ALPERT, A. AND AUYER, A. 2003. Evaluating the 1988-2000 Employment Projections. Monthly Labor Review (Oct.) 13-37.

In the study presented in this article, several different measures were used to assess the accuracy of the US Bureau of Labor Statistics projections for both major occupational groups and detailed occupations. Some of those measures included a comparison of actual with projected employment growth, calculation of absolute error, and a comparison of actual and projected directions of change.

AMITI, M. AND WEI, S. 2004. Fear of Outsourcing: Is It Justified? NBER Working Papers 10808. National Bureau of Economic Research 1 (Oct.).

This is a careful and thoughtful analysis of the economics of offshoring. It has a useful and up-to-date review of both the empirical and theoretical literature. A number of calculations based on IMF data make for interesting consideration. Most developed nations are not more outsourcing-intensive when adjusted for economic size than many developing nations. A study of the United Kingdom found that sectors with higher levels of services outsourcing did not have a slower rate of job growth. In conclusions cited from a companion paper, service outsourcing did not cause a fall in aggregate employment and had the potential to increase efficiency enough to create a sufficient number of jobs in that sector alone to offset jobs lost to outsourcing.

ASSOCIATED PRESS 2005a. 400K+ High-Tech Jobs Lost. (Sept. 15) Seattle, WA. (as reproduced on CBSNEWS.com April 4).

Researchers Snigdha Srivastava and Nik Theodore compiled numbers using the Current Employment Statistics survey and the Current Population Survey and found that there was a loss of 403,300 IT jobs between April 2001 and March 2004. Reasons for continuing job losses in the IT sector were attributed to an insecure economy and outsourcing.

BAILY, M.N. AND LAWRENCE, R. Z. 2005. Don't Blame Trade for US Job Losses. The McKinsey Quarterly 1.

This article analyzes trade and industry data to determine the impact of offshoring on job dislocation in the manufacturing and service sectors from 2000 to 2003. The authors find that only 11% of the manufacturing jobs lost in this period were lost as a result of trade; falling exports rather than rising imports were responsible. The causes were weak domestic demand, rapid productivity growth, and the dollar's strength, all of which reduced US exports. Counting software and business process jobs together, 274,000 jobs at most moved to India from the United States in the period 2000 - 2003. This is compared to 2.1 million new service jobs created every year in the United States during the 1990s, and 327,000 created per year in the 2000 -2003 period. Total employment in computer-related service jobs dropped only modestly from 1999 to 2003. One big category of recent job losses has been in computer support personnel. Their ranks went up rapidly from 1999 to 2000 before falling off, suggesting a Y2K effect. 2003 employment for computer support personnel is still higher than it was in 1999. The loss of 99,000 computer programmer jobs in the United States, the authors argue, probably was partly as a result of offshoring. In this same period, higher-level computer sector jobs such as software engineers and computer and network systems analysts increased. Baily is a senior fellow at the Institute of International Economics and was chair of President Clinton's Council of Economic Advisors. Lawrence holds a distinguished chair in the Kennedy School of Government at Harvard.

BHAGWATI, J., PANAGARIVA, A., AND SRINIVASAN, T.N. 2004. The Muddles Over Outsourcing. Preprint of an article to be published in revised form in Journal of Economic Perspective (June 30).

The authors are professors of economics at Columbia and Yale. The purpose of their paper is to distinguish between four types of phenomena that are "routinely addressed interchangeably under the rubric of outsourcing" and then consider the differences in effect on economic efficiency, jobs, and real wages. In trying to sharpen the definition of outsourcing, they differentiate between outsourcing of online services, outsourcing as it relates to rising total imports, direct investment phenomena, and worries over growing high-skill workers in India and China. They conclude that 1) the public discourse over outsourcing has been confused by muddy definitions; 2) the best definition involves considering outsourcing as trade in services online; 3) when treated in this way, trade in services online differs little in economic character from trade in goods; 4) fears that outsourcing will harm jobs and wages are unjustified; and 5) the probability that growth of skills in India and China will have an adverse effect on US prosperity and wages of skilled Americans is unlikely, although possible.

BISHOP, J.H. AND CARTER, S.D. 1991. How Accurate Are Recent BLS Occupational Projections? Monthly Labor Review (Oct.) 37-43.

Authors' abstract. Bureau of Labor Statistics (BLS) occupational projections made since 1981 have substantially underestimated the growth of skilled occupations and substantially overestimated the growth of occupations requiring lower or more moderate skills. Overall, projections of the 1970s appear to have been significantly more accurate than those of the 1980s. It appears that, when occupational staffing ratios are assumed to exhibit a relatively constant trend, much better projections result. However, even when past trends in the occupational composition of industries are extrapolated into the future, there is still a tendency to under project the relative growth of higher skill jobs that prevailed during the 1960s and 1970s. It may be that the upskilling demand effects of technological progress and work organization are inherently unforeseeable.

