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How Big a Problem is the Offshoring of U.S. Engineering Jobs, and What Can Be Done about It?

A Q&A session with John Steadman,
President, Institute of Electrical and Electronic Engineers-USA

Q: Are some U.S. IEEE members worried about the offshoring process, and how can it be described?

A: IEEE-USA recently approved a position statement on offshore outsourcing, or offshoring, in which we made six major recommendations. Included among these were establishing new U.S. workforce assistance programs to help displaced high-tech workers regain productive employment and ensure that employed workers can acquire the knowledge and skills they need to remain competitive. Many of those displaced workers are our members, who are concerned about the trend to offshore high-tech jobs, particularly in light of historically high levels of high-tech unemployment. For example, the average unemployment rate for U.S. electrical and electronics engineers was a record 6.2 percent in 2003. For computer scientists and systems analysts, this figure was a record 5.2 percent.

The U.S. has lost an estimated three million manufacturing jobs over the last decade. The American Electronics Association reported that U.S. high-tech firms lost 540,000 jobs in 2003 and would lose another 234,000 in 2004. In its Digital Economy 2003 report, the Department of Commerce reported that the number of IT workers employed in all industries has declined by eight percent since 2000. Although initially concentrated in the manufacturing sector and low-skilled jobs, the Commerce Department reports “recent job losses have been widespread across almost all IT goods-and-services-producing industries and across all IT skill levels.”

Some of those jobs will return with a stronger economy, but the great majority are probably gone for good. Offshoring will further compound that shrinkage. Forrester Research projects as many as 3.3 million white-collar jobs of all kinds and over $136 billion in wages will be offshored from the U.S. by 2015. Many of those jobs will be engineers, computer scientists, and other IT professionals.

Q: Why are U.S. companies offshoring so many jobs?

A: Offshoring is being driven by several factors, including the desire of corporations to establish their business presence in potentially lucrative foreign markets and to take advantage of lower costs of production and skilled labor in those markets. Many U.S. companies that have offshored work have brought it back home because of poor work quality, the difficulty in not dealing with someone face-to-face, personal communication breakdowns, and cultural differences.

A recent article in Business Week online told the story of a Boston startup company, eMarket, which was going to pay $40,000 a year for an Indian programmer. The programmer, however, was only going to be paid $15,000 to $20,000, with the rest going to an intermediary outsourcing agency. When the company got 90 resumes, many from highly qualified applicants, for four openings at $45,000 a year, it decided it was worth the extra $5,000 to have people on site than send the jobs overseas. This points to another problem with offshoring: the compression of U.S. salaries. While $45,000 is better than having no job at all, a U.S. programmer can reasonably expect to be paid at least $60,000 a year.

The downward pressure on job opportunities, wages, and working conditions that will occur as more and more scientific and engineering jobs are shifted to lower-cost offshore locations may discourage America's best and brightest young people from pursuing careers in science and engineering.

Q: What do you think would have to be done to limit the problem in the United States?

A: The problem facing the United States is not how to stop offshoring, but how to ensure that the nation remains a technology leader in the face of strong international competition, which is being fueled by the offshoring of American technology and intellectual property. To do that, the U.S. government needs to have an innovative strategy that makes it advantageous for industry to create and retain high-wage, high-value-added manufacturing and service-sector jobs here in the U.S. Among the many things that need to be done are strengthening investments in research and development and increasing support for kindergarten through high school science and math education. Something also needs to be done to help those displaced by these economic changes, especially the high-tech professionals and other workers whose jobs are offshored and who currently receive little or no government assistance.

Q: Will the United States benefit from offshoring?

A: Whether the U.S. as a whole will benefit from increased offshoring will depend on how it is done. There will clearly be winners and losers. Some of the potential adverse consequences include loss of employment opportunities and income for technical professionals; loss of payroll and income taxes at the national, state, and local levels; an increasing imbalance in trade; transfer of investment capital overseas; and increasing reliance on foreign sources of consumer products and defense hardware and capabilities. Whether the potential cost savings to U.S. companies and consumers can overcome these harmful effects remains to be seen.

Of particular concern: the offshoring of high-wage, high-value-added engineering and technical jobs could threaten U.S. leadership in technological innovation, which has implications for our national security as well as our economic competitiveness.

Q: Do you expect federal legislation from the U.S. Congress during this electoral year and what could be the main issues addressed by such a law?

A: Although some offshoring-related bills have been introduced into Congress, we really don't know what will happen with such bills, or if Congress will even debate the issue this year. However, we would like for Congress to consider the needs of their engineering constituents. Industry lobbyists are aggressively attacking as “protectionist” and “anti-free trade” every federal or state proposal to limit what they like to call “global sourcing.” At the same time, budget pressures will make it very difficult for Congress to provide the kind of investments and incentives needed to fuel the growth of the domestic economy and jumpstart the creation of high-wage jobs, especially for skilled workers.

John Steadman is also dean of the College of Engineering at the University of South Alabama, a licensed professional engineer, and a Ph.D. This interview was conducted with Les Echos , a French newspaper.

For more information, visit www.ieeeusa.org/forum/POSITIONS/offshoring.html

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