be the world's leader in innovation.
Our universities are the best in the world, but they can't remain that
way when so many are starved for cash. Federal and state support for
higher education must keep up with rising demand for people who are
creative and adaptive.

Federal government investments in basic research and development are
also vital. We need to guard against what is already a drift away from
basic research toward applied research and development -- that is, from
the creation of new knowledge that can be put to many different uses
versus R&D that's related to the commercialization of specific
products, especially military-related aerospace, telecommunications and
weapons.

And just as with laid-off manufacturing workers, we need to ensure that
high-tech workers are adaptive and flexible. They should be able to
move quickly and get the retraining they need. Pensions and health
insurance should be more portable across jobs. High-tech workers who
want to polish their skills or gain new ones should have access to tax
credits that make it easy for them to go back to college for a time.

But it makes no sense for us to try to protect or preserve high-tech
jobs in America or block efforts by American companies to outsource.
Our economic future is wedded to technological change, and most of the
jobs of the future are still ours to invent.

Author's e-mail: reich@brandeis.edu

Robert Reich is Hexter Professor of Social and Economic Policy at
Brandeis University. He was secretary of labor from 1993 to 1997.

) 2003 The Washington Post Company

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