BIVENS, J. 2004. Will the New International Division of White-Collar Work Make the U.S. Rich? ACM Job Migration Task Force Meeting Washington, DC. (Dec.) (Available at http://www.epinet.org).

This presentation presents various statistics related to offshoring. Topics presented include why offshoring became a political issue, poor US data, the impact of offshoring on jobs and on wage and salary growth, free trade theory and offshoring, and social insurance as a solution to the impacts of offshoring.

BRONFENBRENNER, K., AND LUCE, S. 2004. The Changing Nature of Corporate Global Restructuring: The Impact of Production Shifts on Jobs in the US, China, and Around the Globe. Corporate Restructuring and Global Capital Mobility (Oct. 14).

This 87-page report provides information on production shifts out of the United States to China. The work is based on online media tracking and corporate research conducted in 2000 and 2001 with an update for 2004. Much of the study concerns manufacturing as opposed to call centers, BPOs, and software development and maintenance. The paper argues that BLS estimates of jobs lost due to shifting jobs out of the country are extremely understated. The authors found examples of software jobs being denied consideration under the Trade Adjustment Assistance Act. The study notes the significant increase in production shifts to India for IT work from both the United States and United Kingdom. There are several examples of how devastating to rural/small town economies loss of call centers has been due to outsourcing. 99% of job losses in 2001 were manufacturing jobs with just a handful of IT jobs lost, including call centers; but the number of IT jobs outsourced increased dramatically by 2004. Some anecdotal evidence is given of IT multinationals being concerned about the public relations aspects of moving jobs overseas, e.g., internal memos of how to handle the issue. There are also examples given of call center outsourcing and the effect it has on local communities.

BUFFETT, W. 2005 Chairman's Letter, Berkshire Hathaway (Feb. 28) (Available at http://www.berkshirehathaway.com/letters/2004ltr.pdf).

This letter to shareholders discusses the long-term implications of large trade deficits for the United States, given the large run-ups of trade deficits over the past several years. They include reduced ownership by the American people of the nation's wealth and ongoing payments from the US economy to foreign investors as well as other financial and political effects.

CENTER FOR AMERICAN PROGRESS 2004. Offshoring by the Numbers. (May 21). (Available at http://www.americanprogress.org/site/pp.asp?c=biJRJ8OVF&b=81289 )

This brief report describes some of the problems associated with data from the Bureau of Economic Analysis and the Bureau of Labor that might be pertinent in understanding offshoring.

CHABROW, E. 2004. U.S. Holds an Edge in Global I.T.-Services Skills. Information Week 22 (March) 981.

This article provides some basic data about US trade balances in services generally and in IT services in particular. It also provides some information about job loss and job creation in the US computer industry. Much of the data is based on an analysis of Bureau of Labor Statistics data.

COMPUTING RESEARCH ASSOCIATION, 2004. 2003-04 Taulbee Survey. (Available at http://www.cra.org/statistics/).

The Taulbee Survey is the principal source of information on the enrollment, production, and employment of PhD.s in computer science and computer engineering and in providing salary and demographic data for faculty in computer science and computer engineering at doctoral institutions in North America. Undergraduate majors and master's students who are studying at these doctoral-granting institutions are also tracked. Statistics include gender and ethnicity breakdowns.

DICARLO, L. 2004. IT Employees Well-Paid, In Demand. Forbes.com, (June 8).

This brief article mainly reports on the findings of the Meta Group's annual IT staffing and compensation guide. Three surprises: fewer companies are using offshore labor than most people believe (only 19%), IT salaries have staying power, and demand is still very strong for certain IT skills. The article reports that IBM chief Sam Palmisano and Georgia Tech President Wayne Clough are forming a National Innovation Initiative to create a strategic US policy towards innovation as a way to ensure a US lead and protect jobs for Americans.

ECONOMIC POLICY INSTITUTE. 2004. The State of Working America 2004/2005: Recovery Yet to Arrive for Working Families. Press Release (Sept. 5) (Available at http://www.epinet.org/books/swa2004/news/swa2004_release_final.pdf).

This press release provides data on the condition of the US economy and the state of jobs, wealth, and living standards for US workers. This report provides a context for understanding offshoring.

EDEN, L. 2005. Went for Cost, Priced at Cost? An Economic Approach to the Transfer Pricing of Offshored Business Services. Texas A&M University. Bush School Working Paper 570 (May).

The paper considers the implications for national tax administrations and for corporations of transfer pricing decisions, that is, the pricing of products traded between units of a multinational organization. The paper was motivated by the rapid increase of such trading because of offshoring. The paper presents an economic analysis of a case study from the teleservices industry. The author finds that, although companies went for cost and stayed for quality, as far as transfer pricing is concerned, companies should go for cost and price at cost in the offshored business services industry instead of using OECD transfer pricing guidelines that require multinationals to treat transfers as though they were being made by unrelated entities.

