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Articles - Publication Date 7.1.2004
The Numbers Deficit
Hard data on offshoring are hard to come by.
By John S. McClenahen
For workers like John Fern, for the AFL-CIO, for the National Association of Manufacturers (NAM) and the Business Roundtable and for President George Bush and the men who want to replace him in the White House, there are few issues as emotional as the offshoring of U.S. jobs. And with good reason. "Improving one's skills is a necessary but no longer sufficient condition for economic success," contended a late-May report from the Washington, D.C.-based Progressive Policy Institute (PPI). "Working Americans wonder whether any job will be safe in the fiercely competitive global marketplace."
Yet amongst widespread anxiety is an absence of reliable numbers. "It is unclear how many jobs have been lost to offshoring," May's PPI report stated. Forecasting, too, is difficult and projections are subject to withering challenges. For example, "squirrely predictions" is the term John Castellani, president of the Business Roundtable, used in April to describe a Forrester Research estimate that 3.3 million U.S. white-collar jobs would go overseas by 2015 and International Data Corp.'s estimate that nearly 25% of U.S. white-collar tech jobs would move offshore by 2007. "While accurate numbers are hard to come by, most economists estimate that about 100,000 white-collar jobs . . . have gone overseas in each of the past three years -- for a total of about 300,000 jobs so far. Given the 138 million-plus Americans with jobs today, that is not an alarming number," said Castellani, whose group encompasses the CEOs of America's 150 largest corporations, companies with $3.7 trillion in annual sales and 10 million workers.
Whether the numbers are alarming or not, the situation is not as simple as Castellani's comments or Forrester's revised numbers -- it's now projecting 3.4 million U.S. white-collar jobs will migrate overseas during the next decade -- make it seem. For example, at California software producer QAD, cost, not the lack of available skilled workers, is now the major reason more than half the company's jobs are offshore. The "burden cost" of a software developer in the U.S. is $138,000 annually, while for an Indian software developer with equivalent skills and capabilities, her company's "burden cost" is about $35,000 per year, explains QAD president and founder Pamela Lopker. But not so for Michael Mallia, CEO of AFCO Systems Inc., a privately held, Farmingdale, N.Y., maker of high-tech equipment enclosures. "A lot of people look at the direct labor of manufacturing as the most expensive thing that's associated with manufacturing," he notes. It's a myth, he contends. "In a technology-oriented, automated type of factory, you'll find that the direct labor is a very small percentage of the overall cost," he insists. His challenge: finding people with skills. And it's not Mallia's challenge alone. "We are headed for the most severe shortage of skilled labor that this country has ever seen, warns futurist Roger Herman, CEO of the Herman Group, Greensboro, N.C.
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