September 13, 2005 in Business

Offshore job loss may be overstated

Dallas Morning News
 
Associated Press photo

HTMT employees discuss a work matter in Bangalore, India, where software engineers earn one-third what starting U.S. engineers make.
(Full-size photo)

WASHINGTON — From India to Mexico, software programmers, engineers, call-center workers and CPAs stand ready to take over jobs from their U.S. counterparts.

And plenty of American businesses hounded by low-cost competitors or lured by overseas savings are willing to move those jobs offshore.

Yet a batch of recent research suggests there is less hazard to the work force — and less money to be saved by employers — from moving offshore than you may think.

For example: Many global companies have decided that the optimal location for research and development is the United States.

“The infrastructure, the market size, the risk profile, access to talent — these are very rational reasons why we have such a high incidence of companies from all over the world placing their R&D facilities in the United States,” said Diana Farrell, director of the McKinsey Global Institute, the think tank of business consultants McKinsey & Company.

Texas Instruments Inc. followed a similar line of reasoning in deciding to build its most advanced semiconductor fabrication plant in Richardson, Texas, said Paula Collins, TI vice president for Washington.

“We were not going after cheap labor,” she said. “The reasons we chose to stay in the Dallas area are really tied to cutting-edge research,” both at TI’s facilities and in the university community.

In the constant churn of the U.S. labor force — where 5 percent of the 125 million jobs are lost while another 5 percent are created each year — service jobs moved overseas have so far had a minor impact, said Ton Heijmen, senior advisor on offshoring to the Conference Board.

McKinsey’s research on the global labor market found 1.5 million service-sector jobs had moved from the United States and other developed countries to the developing world by the end of 2003. That figure is expected to grow to 4.1 million by 2008, Farrell said.

Given all the public debate and anxiety about losing good-paying jobs to low-wage countries, it’s a surprisingly low figure.

“We’ve only seen the beginning of it. There’s enormous room for growth,” said Heijmen.

But both the Conference Board and McKinsey have found many companies reluctant or unprepared to take advantage of moving jobs offshore.

That’s because they know some businesses either lost money or didn’t save anything by moving offshore. A survey of 5,231 firms done last year by consultant firm Ventoro found 53 percent fell into those categories.


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