U.S. jobs exodus accelerating

May 18 2004 by Brian Amble Print This Article

The exodus of service-sector jobs from the United States is accelerating. A new report by research firm Forrester estimates that 830,000 US jobs will be moved overseas by 2005, a 40 per cent increase on the prediction it made in November 2002.

By 2015 Forrester predicts that a total of 3.4 million US-based positions - ranging from ranging from telemarketers and accountants to software engineers and chief technology officers - will have been relocated overseas.

"It's happening more quickly than we anticipated because employers are finding they can significantly reduce labour costs by sending jobs to low-wage countries, particularly India," said Forrester's vice president, Stephanie Moore.

The report says that these job losses represent an annual loss in US wages of more than $151 billion.

Forrester says that some 181,000 IT-related jobs will be moved offshore by the end of 2005, compared to 102,000 in 2003. This number will rise to 542,000 by 2015. Life sciences jobs being moved offshore will rise from 300 in 2003, to 4,000 in 2005 and 39,000 in 2015. In the "office" category, 146,000 jobs were moved offshore in 2003, a figure that is expected to climb to 410,000 in 2005 and 1.6 million by 2015.

"Specifically we see a shift into areas like back-office accounting, claims and loan processing in the banking and insurance industry as part of this next wave," said Forrester's John McCarthy.

And he added that growing publicity around offshoring - and particularly the potential cost savings involved - may have hastened the trend.

"People were reading about offshoring at their breakfast table," McCarthy said. "That made a lot of chief information officers who were unaware of the cost savings consider moving in that direction."

But McCarthy also said that 58 per cent of those US firms questioned said they did not use any overseas facilities and did not have any plans to do so, while global instability could also slow the trend.

"While no factor will put a crimp in the move offshore, Forrester can see a scenario where the combination of global tensions and more onerous legislation combine to curtail its growth," McCarthy said.

And concern about domestic legislation is widely shared. Some 85 per cent of US companies considering offshore contracts said that they are concerned that legislation or political pressure might prevent them from offshoring work, according to a study released in March by research firm DiamondCluster International.

Another issue that might derail Forrester's predictions is the potential consumer backlash against companies that offshore jobs. Two recent studies in the UK have found that one in seven Britons disliked offshoring (or at least its effect on their customer experience) so much they have changed suppliers.

Last year, Australian-owned Myers Credit Cards pulled out of its outsourcing contracts in India after a customer backlash over levels of service while some British firms such as on-line retailer Shop Direct have also pulled out of India.

But Stephanie Moore said that the accounts of companies backing out of offshore projects had been overstated. "There have been isolated pullbacks, but when you look at the ones we referenced, Dell and Lehman, neither company has left India, neither company has significantly curtailed their offshore outsourcing efforts there."

However one thing that is certain is that with US presidential elections in the autumn, offshoring is a political issue that is not going to go away Ė and as both President Bush and his opponent John Kerry know, scapegoating foreigners for the woes of the domestic economic economy will always have strong political appeal.