U.S. Companies Say Offshoring Has Not Cost Domestic Jobs

Report concludes many firms shifting overseas because of labor shortage.

More than half of companies participating in a survey say offshoring has not resulted in higher unemployment rates domestically, according to The Conference Board.

Cost-cutting is not the driving factor for moving job functions overseas. The results were part of a survey released Jan. 19 by the Center for International Business Education and Research's Offshoring Research Network at Duke University's Fuqua School of Business and The Conference Board.

Firms shifting jobs overseas may be responding to a shortage of skilled domestic employees, the survey shows. In addition, manufacturers and high-tech/telecommunication companies are moving increasingly toward the use of third-party providers of offshore labor rather than using captive operations.

"Over half of the participants in our survey say offshoring has resulted in no change in the number of domestic jobs in most functions," said Fuqua Professor of Strategy and International Business Arie Lewin. "The finding that the U.S. software sector has the highest ratio of offshore to domestic employees -- almost 13 offshored jobs per 100 domestic jobs -- may be a reflection of a scarcity of domestic science and engineering graduates in the U.S."

The survey also shows average achieved cost savings offshore have declined for functions at many companies, including IT services and software development. Average achieved savings have increased for administrative and innovative functions.

"The potential for cost reduction alone is no longer reason enough to move operations," said Ton Heijmen, Senior Adviser to The Conference Board. "One survey respondent noted it has taken his company several years to discover that the impact of labor arbitrage disappears in fewer than three years. Companies are now shifting from cost-driven offshoring implementations to a multidimensional value proposition in creating a global footprint."

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