Offshoring An Employment Booster

New Delhi: | Updated: Mar 26 2004, 05:30am hrs
Offshoring is not a threat to hi-tech employment, rather it will create new jobs and boost economic growth, according to the US based Cato Institute.

The wild claims that offshoring will gut employment in the IT sector are totally at odds with reality, Centre for Trade Policy Studies, part of Cato Institute, specialising in free trade said in a briefing paper.

Although offshoring does eliminate jobs, it also yields important benefits to the extent that companies could reduce costs by shifting certain operations overseas and increase productivity, it said.

The process of competition ultimately passes the resulting cost savings on to consumers which then can spur demand for other goods and services. In particular, offshoring facilitates the diffusion of it throughout the US economy. According to Catherine Mann at the Institute for International Economics, offshoring of computer-related manufacturing accounted for 10-30 per cent drop in hardware prices, the paper said.

The resulting increase in productivity encouraged the rapid spread of computer use and thereby added some 230 billion dollar in cumulative additional GDP between 1995 and 2002, it pointed out offshoring offers the potential to take similar bite out of the IT software and service prices.

The IT job loss projected by Forrester amount to fewer than 32,000 per year, a relatively modest attrition in the context of total IT-related employment of nearly six million, it said.

These job losses meanwhile will be offset by new IT-related jobs as computer and mathematical occupations continue to boom.

The doomsayers are thus confusing a cyclical downturn with a permanent trend, it added.

Despite the trend towards offshoring, IT-related employment is expected to see a healthy increase in the years to come.