Offshoring Will Create Winners -- but Let's Not Forget 'Losers'

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Earlier this month I wrote about a UK survey that seemed to indicate that offshoring depressed entry-level IT salaries. The Association of Technology Staffing Companies found that while entry-level salaries remained flat over a five-year period, earnings for project managers saw healthy growth -- because of the increased demand for folks to manage offshore workers, contends the group's CEO. Stagnant salaries will lower the numbers of local folks pursuing IT careers, ultimately resulting in a lack of IT managers, believes the CEO.


Yet as with any study, there's always another in the pipeline that contradicts it.


Economists Runjuan Liu of the University of Alberta and Daniel Trefler of the University of Toronto, in a new research paper, opine that the benefits of offshoring to China and India outweigh the negatives. While some less-educated U.S. workers are at risk of losing jobs, such job losses are offset by the growing sales of U.S.-produced services in those two countries, notes Wall Street Journal blogger Brian Blackstone in a post about the research.


Not only that, say Liu and Trefler, but based on past trends in business, professional and technical services, more educated workers whose jobs are exposed to offshoring can expect to switch jobs less often, spend slightly less time unemployed, and earn slightly more over the next decade. They write:

... we can say with confidence that even if service trade with China and India grows at its current clip, the labor-market implications will be small.

Of course, there's always the chance that offshoring's growth will exceed the current pace. The research doesn't appear to take that into account. And what about those less educated folks, whom Liu and Trefler say will be "losers?" Earlier this year, AT&T's CEO said low high school graduation rates in parts of the U.S. were making it difficult for his company to find folks with enough education to fill customer service positions it had hoped to onshore. As I wrote:

Much of the debate over immigration reform, including the hot-button issue of whether the U.S. should award more H-1B visas, revolves around either high-end positions that require an advanced education or the kinds of menial jobs often filled by folks without a high school education (including illegal aliens). People often seem to forget that there are lots of jobs in the middle of the scale, such as the types of positions AT&T is trying to fill. Many folks don't have the inclination or the financial resources to attend college. They need to know that if they apply themselves in high school, they can still get a decent entry-level job -- albeit not one where they can expect to make six figures.