New Take on Outsourcing and Jobs

Here is a new take on offshore outsourcing. A new Institute for International Economics study argues that outsourcing by US companies of IT services to countries like India and Singapore will enhance American productivity growth, create new higher value and lead to higher paid technical jobs.

New programming jobs may be transferred to India but they are not cancelling out job growth in the US, says the author of the study, Catherine Mann, an economist at the Institute for International Economics in Washington. "The globalisation of software and IT service means that some IT jobs will be done abroad. But as more sectors of the economy and more businesses use the IT packages in the US, high skill jobs to design and tailor IT packages will increase in the IT sector and jobs demanding the skills to use these IT packages effectively will diffuse throughout the economy," she said.

Mann sees a repeat of what happened in the 1990s. Globalized production of IT hardware led to lower prices during the 1990s, prompting IT investment and transformation, she said.

While IT was disruptive to businesses and workers alike, "its influence on them and their successful response to that influence" were the key to faster income growth, lower inflation and more employment.

"Deeper transformation and wider diffusion" caused by outsourcing will bring about a second wave of production growth in the US, Mann's study says.

Let's hope that Catherine Mann is correct. Go here to download her report. It is an excellent read.