EGGER, H. AND EGGER, P. 2001. International Outsourcing and the Productivity of Low-Skilled Labor in the EU. WIFO-Working Paper 152. (Available at http://publikationen.wifo.ac.at/pls/wifosite/wifosite.wifo_search.frameset?p_filenam e=WIFOWORKINGPAPERS/PRIVATE539 7/WP152.PDF).

From paper abstract. This paper presents first insights into the role of international outsourcing on the productivity of low-skilled workers in manufacturing. In the short run, international outsourcing exhibits a negative marginal effect on real value added per low-skilled worker, the long-run parameter estimates reveal a positive impact. This may be explained by imperfections on European and goods markets which prohibit an immediate adjustment in the factor employment and the output structure. The change in the outsourcing intensity since 1993 alone accounts for a long-run increase of about 3.3% in the real value added per low-skilled worker.

EGGER, H. AND EGGER, P. 2003 Outsourcing and Skill-Specific Employment in a Small Economy: Austria after the Fall of the Iron Curtain. Oxford Economic Papers 55, 4, 625-643).

Abstract from the paper. We set up a model in which firms in a small industrialized country outsource part of their production to a foreign economy that is rich in low-skilled labor. We analyze how a decline in trade costs affects outsourcing activities and the production structure in the small economy. A stimulation of cross-border outsourcing raises wage dispersion and, if labor markets are unionized, also the employment of high-skilled relative to low-skilled labor. Using a panel of Austrian industries, we find, first, that decreasing trade barriers-as observed after the fall of the Iron Curtain-indeed stimulate outsourcing to Central and Eastern Europe and the former Soviet Union, and, second, that outsourcing to these countries significantly shifts relative employment in favor of high-skilled labor.

EGGER, P., PFAFFERMAYR, M. AND WOLFMAYR-SCHNITZER, Y. 2001. The International Fragmentation of Austrian Manufacturing: The Effects of Outsourcing on Productivity and Wages. North American Journal of Economics and Finance 12, 257-272.

Abstract from the paper. Since the fall of the Iron Curtain, Austria and other small, open Western European countries have increasingly outsourced part of their production to the Eastern transition countries. This study assesses the effects of fragmentation of Austrian manufacturing on total factor productivity and mandated factor prices. Outsourcing to the East significantly improves domestic growth in total factor productivity but possibly less in low-skill, labor-intensive industries and more in capital-intensive ones. Estimates of the mandated wage regressions suggest that, in the presence of perfect factor markets, wages would be lower for low-skilled workers and higher for high-skilled workers as a result of outsourcing.

EVALUESERVE 2004. Global Sourcing: What does the US Economy Gain? Evalueserve (Feb. 10).

Modified from the report introduction. An in-depth analysis of the impact of global sourcing in three industries, i.e., the call center industry, the IT services industry, and the IT-enabled services industry, has been conducted. The report found that the displacement of a number of jobs is inevitable in the short term, but the overall impact is positive for the US economy. In order to minimize even these short-term effects, more programs for retraining and upgrading worker skills should be introduced.

EVALUESERVE 2004. Global Sourcing Imperative in the UK Economy: 1993-2010. Evalueserve (Feb. 11).

The inevitability and necessity of global sourcing services in the United Kingdom is discussed. Global sourcing is said to enable the UK economy to overcome the expected labor shortfall during 2003-2010 as well as maintain its economic growth. The benefits of immigrant workers who have helped the UK economy is also mentioned.

FEENSTRA, R. AND HANSON, G. 1996. Globalization, Outsourcing, and Wage Inequality. The American Economic Review 86, 2, 240-245.

In this older (1996) article, two economists examine the degree to which international trade, and offshoring in particular, has contributed to the declining wages of unskilled workers in the United States. They hypothesize that when firms respond to import competition from low-wage countries by moving non-skill-intensive work abroad, this will shift employment forward for higher skill workers within the industry. The study uses data from US manufacturing industries from 1972-1994. Their data analysis shows that offshoring contributed substantially to the increase in the relative demand for non-production labor. However, they find a negative correlation between offshoring and relative earnings which is paradoxical and they argue needs further investigation. The paper also discusses the definition of global outsourcing and some of the characteristics of industries that have made heavy use of offshoring.

FEENSTRA, R. C. AND HANSON, G. H. 2001. Global Production Sharing and Rising Inequality: A Survey of Trade and Wages. NBER Working Paper 8372.

From the paper's abstract. We argue that trade in intermediate inputs, or 'global production sharing,' is a potentially important explanation for the increase in the wage gap between skilled and unskilled workers in the U.S. and elsewhere. Using a simple model of heterogeneous activities within an industry, we show that trade in inputs has much the same impact on labor demand as does skill-biased technical change: both of these will shift demand away from low-skilled activities, while raising relative demand and wages of the higher skilled. Thus, distinguishing whether the change in wages is due to international trade or technological change, is fundamentally an empirical rather than a theoretical question. We review three empirical methods that have been used to estimate the effects of trade in intermediate inputs and technological change on wages and summarize the evidence for the U.S. and other countries.

