Dr. Dobb's Journal July, 2005
The good news is that the U.S. lost only 25,000 hi-tech jobs in 2004. The bad news is that, you guessed it, the U.S. lost 25,000 tech jobs last year. In its report "Cyberstates 2005: A State-by-State Overview of the High-Technology Industry," the American Electronics Association saw the 25,000 lost jobs as a good thing, compared to the 333,000 tech jobs that disappeared in 2003 and 612,000 in 2002.
Okay, statistically speaking, the AEA is probably right. But the employed AEA statisticians might want to check with some of the unemployed engineers about how good this job loss thing is. In general, the AEA attributed the slower job-loss rate to a greater demand for software service and computer technical service positions, not to mention growth in computer-related jobs in the defense industry. The biggest job losses were in the computers and peripheral equipment sector—down 11,900 jobs—and electronic components—down 5500. On the upside, both the software services industry, which includes software developers, and the engineering and tech-services industry added more than 30,000 jobs each in 2004. Overall, U.S. high-tech employment totaled 5.56 million jobs in 2004 (http://www.aeanet.org/Publications/idjj_cyberstates2005_overview.asp).
Still, I can't help but wonder where all those jobs went. The easy bugaboo is, of course, offshore outsourcing. Au contraire, mon frère, says the AEA. In its 2004 report "Offshore Outsourcing in an Increasingly Competitive and Rapidly Changing World: A High-Tech Perspective," the AEA attributed U.S. job losses to downturns in the domestic and international economy, the bursting of the technology and telecommunications bubbles, and increased productivity.
Apparently, I'm not alone in wondering where all those jobs went. Upon seeing so many of his friends unemployed or working as temps, independent film-maker Greg Spotts began scratching his head over the same question. To find the answer, Spotts quit his job and hit the road for six months, investigating the loss of American jobs to international competition by visiting 19 communities across America. In the process, he talked to everyone from unemployed garment workers to out-of-work software developers and engineers. The result was his self-funded documentary film entitled American Jobs (http://www.americanjobsfilm.com/).
When it came to software development, which has been particularly hard hit by offshore outsourcing, what Spotts discovered was an egregious and blatant misuse of the rules governing L-1B visas. Because they are designed to let transnational companies move existing employees around, L-1Bs don't have H-1B-like restrictions regarding the number of visas issued or the salaries paid. Consequently, Spotts found software professionals like Myra Bronstein, who lost her job not because of incompetence, but because she was too expensive. Moreover, Bronstein's employers (Watchmark) threatened to deny unemployment benefits if she and her soon-to-be out-of-work colleagues balked at training replacements brought in from offshore to sit at their desks, answer their phones, and use their computers.
Just as maddening was the U.S. airline industry that, after 9/11, canceled orders for U.S. manufactured Boeing airplanes, took a $5 billion taxpayer-funded bailout, and then ordered new planes from nonU.S. manufacturers. For its part, according to Spotts, Boeing subsequently laid off half of its U.S. workforce, then proceeded to hire 800 or so offshore engineers.
But the short-term move to outsourcing may end up being a long-term headache for companies taking the offshore plunge. According to a recent Deloitte Consulting survey of 25 large organizations, 70 percent of the survey participants had significant negative experiences with outsourcing projects. Consequently, 25 percent of the companies ended up bringing functions back in-house after figuring out that projects ran smoother and at lower costs. Overall, 44 percent said that outsourcing didn't save any money at all.
The study, entitled "Calling A Change In The Outsourcing Market" (http://www.deloitte.com/dtt/cda/doc/content/us_outsourcing_callingachange.pdf), posits that companies initially turned to outsourcing to cut expenses, simplify project execution, and gain expertise that was lacking in-house. To the contrary, many companies found out that outsourcing actually introduced complexity, added cost, and required more senior management time than anticipated. Nearly 50 percent of the surveyed executives said that hidden costs were the most common problem when managing outsourced projects.
Meanwhile, tech workers in Western Europe are getting a little testy about the effect of offshore outsourcing in their neck of the woods. In particular, IBM workers in Germany and France are calling for work actions and stoppages to protest layoffs and facility closings as IBM shifts jobs to Asia and Eastern Europe. So far, IBM has announced it will eliminate 600 jobs and close two facilities in Germany, and 500 jobs and five sites in Sweden. Moreover, up to 2000 jobs may be cut in France. All in all, IBM employs about 100,000 workers in Western Europe.
According to the global economy, one worker in one part of the world is exactly the same as another worker elsewhere. It's like someone said in Greg Spotts' documentary: "The global economy is making no distinction between whether you are a textile worker making Fruit-of-the-Loom underwear or whether you are a computer programmer making Oracle or Microsoft products." Alas, it appears some companies are finding out the hard way that this isn't always true.