June 10, 2004 4:37 PM PDT

Lost your job? Don't look overseas

A tiny fraction of workers hit by mass layoffs earlier this year lost their jobs because of "offshoring," according to research released Thursday by the U.S. Department of Labor.

The department said that in the first quarter, 4,633 nonfarm workers in the private sector lost their jobs for at least 31 days due to the shift of work outside the country. That was less than 2 percent of the 239,361 workers affected by extended mass layoffs, according to the department.

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The study will likely add fuel to the debate over sending technology jobs and other work abroad, which critics blast as threatening the nation's economic future and defenders call a healthy development. Until now, much of the debate over offshoring has been based on projections. These include an estimate from Forrester Research that 3.4 million jobs will move overseas in the next 11 years.

The Labor Department's report reflects current information, with data based in part on unemployment insurance claims. But there are limits to the new study. The statistics reflect layoffs only at companies employing at least 50 workers, where at least 50 people filed for unemployment insurance during a five-week period and the layoff lasted more than 30 days.

Questions on job loss related to the movement of work were added to the Labor Department's research program in January, amid nationwide anxiety about sending work abroad.

Among the concerns surrounding the offshore trend is that the flow of programming and other technology work overseas, combined with problems in the U.S. educational system and decreasing investment in research and development, puts the country's technical prowess in jeopardy.

But technology leaders have countered that sending work to lower-wage nations is good for the U.S. economy and that protectionist measures would result in lower economic growth and higher unemployment.


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The New Outsourcing Capital of the World ... America?
LOS ANGELES--(BUSINESS WIRE)--May 20, 2004--With the majority of software development projects heading to India, many companies are keeping software testing projects within our borders. Ensuring that software has been developed to specification is often left up to firms within the United States. Denny Tao of Outsource Testing, Inc. has seen business double in the last six months.

"Most of our clients have not seen the savings they thought they would by outsourcing to India. Other clients have been frustrated over the lack of quality, schedule delays, cultural differences, difficulty communicating between time zones, and consumer sentiment. We have been in the business of helping our clients deliver quality products for over 10 years. Recently we have seen a significant upswing in clients who would like to supplement development efforts abroad, with American-based testers. Having our testers onsite is a breath of fresh air to many of these organizations. Being able to actually see the testing taking place sets our clients' minds at ease," said Denny Tao, Vice President of Business Development for Outsource Testing, Inc.

Outsource Testing consultants are based within the United States and perform testing services at client sites or at Outsource Testing's Quality Control Lab. For more information, please visit: <a class="jive-link-external" href="http://www.OutsourceTesting.com" target="_newWindow">http://www.OutsourceTesting.com</a>.

About Outsource Testing:

Outsource Testing, Inc. has provided software and system testing services for over ten years. We have assisted some of the largest organizations in the world. By outsourcing the testing effort, clients are assured that an objective third party has done a thorough examination of the software or system under test. Outsource Testing is free from internal company politics, and has no interest other than releasing a quality product.

Outsource Testing provides its services at our Quality Control Labs in Southern California or at client locations across the globe. Outsource Testing runs automated and manual tests, executes and reports results, all with no effort on the client's part. By using Outsource Testing services, companies free up management, developers, and IT staff to focus on executing the business plan. By leveraging Outsource Testing's expertise, equipment, and software, clients not only see a significant cost-savings, but also release a better product. Outsource Testing is headquartered in Covina, Calif. For more information, please visit <a class="jive-link-external" href="http://www.OutsourceTesting.com" target="_newWindow">http://www.OutsourceTesting.com</a>.
Posted by (1 comment )
Reply Link Flag
The Outsourcing Scam
Outsourcing is not the solution, it is the problem.

When a company is experiencing massive losses, moving work into another area of the world only moves those problems to another part of the world. What, for example, is causing those losses in the first place? Instead of finding out what is causing the losses, they instead outsource the work to save on expenses, often cutting off their nose to save their face.

Salaries only account for 50% to 60% of the costs, the rest are travel expenses, communication costs, import/export fees, etc. <a class="jive-link-external" href="http://www.ovum.com/go/content/c,39608" target="_newWindow">http://www.ovum.com/go/content/c,39608</a> Many times the Outsourced work is of poor quality and costs more to fix than create. Often requiring the hiring of local consultants to fix bad programming code, or create a quality management system for the overseas office.