FREEMAN, R. AND RODGERS, W. III. To appear. The Weak Jobs Recovery: Whatever Happened to the Great American Jobs Machine? FRBNY Economic Policy Review. (Available at http://www.ny.frb.org/research/epr/forthcoming/freeman.pdf).

The authors consider the reasons for the weak jobs recovery as the United States comes out of its most recent recession, including the role of offshoring. They argue that the current recovery is the worst in recent US history for job creation. The slow growth of job creation is spread across many sectors not just those affected by the dot-com crash. Employment growth was down for populations sensitive to swings in the business cycle but not particularly sensitive to the dot-com phenomena. There are no particular geographical dimensions to the jobless recovery. A combination of sluggish wage growth and stagnant employment meant a moderate increase in poverty through 2003. They identify factors that affected the weak job recovery including the rise in the trade deficit, drop in foreign direct investment in the United States, rise in health care coverage for American workers, and tax cuts directed at the wealthy. The authors believe that something fundamental has changed that has caused this "jobless recovery". The United States main welfare state protection for workers is full employment which requires a tight labor market as in the late 1990's for the entire population to experience the benefit.

GEISHECKER, I. AND GORG, H. 2004. Winners and Losers: Fragmentation, Trade, and Wages Revisited. Forschungsinstitut zue Zukunft der Arbeit (Institute for the Study of Labor), Bonn, Germany (Jan.).

The study investigates the relationship between outsourcing and wages, conducting an economic analysis using a data set (the German Socio-Economic Household Panel) and industry-level data for the years 1991-2000. It found a significant decrease in wages of low-skilled workers as a result of outsourcing and that there was a significant but less pronounced increase in wages for high-skill workers. The results were not significant for mid-skill workers. In particular, wages for jobs that required a college or technical school training increased, while wages for jobs with lower required qualifications decreased. Germany, the authors point out, the largest economy in Europe, is far more open to international trade than the United States and has recently increased opportunities for production sharing with nearby countries in Central and Eastern Europe because of the major political and economic changes these countries have had.

GLOBAL INSIGHT (USA) 2004. The Impact of Offshore IT Software and Services Outsourcing on the U.S. Economy and the IT Industry. Sponsored by The Information Technology Association of America (March).

This study provides a useful description and analysis of the impact of outsourcing on US jobs to date, an analysis of how many of the 372,000 US software and services jobs lost between 2000 and 2003 were due to outsourcing (estimated at 104,000), the reasons behind the movement to offshore outsourcing of IT software and services, and the economic payoff to the United States for outsourcing. The main body of the report is findings based on running an econometric model.

GOLDMAN SACHS 2004.Offshoring By the Numbers. Center for American Progress (May 21). (Available at http://www.americanprogress.org/site/pp.asp?c=biJRJ8OVF&b=81289 ).

Due to limited government data on the number of jobs lost due to offshoring, the only available data estimates are provided from universities and private research groups. Goldman Sachs, a researcher, provides the following statistics: 300,000 - 500,000 jobs have been offshored over the last three years; only one thousandth of US employment is affected by outsourcing; and job losses up to 6 million could move offshore over the next 10 years.

Book description from Amazon. In this book, Ralph Gomory and William Baumol adapt classical trade models to the modern world economy. Trade today is dominated by manufactured goods, rapidly moving technology, and huge firms that benefit from economies of scale. This is very different from the largely agricultural world in which the classical theories originated. Gomory and Baumol show that the new and significant conflicts resulting from international trade are inherent in modern economies. Today improvement in one country's productive capabilities is often attainable only at the expense of another country's general welfare. The authors describe why and when this is so and why, in a modern free-trade environment, a country might have a vital stake in the competitive strength of its industries.

GORG, H., HANLEY, A., AND STROBL, E. 2004. International Outsourcing and Productivity: Evidence from Plant Level Data. University of Nottingham.

From the paper's abstract. We investigate the impact of international outsourcing on productivity using plant-level data for Irish manufacturing. Specifically, we distinguish the effect of outsourcing of materials from services inputs. Moreover, we examine whether the impact on productivity is different for plants being more embedded in international markets through exporting or being part of a multinational. Our results demonstrate that these distinctions can in general be important and are line with implications from the recent theoretical literature.

GROSSMAN, G. AND HELPMAN, E. 2002. Outsourcing in a Global Economy. National Bureau of Economic Research. NBER Working Paper 8728 (Jan.). (D)

In this article, two economists build a model to study outsourcing decisions in a global economy. The model requires producers to go outside the firm for some essential service or component. The search for this supplier is costly and specific to a market. The model has built into it "thick-market externality" which states that a search is more profitable in markets where there are more suppliers present. The paper considers how labor supplies and investment technologies affect the equilibrium locations of outsourcing activities. The paper also considers the role of the contracting environment, characterizing the legal setting in the supplier country by the fraction of a relationship-specific investment that is verifiable to a third party. This paper represents an intermediate result in a series of papers that have as an ultimate goal building a model that considers both whether to do work in house or subcontract and whether to subcontract at home or abroad.

