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Home -> Finance -> Full Story

'Impact of BPO on US jobs tough to determine'
Tuesday, April 13 2004 18:02 Hrs (IST)

Washington: The impact of outsourcing on American jobs is very difficult to determine despite the heated political debate now underway in the US, as the Government does not keep count of jobs leaving the country and the statistics available on the trend are sketchy, experts said.

Though American companies have been shifting jobs overseas for decades, the latest wave during election year has been especially scary to some because it includes well-paying white-collar jobs, not just factory workers, they said.

It is also impossible to know if all new Indian workers specifically replaced jobs in the US, suggesting that outsourcing's impact could be lower than even these numbers suggest.

Some of the workers could have been hired as part of an overseas expansion or to fill positions that never existed in the America. Illustrating with actual instances, a US daily said desperate to cut costs in the struggling Internet equipment business, executives at Infineon Technologies decided in 2003 to eliminate 40 high-paying engineering jobs at its San Jose research facility and transfer the work to India.

However, at about the same time, the German semi-conductor company started adding about 150 engineers and other white-collar workers at its operations in Cary, North Carolina, and Burlington, Vermont, catering to a different set of customers.

"Just how do you count the number of jobs that are gained or lost as companies shuffle their operations around the world?" asks the 'Wall Street Journal'.

The 'Wall Street Journal' pointed out that while Infineon workers in San Jose are feeling the pinch from outsourcing, those in Cary or Burlington are overlooked beneficiaries of insourcing, or employment created by foreign investment in the US.

The economic picture, the paper points out, is further complicated because there are clear - though hard to pinpoint - benefits in moving operations overseas, such as cheaper goods for US consumers. These benefits are easily obscured by stark examples of job loss.

Many economists estimate that roughly 1,00,000 white-collar jobs migrate overseas each year. That is a substantial number but actually small when measured against the size of the labour market and job loses that occur for other reasons.

The paper cites estimates from John McCarthy, a researcher of Forrester Research Inc in Cambridge, Massachusetts. Based on his own assumptions about the vulnerability of various job categories to outsourcing, he made his educated guess about how many jobs would be shipped offshore by 2015.

McCarthy's number - 3.3 million jobs representing $ 136 billion in wages - fed a growing media and political storm. He now says his numbers were hyped and that it "makes me a little mad".

The projected loss of jobs and income will occur over a number of years, mostly later in the decade, he said, adding to date the actual number of white-collar jobs that have moved offshore is less than 3,00,000. That equals only about 0.2 per cent of the total job market in any given year.

Another widely cited estimate produced in 2003 by International Data Corporation (IDC), a market research company in Framingham, Massachusetts, also appears to be flawed.

In 2003, an IDC analyst surveyed eight executives in technology service companies and estimated that 23 per cent of all white-collar tech jobs will be filled offshore by 2007, up from five per cent in 2004.

Michael Shirer, an IDC spokesman, admits now that the methodology in the report was "a little wobbly" and the result probably an overestimate.

"There is a great deal of partial telling of the story...how much outsourcing will accelerate in the years ahead," said the paper, is 'the great unknown,'" Jitendra Singh, a management professor at the University of Pennsylvania's Wharton School, who has studied outsourcing, said. He said charitably, "It is understandable given the political season that we are in."

The 'Journal' pointed out that even the highest estimates of job loses to outsourcing are small compared with the gross number of jobs lost in a given year.

An average of 13 million jobs were eliminated annually in the US over the past decade, said Ben Bernanke, a Federal Reserve Governor, in a recent speech. But these lost jobs, he said, are typically offset by the creation of new jobs in a labour market remarkable for its high level of churn.

The paper pointed out that the movement of manufacturing jobs overseas has been a larger phenomenon than white-collar jobs. It is estimated that up to one million manufacturing jobs have been shifted overseas since 2001 by US corporations or their suppliers.

PTI



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