Does Offshoring Depress Entry-level IT Salaries?

Ann All

Back in March, I wrote about the contention of several experts, including Duke University's Vivek Wadhwa and Ron Hira of the Economic Policy Institute, that the tech industry's use of immigrant labor was keeping IT salaries relatively flat despite surging demand for such positions.


Some folks, including the Urban Institute's Hal Salzman, also fault companies' unrealistic expectations for their workers. For example, Salzman noted one manager's desire for a mid-level Java programmer with a decade of experience, despite the fact that Java hasn't been around much longer than that.


Plenty of folks do envision a shortage of tech talent, either now or in the near future. In my late 2006 conversation with Christine Bullen, senior lecturer and director of the IT Outsourcing Program at the Stevens School of Technology Management, she predicted a fairly severe shortage in 2009-11 unless U.S. enrollments in computer science and IT programs begin increasing.


Bullen attributed U.S. students' relative lack of interest in IT to widespread pessimism about IT jobs following the dot-com bust and negative hype about offshoring reducing the demand for U.S IT pros. She said:

Together these issues communicated to young people that there were no career opportunities in IT. However, these knee-jerk reactions were na�ve, as they were not based on really understanding the needs of the marketplace.

But maybe there is some truth to the belief that offshoring depresses the demand for local, entry-level IT employees. That is the contention of Anne Swain, CEO of the UK's Association of Technology Staffing Companies, which recently found that earnings for entry-level IT jobs in the UK have dropped in real terms over the past five years.


According to a ComputerWeekly.com story about the research, salaries for first-line support staff have remained flat at around 18,000 (U.S. $35,500). During the same period, project managers saw a salary increase from 37,500 (U.S. $74,000) to 45,000 (U.S. $88,900). Swain attributes this growth in managerial salaries to the increasing demand for professionals to manage offshore workers.


Swain believes stagnant entry-level earnings are discouraging UK students from pursuing IT careers. She says:

The outsourcing of entry-level IT jobs has meant fewer graduate-level jobs are available in the UK. It is like removing the bottom rung from the career ladder.

This will exacerbate a shortage in the already-tight numbers of experienced IT managers, says Swain, who wonders:

"... how do you get experience if entry-level jobs are being sent offshore?"

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Add Comment      Leave a comment on this blog post
Jun 16, 2008 6:20 PM Robert Jones Robert Jones  says:
Wow, yes it is cheaper to do off site IT work, especially for large software companies. Windward Software out of Penticton is going off shore to the Philipenes for their support group. They can hire 10 locals for one Canadian. The problem with this is we are shooting ourselves in the foot, giving our "labour" away to a foreign country. Yes it is cheaper, but in the long run, could cost us dearly. Reply
Jun 17, 2008 5:40 PM Peter Burghardt Peter Burghardt  says:
The trend of continued off shoring of critical skills and services is not a well considered economic model. It only follows that in our free market local supply will diminish as local demand diminishes. In addition with the continued growth in the trade deficit the long term impact seems certain to further diminish the US position in the world market.There needs to be more focus on innovation to improve our competitive position, not just finding cheaper labor to perform the same old processes. Reply

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