GROSSMAN, G., HELPMAN, E., AND SZEIDL, A. Complementarities Between Outsourcing and Foreign Sourcing. Work In Progress. (Available at http://econ.tau.ac.il/research/abstract.asp?id=12005).

In this paper, three economists use recent advances in the theory of economic analysis to build an economic model that enables them to "identify circumstances under which firms choose to make their inputs themselves or buy them from third parties and when they choose to produce or procure their inputs locally or abroad." This is a model that considers both whether to do work in-house or subcontract and whether to subcontract at home or abroad.

HENG, S. 2005. Software Houses: Changing from Product Vendors to Solution Providers. Economics: Digital Economy and Structural Change. Deutsche Bank Research 50 (April).

Extract from paper (slightly modified). This study adopts the user's point of view in outlining the key trends in the product ranges of the software houses from system software to application software. Because of its external vantage point, this study does not address new approaches in software development such as open source software or Model Driven Architecture (MDA) nor does it deal with the convergence of information and communications technologies (ICT), for example, in the shape of voice over Internet protocol (VoIP). And to round off, we quantify the market environment for software houses on an international comparison.

HOFFMAN, T. 2004. Demand for IT Contractors Rising Slowly. Computerworld (April 5).

A December 2003 survey of 364 IT decision-makers showed that 52% of North American companies will use a combination of internal training and IT contractors to make up for a shortage of IT skills in 2004, while 22% will increase internal IT staffs. Qualitative evidence is given of reluctance to initiate new IT projects even though they are being talked about as possibilities.

HUBER, N. 2004. One Third of Firms Are Spending Too Much on Managing Suppliers. Computer Weekly (March 23).

According to a survey of UK executives by the outsourcing consulting firm Morgan Chambers, a third of the companies surveyed are spending 7% or more of their budget on managing their outsourcing relationships (both within the country and offshore). 23% are spending more than 10%. Morgan Chambers advises companies not to spend more than 7% for management. Some of the cost is attributed to micromanagement by the clients, which should not happen if the client trusts the vendor.

JENSEN, J. B. AND KLETZER, L.G. 2005. Tradable Services: Understanding the Scope and Impact of Services Offshoring. In L. Brainard and S. M. Collins Eds. To appear. Brookings Trade Forum 2005 Offshoring White-Collar Work - the Issues and the Implications.

Abstract from the paper. We develop a new empirical approach to identify tradable service activities. Contrary to conventional views of service activities as non-tradable, we find a significant number of service industries and occupations that appear tradable and substantial employment in these tradable activities. Workers employed in tradable service activities differ from workers employed in tradable manufacturing and non-tradable services. In general, we find little evidence that service activities that are tradable have lower employment growth than other service activities. However, at the lowest end of the skill distribution, there is suggestive evidence of lower employment growth. There is also evidence of higher worker displacement in tradable services. Workers displaced form tradable service activities are different from displaced manufacturing workers; displaced tradable service workers have higher skills and higher pre-displacement earnings than displaced manufacturing workers.

KATKALO, V. AND MOWERY, D.C. 1996. Institutional Structure and Innovation in the Emerging Russian Software Industry. In D. C. Mowery Ed. Institutional Structure and Innovation in Emerging Russian Software Industry. Cambridge University Press. New York, NY, 240-271.

From Amazon.com. "This is the first book to provide comparative research data on the software industry in three major parts of the world: the U.S., Japan, Western Europe, and the Russian Federation. It explores the reasons that some countries have had more success in software development than others. The research was conducted by a group of international experts in the software industry." The article provides the case of the Russian software industry.

KLETZER, L., 2001. Job Loss from Imports: Measuring the Cost. Institute for International Economics, Washington DC.

From IIE News Release, Oct. 11, 2001. Job Loss from Imports: Measuring the Costs by Lori G. Kletzer, the second publication in the Institute's Globalization Balance Sheet series, concludes that many American workers are concerned about trade-related job loss with good reason. Import-competing job loss is very costly. Vulnerable workers experience considerable difficulty regaining employment, and suffer large and persistent earnings losses upon reemployment…. This new study identifies who bears these costs and measures the size of the burden. It reveals that there is indeed job loss associated with import competition and that job loss is costly for many workers due to difficulties finding new employment at a level of pay similar to the old job. But these high costs are not unique to "trade-displaced" workers, as workers displaced from manufacturing jobs for other reasons incur similar costs. If workers and consequences are alike, across differing causes of job loss such as increasing foreign competition, technological change, downsizing, and restructuring, then policymakers should consider adjustment programs for all displaced workers and broaden eligibility for them beyond trade-displaced workers.

