Offshoring of IT Jobs Only Beginning

By Sharon Gaudin

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About 30 years ago, Jim Pace was a hard-working steam fitter at General Electric. When G.E. started to ship work overseas, he was laid off, becoming just one of the many manufacturing workers whose job was sent to foreign shores.

Unemployed and looking for a new start, friends and peers told Pace to get into the high-tech field. ''Pick yourself up. Go back to school. Computers are the wave of the future.'' So that's exactly what he did. Pace went back to school and in 1979 he got his first job in IT. Over the next 23 to 24 years, he would work as a programmer, a system designer and a team leader.

But a year and a half ago, Pace's future started to look an awful lot like his past.

Like countless others in the IT field, Pace -- once again -- saw his work being shipped overseas. And once again he was unemployed. Pace had the misfortune to be caught up in two giant offshoring waves -- the first which struck manufacturing, rendering it a nearly obsolete industry in the United States, and the second which is striking the high-tech industry today.

''I can't go back to manufacturing. I can't find a job in IT,'' says Pace, who today is selling cars for a third of the salary he made two years ago. ''It's rough. It's really rough. I've tried for an IT job... but everybody is vying for the same job so they have a lot to choose from. You're lucky if you even get an interview anymore.''

Pace is just one of the many faces caught up in the offshoring of U.S. high-tech jobs. At first, only base-level jobs, like call centers and programming, were being shipped to countries like India, China and Russia. Now mid-level jobs seem to be finding the same path out of the country. Only top-tier jobs, like CIOs and team and administrative leaders, seem to be swimming against the current.

And it's not a current that is showing any signs of slowing.

Ominous Forecasts

Six years from now, one quarter of traditional U.S. IT jobs will be done offshore, according to new predictions from researchers at Gartner, Inc., one of the top industry analyst firms. Today, an estimated 5 percent or fewer of U.S. IT jobs have been offshored. By 2010, 25 percent will be situated in emerging countries.

Similarly, industry analyst giant IDC is predicting that by 2007 nearly one out of every four (23 percent) IT jobs in America will have been moved offshore and performed by non-US personnel. This year that figure is 5 percent.

Gartner's study also shows that not all of those offshore jobs will have laid-off American counterparts. Some of those jobs in places like the Philippines and Malaysia will be created by U.S. companies opening IT operations in those countries, bypassing the middle man of outsourcing companies and, at times, avoiding layoffs here by starting brand new IT programs there.

That's not a lot of solace for Pace, and the thousands, if not hundreds of thousands, of IT workers like him, who can't find an IT job here in the U.S.

Four or five years ago, during the golden age of the IT industry, there were more high-tech jobs than skilled American workers could possibly fill. Using the H-1B visa system, companies were bringing in hundreds of thousands of foreign workers, and were just beginning to ship a few jobs offshore -- a trickle of employment. But few squawked. After all, there were more than enough jobs to go around.

But that all changed when the dot-com bubble burst, starting a major slide in the tech industry.

To save money, companies began to accelerate their offshoring. A U.S. programmer might earn $45,000 while a foreign worker might only take home $5,000 in the same year. The savings, especially during a down-turn in the economy, was too much for the industry to resist.

That means today, Americans trained and experienced in high-tech are looking for jobs while H-1B visa workers are still brought into the country and low- to mid-level jobs are still being shipped out.

''The government doesn't even have the numbers. They don't know how many high-tech jobs have been shipped overseas,'' says John Bauman, president and co-founder of The Organization for the Rights of American Workers (TORAW). ''They didn't track them because there were no special benefits for IT people getting laid off.''Bauman says people laid off in the hard-hit manufacturing industry received federal coverage -- two years of unemployment benefits, 75 percent of medical benefits and retraining assistance. None of that has been available to high-tech workers.

Bauman says his organization, which has 250 members in 27 states, supports efforts to get these benefits for high-tech workers suffering the local effects of offshoring.

''I know people in our organization who have been unemployed for years,'' adds Bauman, who was out of work for 20 months before finding a job as a full-time consultant. ''We've heard that more IT jobs are opening up. Some of our members have found new employment. But nobody addresses the fact that you might be earning 40 percent to 60 percent less than you used to. It's getting to the point that people are desperate. I know people who are about to lose their homes, or they've declared bankruptcy. It's terrible.''

Pace agrees, adding that even though he is working today as a car salesman, his life is drastically different.

''I went from making $120,000 down to $40,000,'' says Pace. ''It's a hardship. Luckily, my wife is working. We've had to cut back on a lot of different things. I pick up part-time work here and there, working on motorcycles, and I'm learning mortgage originating... I had close to $100,000 in a 401K and we went through that.''

An Answer in Legislation?

Bauman and Pace are laying a good deal of their hopes on some pending legislation. And there's quite a few bills regarding offshoring out there.

Looking to discourage U.S. companies from moving jobs offshore, a Vermont congressman has introduced a bill that would hit companies in the wallet for taking away American jobs.

The Defending American Jobs Act of 2004 would bar companies from receiving federal grants, loans and loan guarantees if they layoff U.S. workers and hire foreign workers in their place. Put into play this past spring, the bill, sponsored by Rep. Bernie Sanders (I-Vt.), is now before the House Committee on Government Reform.

A similar bill was introduced this past winter by Senate Minority Leader Tom Daschle (D-S.D.). Under this bill, companies that plan to move IT jobs overseas may be required to disclose layoff plans three months in advance.

Daschle reportedly was responding to a Bush administration argument defending a free-trade approach to the offshoring of service jobs, including IT jobs.

Sen. Chris Dodd (D-Conn.) recently proposed legislation that would ban offshore outsourcing of federal contract work unless specific conditions are met. For example, if the product or service was only available overseas, then offshore work would be allowed.

''I think the only recourse we have right now is legislation,'' says Bauman. ''But that's only going to slow it down. It's not going to eliminate it.''

Pace agrees that the offshoring trend has too much momentum to actual draw it to a halt. The best they can hope for is to slow it down, giving workers time to prepare and giving the government time to step in and help displaced workers.

''To slow it down, we need to have some kind of protection,'' says Pace, who is president of Rescue American Jobs, a group with about 1,500 members. ''They should raise taxes on these companies. Make it more advantageous to stay in this country... We could slow this down if we cut out all the tax breaks we're giving them. Can you imagine getting a tax break to ship a job to China?''