Until last summer, software engineer Carl Samuelson felt lucky to have a good job when so many others in the tech industry were losing theirs. That is, until he learned that his employer, Ireland-based Riverdeep, planned to close the Redmond, Washington, office where he worked. The project Samuelson and his team of software developers were working on was being sent to a contract firm in India.
Days later, while Samuelson was still reeling from the news, his Indian replacement arrived. Samuelson was directed by company officials to perform a “knowledge transfer,” to his successor. By October 1, Samuelson, age 46 and a nine-year veteran of software development, was unemployed.
Overall, U.S. employers will move about 3.3 million white-collar service jobs and $136 billion in wages overseas in the next 15 years, according to a study by Forrester Research Inc. Leading the exodus will be the information technology (IT) industry, the Cambridge, Massachusetts-based firm says.
Forrester says major software and technology firms like Microsoft, Hewlett-Packard, Oracle, and i2, Inc. have joined the growing ranks of Fortune 1000 firms that are moving software development to facilities in India, the Philippines, and China.
The study's author, analyst John C. McCarthy, says companies are embracing offshore outsourcing because they feel they can get quality work at 50 percent of the cost they would pay for domestic labor.
According to a report released in March by the American Electronics Association, the U.S. high-technology industry lost more than 500,000 jobs in two years, reducing high-tech employment by 10 percent, from 5.7 million in January 2001 to 5.1 million in December 2002. Job losses are expected to continue at least through 2003.
Even if IT workers find jobs, they may also find that wages and benefits have dropped dramatically.
“Research shows that the 15 to 25 percent decline in wages can be traced to the effects of globalization,” says Jared Bernstein, a Washington, D.C.–based economist for the Economic Policy Institute. “This used to be true of lower wage workers, but now we see it occurring with IT [workers].”
Meanwhile, Carl Samuelson is looking for another job. It may be a tough search. Nationwide, predictions of economic recovery have been drastically wrong. In April, the Labor Department announced that 108,000 jobs were lost in March—three times as many as predicted. This follows February losses of 357,000 jobs and brings to 2.1 million the net number of jobs that have vanished since the March 2001 start of the recession. Also rising is the number of “discouraged workers,” those who have given up looking for work. There were 474,000 discouraged workers in March, up from 330,000 a year ago.