KLETZER, L. 2004. Trade-Related Job Loss and Wage Insurance: A Synthetic Review. Review of International Economics 12, 5 (Nov.).

The paper seeks to promote further integration of empirical and theoretical discussions of trade and worker adjustment. From the author's recent studies of the costs of job loss, she develops a set of stylized facts of trade-related job loss with a focus on worker characteristics and labor market consequences. These stylized facts are relevant to any credible model of trade liberalization and adjustment costs. The author discusses the basic ideas of wage insurance and summarizes the few data known about how a program might work if implemented in the United States. A final section provides a list of issues for a model of trade that will be consistent with the empirical stylized facts, and sets out questions for future research.

KNAPP, P. 2004. 1.2 Million European Jobs to Flee Offshore. Brainbox.com. (Available at http://Brainbox.com.au) (Aug. 24).

This news article summarizes a Forrester Research report that states that 1.2 million European jobs will be sent offshore in the next ten years with the technology sector to suffer the greatest losses. Reasons for offshoring to destinations such as Russia and India are also briefly summarized. The report identifies the United Kingdom as the European country that most embraces offshoring.

KOZLOW, R. AND BORGA, M. 2004. Offshoring and the U.S. Balance of Payments. The Brookings Institute (June 22).

This PowerPoint presentation looks primarily at what BEA data can tell us about offshoring and US balance of payments. It considers whether the BEA data under-counts trade in services and why the service imports from India are so small. There is some discussion of the data strengths, challenges, and improvements.

KRISHNADAS, K.C. 2005. Fragmented China Software Sector No Match For India, Report Finds. Electronic Engineering Times (February 21). (Available at http://www.cmpnetasia.com/ViewArt.cfm?Artid=26204&Catid=2&subcat=86 ).

This news report summarizes an article from McKinsey & Co, which states that even though China has three times as many software services as India, it will not emerge as a leader in the industry due to the fragmentation in the software sector.

LAMOREAUX, N. AND SOKOLOFF, K. 1996. Long-Term Change in the Organization of Inventive Activity. In Proceedings of the National Academy of Science 93, 12686-12692.

Abstract from the paper. Relying on a quantitative analysis of the patenting and assignment behavior of inventors, we highlight the evolution of institutions that encouraged trade in technology and a growing division of labor between those who invented new technologies and those who exploited them commercially over the nineteenth and early-twentieth centuries. At the heart of this change in the organization of inventive activity was a set of familiar developments that had significant consequences for the supply and demand of inventions. On the supply side, the growing complexity and capital intensity of technology raised the amount of human and physical capital required for effective invention, making it increasingly desirable for individuals involved in this activity to specialize. On the demand side, the growing competitiveness of product markets induced firms to purchase or otherwise obtain the rights to technologies developed by others. These increasing incentives to differentiate the task of invention from that of commercializing new technologies depended for their realization upon the development of markets and other types of organizational supports for trade in technology. The evidence suggests that the necessary institutions evolved first in those regions of the country where early patenting activity had already been concentrated. A self-reinforcing process appears to have been operating whereby high rates of inventive activity encouraged the evolution of a market for technology which, in turn, encouraged greater specialization and productivity at invention as individuals found it increasingly feasible to sell and license their discoveries. This market trade in technological information was an important contributor to the achievement of a high level of specialization at invention well before the rise of large-scale research laboratories in the twentieth century.

LAMOREAUX, N. AND SOKOLOFF, K. 1997. Location and Technological Change in the American Glass Industry During the Late Nineteenth and Early Twentieth Centuries. NBER Working Paper #5938. Cambridge, MA.

Abstract from the paper. Scholars have attempted to explain geographic clustering in inventive activity by arguing that it is connected with clustering in production or new investment. They have offered three possible reasons for this link: because invention occurs as a result of learning by doing; because new investment encourages experimentation with novel techniques; and because there are local information flows that make inventors more fertile in areas where producers are concentrated. In this article, we test these theories by studying geographic patterns of production and invention in the glass industry during the late nineteenth and early twentieth centuries. We find that the patterns deviate significantly from what the theories would predict and offer the alternative hypothesis that inventive activity proceeded most intensively in areas where markets for technology had developed most fully, that is, where there were localized networks of institutions that mobilized information about technological opportunities and mediated relations among inventors, suppliers of capital, and those who would commercially develop or exploit new technologies.

LANDEFELD, S. AND MATALONI, R. 2004. Offshore Outsourcing and Multinational Companies. The Brookings Institute (June 22).

This PowerPoint presentation examines BEA data for what it tells us about the role of multinational companies in offshoring. The data tells us about where multinationals are locating their operations, what they are producing, what they are importing and exporting (and to where), what domestic US foreign content is, and what wages are paid in the United States and abroad.