<a class="jive-link-external" href="http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2003/11/16/BUGTR32G6L1.DTL" target="_newWindow">http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2003/11/16/BUGTR32G6L1.DTL</a>

Ask Dell how their offshoring help desk worked:
<a class="jive-link-external" href="http://comment.cio.com/comments/14247.html" target="_newWindow">http://comment.cio.com/comments/14247.html</a>

Ask the lawyers who draft up the contracts:
<a class="jive-link-external" href="http://www.computerworld.com/managementtopics/management/itspending/story/0,10801,86746,00.html" target="_newWindow">http://www.computerworld.com/managementtopics/management/itspending/story/0,10801,86746,00.html</a>

There also are security concerns, often Offshore workers place malware and backdoors in program code, so they can get back into systems after the work is done and they are dismissed. <a class="jive-link-external" href="http://www.computerworld.com/securitytopics/security/story/0,10801,84723,00.html" target="_newWindow">http://www.computerworld.com/securitytopics/security/story/0,10801,84723,00.html</a>

<a class="jive-link-external" href="http://www.computerworld.com/careertopics/careers/story/0,10801,80935,00.html" target="_newWindow">http://www.computerworld.com/careertopics/careers/story/0,10801,80935,00.html</a>

Also consider IP-theft, often other countries do not have IP laws and offshore coders take code for one company to another one. There can be legal issues over this, very serious ones.

Consider also that the average Indian programmer makes $200USD/month and does not even own a computer at home. How then, are they able to practice and keep skills current when they cannot even afford a personal computer on such a small salary?

There is no crediable evidence that outsourcing or offshoring helps grow the US Economy. In fact, there is evidence that it ruins the economy as middle-class IT workers are let go and no longer able to find IT jobs and have to settle for lower paying jobs. Hence fewer taxes being paid, fewer things being bought, higher debts, and more bankruptcies. Tell me again how a $200USD/month programmer in India contributes to the US Economy? Our economy is consumer driven, when the consumers lose their jobs, they stop consuming as much as they used to consume.

In fact there is no real benefit to outsourcing/offshoring:
<a class="jive-link-external" href="http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2003/11/16/BUGTR32G6L1.DTL" target="_newWindow">http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2003/11/16/BUGTR32G6L1.DTL</a>

Face it, bogus reports like this one and many others are astroturf to make us believe that outsourcing and offshoring is a good thing.
Posted by Orion Blastar (590 comments )
Reply Link Flag
Misleading story
This story only looks at data about recently laid off
workers. Look at the millions who lost their jobs
and what options they have. Look at www.hp.com and
search the career section for IT jobs. Any IT jobs!
They are only hiring in India. The same can be said
for many fortune 500 companies. I had to decrease my
standard of living in order to work in this country.
I am a US citizen with an advanced education and I
can barely pay my bills. Only the "investor" class
thrives in an environment like this. The American
dream is dead!
Posted by Johnny Mnemonic (374 comments )
Reply Link Flag
Considering the current trade deficit, and the amount of manufacturing and service jobs which have been lost just this year.The labor department needs to seriously recaulculate their figures.
Posted by dohoney (3 comments )
Reply Link Flag
Total #'s?
What about the number of jobs that were NOT created here but rather overseas?It's harder to find a job nowdays because of this.
Posted by (1 comment )
Reply Link Flag
Lies, Damn Lies and Statistics
This report has to rank up there with the Waren Commission finding of a single gunman. Does anyone belive this tripe?

If only 4,000 jobs went to India, who is employing the 10's of thousands of Indian workers doing IT work for US companies?

I guess the Bush Administration thinks we will buy and crap they dish out no matter how absurd. Where is the Media calling 'BS'? Is Cnet et-al just a mouthpiece for the Administration? No Independent verification?

Same on you for not debunking this prior to posting it.

Tom Vande Stouwe
MCSD, MCAD, MCT, MCP, Unemployed
Posted by (4 comments )
Reply Link Flag
Wrong numbers once again!
Hmmm, this is just another report attempting to calm people down about what's going on. Maybe only 2% of all jobs lost got lost to outsourcing, but what about NEW jobs lost to outsourcing? Did anybody notice that our kids who spent a long time in college to get a degree have a hard time finding jobs right now? And even if they can find one they usually have to put up with a crappy salary... How will they pay back their student loans? How will they become future customers for our economy?

Do some of the major players in outsourcing ever consider who their customers are? I mean you are selling your products and services here in the US and not to India! Ever thought about that?

I also can't believe that some people really believe that we are helping India this way. We are only helping a few people who own the outsourcing companies in India to become richer and richer. Ever checked on local salaries with your outsourcing partner?

I think what we really need is an outsourcing tax to balance economy once more. Hopefully some of our politicans will wake up soon before it is too late.