According to a compensation study of 650 large and mid-sized firms in the United States with at least $200M revenue, outsourcing has had little impact on salaries for IT workers in areas such as senior network architect or senior database manager due to the scarcity of qualified people to fill these jobs. Technology workers with more general skills were more likely to find wages stagnant. High-demand skills include Java, SAP, Oracle, networking, security, and project management. In lower-level IT jobs, there is more variation in pay by local community; in these high-demand jobs, the pay is similar throughout the United States. Despite unmet need, many hiring managers have not increased recruiting significantly. As a result, current employees are reporting low morale from increased work loads and insufficient staffing.

MANN, C.L. 2003. Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth. International Economics Policy Brief, No. PB03-11. Institute for International Economics (Dec.).

This article argues that the globalization of software of IT services is ultimately good for the economy. Although some of the jobs will go abroad, "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", which will ultimately produce higher demand for workers and actually boost the IT sector.

MANN, C.L. 2004. What Global Sourcing Means for U.S. IT Workers and for the U.S. Economy. Virtual Machines 2, 5 (July/Aug.).

Mann argues that global sourcing of hardware in the 1990's reduced the price of IT hardware which led to increased IT investment and more jobs for IT workers and that the same is now happening with software. The widespread use of IT has led to higher productivity for the US government. Mann argues that in the United States, IT jobs are moving up the skills ladder. She advocates policies to increase the skill level of current and future IT workers, provide a safety net for displaced workers, and open up international trade.

MANN, C.L. 2004. Global Sourcing and Factor Markets: The Information Technology Example. ACM Job Migration Task Force Meeting, Washington, DC (Dec.).

The PowerPoint slides discuss the globalization of hardware and software, macroeconomic gains from offshoring hardware in the 1990s, sectoral investment in IT and opportunities for economic growth in under-invested areas, what one can learn about globalization of software from globalization of hardware, structural factors and jobs, and policy implications.

MARIANI, M. 2001. Next to Production or to Technological Clusters? The Economics and Management of R&D Location. Journal of Management and Governance 6, 2, 131-152.

Abstract from the paper. This paper examines the relationship between the location of R&D and production activities. By using a sample of 799 Japanese investments in Europe, it distinguishes between affiliates performing only R&D, both R&D and production, and production only. The analysis produces two main results. First, R&D tends to locate near production activities. Interestingly, however, the higher the science-intensity of a sector, the less important is the linkage with production, i.e., the higher the number of only R&D labs. This is interpreted as the effect produced by more general and transferable scientific work, compared to applied work. Second, by performing a multinomial logit analysis, we show that R&D independent or linked to production is attracted by different local factors. Managerial and policy implications are also discussed.

MARKLUND, G. 2005. World Investment Trends: Summary of UNCTAD World Investment Report 2004 (The Shift Towards Services, 2004). Swedish Institute for Growth Policy Studies.

The presentation highlights important points from the World Investment Report. These include worldwide numbers about foreign direct investment and FDI balances. It also discusses driving forces in the Asia-Pacific and Central and Eastern European regions. Finally it discusses the shift toward services, captive and third-party business models, the reasons behind the growth in service FDI, and mergers and acquisitions.

MARKLUND, G. 2004. Offshoring in Europe: Summary of UNCTAD, Roland Berger Consultants - Service Offshoring. Swedish Institute for Growth Policy Studies (June).

This slide presentation focuses on some of the highlights of the UNCTAD report on service offshoring. Marklund provides some statistics about the size of service offshoring, identifies driving forces (most notably cost savings), discusses the kinds of services offshored and reasons that certain activities are not offshored, considers drivers for the selection of the country to do the work, and lists some benefits and potential adverse effects of service offshoring.

MATALONI, R. JR. 2004. U.S. Multinational Companies. Survey of Current Business (July).

The article provides some economic context for understanding offshoring. Based on the annual BEA survey of US direct investment abroad, the worldwide value added of non-bank US multinationals decreased in 2002 for the second year in a row. Some other points made include the following.

• The weakness in multinational operations was mainly concentrated in the United States and, in particular, in the telecom services and communication equipment manufacturing industries.
• High-wage countries continue to host the majority of all newly acquired or established foreign affiliates.
• Employment in US multinationals decreased 1.1% in 2002 with the decrease concentrated in the manufacturing and information (mainly telecom) industries.
• While employment in foreign affiliates remains concentrated in high-wage countries, employment grew at an average rate of 6% in low-wage countries but only 3% in high-wage countries (attributed to cost considerations, new markets, and policy liberalizations towards foreign direct investment)

MATALONI, R. JR. 2004. A Note on Patterns of Production and Employment by U.S. Multinational Companies. Survey of Current Business (March).

Abstract from the paper. This note examines recent patterns and trends in the worldwide operations of US multinationals with a focus on production and employment. For example, US parents have consistently accounted for about three-fourths, and their majority-owned foreign affiliates for about one-fourth, of the total gross product, capital expenditures, and employment of US multinationals. The note concludes with a discussion of several data and analytical considerations.