Jens Straten
Project Manager
Posted by jstraten (4 comments )
Reply Link Flag
Reality is worse than the percentages being cited
When offshoring advocates report that offshoring is only 2% of IT spending, that doesn't take into account that the offshore IT people get paid so much less. I don't have exact figures, but if they are getting paid 1/5 of what US or EU workers get paid, then that converts the 2% of spending into 10% of the jobs. I know that things aren't quite so simple, but I think the basic point is valid -- you can't just compare spending. Many more jobs are being lost than we are being led to believe. The spending percentage is predicted to rise to 5% over the next few years, so that's roughly 25% of jobs -- 1 job out of 4.

Quick-fix legislation is not going to fix things long-term. Although sometimes a tourniquet is necessary first-aid to prevent bleeding to death, so not all short-term fixes are bad. Ultimately, though, we need to take a long, hard look at how we, as a people, spend our money and our time. The rest of the world claims Westerners (especially Americans) consume way too much. Maybe they are right, and we are finally getting our just deserts.
Posted by dmm (336 comments )
Reply Link Flag
Push for what the Government can regulate
As some of the comments concerning "outsourcing" suggest, the statistics related to the effects of "outsourcing" are moot.

American's should be focusing on the areas that the U.S. Government is required to enforce for its own survival, and that is the area of Income taxes and to a lesser extent fair labor standards. I believe that the major contribution to corporate profits that outsourcing exploits is an overall lower tax rate on employees' earnings. Outsourcing also side steps contributions by both the employer and the employee to Social Security.

The arguments against outsourcing will take on a new meaning when the paradigm shift occurs within Congress to see that Outsourcing is one great big tax avoidance scheme.
Posted by (1 comment )
Reply Link Flag
Lost Your Job?? Outsourcing isn't the only way jobs leave the US.
Outsourcing is only part of the problem of jobs leaving the US. Mergers and buyouts contribute greatly to this problem. I worked for a company in Santa Barbara called Advanced Computer Communications. ACC was a very successful router company that has been in business since the early '60s and was one of the sites on the first connection of the DARPANET, the forerunner to the current Internet. But in 1998, ACC allowed themselves to be bought by Ericsson, the Swedish multinational telephone equipment company, in order to round out their Internet equipment line. Within 48 months, ACC ceased to exist, as Ericsson sucked out all the products and knowledge from the company and then closed it. 90% of the employees, including me, were laid off. Only a few employees were given the option of a transfer to Dallas, Copenhagen, or Sidney. All of ACCs products and support was transfered to Australia, Sweden, and the Netherlands. This is outsourcing with a vengence. This silly report tells about only 4600 jobs lost in the first quarter of this year. How about a report that tallys how many jobs have been lost offshore for the past sixteen quarters????
Posted by macevanscb (16 comments )
Reply Link Flag
Bad statistics
Yes, if you were laid off and they hired someone abroad to do your job, you were offshored, but if they cut back a project here while expanding another one abroad, it isn't. If they lay you off now but don't offshore it until next year it isn't. If one company cuts back here, while another one expands abroad, it isn't. When one uses such a narrow definition of offshoring, it is not surprising they found so few. Actually it is surprising they found so many.
Posted by MyLord (34 comments )
Reply Link Flag
But how did the Department get their data?
The story fails to mention the methods that were used by the Labor Department to gather the data. They sent out optional surveys asking explicitly if the company made layoffs to shift jobs overseas and many did not respond.

Of those that did respond consider a scenario where the company laid off people in 2001 and 2002 as cost-cutting moves, sees their business growing again, hires primarily in India, and aims to reduce their American workforce through attrition. Most companies would not report this as "layoffs to shift jobs overseas". Does this fit the reality of most large IT companies?

Regarding the "Race" issue mentioned in the article there is a big difference between outsourcing to Australia vs. India and race is not the reason. The difference is that one country is has an equivalent standard of living to the US and the other is a third-world country with people willing to work for food. When we expose our labor force to these markets without protection we risk lowering our standard of living. It is like removing a dam that is holding water. The level will equalize and one will be much lower.

On the bright side we can hope that China and India will incease their internal demand for IT services as they become industrialized and suck up the slack in the market.
Posted by (1 comment )
Reply Link Flag
I don't believe the labor dept number, we lost 39 positions to outsourceing in Q1. It's hard for me to believe a 200-person company would take up nearly 1% of nation-wide numbers.

something's terribly wrong here.
Posted by (2 comments )
Reply Link Flag

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