MCCARTHY, J. 2004. A Change for the Better. Info World (June) 38-47.

This article reports information from the 2004 InfoWorld Compensation Survey, which was filled out by 1092 IT executives online. Some of the basic findings relevant to the study are stated here, together with reprints of a few of the tables. Topics include companies planning layoffs and hiring freezes, employee attitudes about job security and satisfaction with compensation, reasons employees were concerned about job security, and the growing gap between salaries for upper management and lower IT positions.

MCDOUGALL, P. 2004. There's No Stopping the Offshore-Outsourcing Train. Information Week (May 24) 18.

The article reports an update of the Forester Research projections: 830,000 US service jobs will move to low-wage countries by the end of 2005; the projection a year earlier had been 588,000. Updated projection of 3.4 million jobs lost by 2015 instead of 3.3 million. It also reports a Hewitt Associates study that indicated that the cost of outsourcing services is increasing 15% per year as demand rises.

MCDOUGALL, P. 2004. Offshore Outsourcing Revenue Soaring at 20%-A-Year Pace, (October 16). (Available at http://www.informationweek.com/showArticle.jhtml;jsessionid=30ZCYX233GKMKQSNDBGCKHSC JUMEKJVN?articleID=50500438).

This article summarizes a study by IDC that states that "the worldwide market for offshore IT services will grow to $17 billion in 2008 from $7 billion in 2003, achieving a compound annual growth rate of 20%." The growth is attributed to more high-value jobs being sent overseas.

MCDOUGALL, P. 2005. Exclusive: Gartner Predicts The Increase in Offshore Outsourcing by 2015 (March31). (Available at http=//www.crn.com/sections/breakingnews/breakingnews.jhtml?articled=160400729)

This article summarizes findings from Gartner which state that "less than 5% of IT jobs in the United States and other developed countries are currently offshored, but by 2015 that number will rise to 30%". Gartner also predicts that

1. worldwide spending on offshore research and development and engineering will increase by a whopping 860%, from $1.25 billion in 2004 to as much as $12 billion in 2010,
2. Offshore spending on infrastructure outsourcing will grow from between $100 million and $250 million to between $3 billion and $4 billion over the same period,
3. Offshore spending on application-development services will more than double from $23 billion to as much as $50 billion.

META GROUP 2004. Annual IT Staffing and Compensation Guide.

This is a standard industry source for IT staffing and salary data, covering 180 IT occupations. It is based on surveys of 650 US companies, across 14 industries. Findings include demand for certain IT skills remains strong, including application development and Java application management. Most companies are paying as much as 20 percent more to technical IT workers than to non-technical workers, partly attributable to a gradually improving job market and overall demand for IT skills.

NATIONAL CENTER FOR POLICY ANALYSIS 2004. Outsourcing Creates U.S. Jobs. Daily Policy Digest Dallas and Washington, DC. (March 15).

The Policy Digest reports numbers from the Bureau of Economic Analysis, Economics and Statistics Division, US Department of Commerce report titled U.S. International Trade in Goods and Services, dated March 10, 2004. The bottom line is that foreigners outsource more work to the US than vice versa, and protectionist activities might be reciprocated with strong effect.

This is an annual report that provides various statistics about the state of science and engineering in the United States.

This brief article provides information from a new Gartner consulting report that contends that 80% of outsourcing projects that are started to save money fail to do so. The report provides other statistics about loss of customers, the importance of planning, employee churn, and mergers and acquisitions in the call center industry.

PANAGARIYA, A. 2004. Why the Recent Samuelson Article is NOT about Offshore Outsourcing. (Available at http://www.columbia.edu/~ap2231/Policy%20Papers/Samuelson%20JEP%20(Summer%202004)_No t%20on%20Outsourcing.html).

The title of this research note explicitly states its purpose. The note is based mainly on J. Bhagwati, A. Panagariya, and T.N. Srinivasan's "The Muddle of Outsourcing," Journal of Economic Perspectives, Fall 2004. The author does not dispute that the key example in the Samuelson paper shows that technological progress in China can wipe out all potential gains for America. Instead, the claim is that Samuelson is not modeling outsourcing because it does not reflect the fact that virtually all activities associated with outsourcing have the property of being non-traded before communications technologies turned them into traded services.

ROBERTS, P.C. 2004. Can a Country with a Collapsing Currency Remain a Superpower? Counterpunch (Sept. 29). (Available at http://www.counterpunch.org/roberts09292004.html ).

Roberts is a conservative economist who argues against outsourcing. He is particularly worried about the massive US trade deficits and explains how outsourcing turns domestic production into imports, thus worsening the trade deficit. Another problem with outsourcing is that it harms America's industrial strength, making it harder to export products and services to the world. Given that many of the replacement jobs pay less than the jobs that are outsourced, this pattern harms the ladders of upward mobility for Americans. The paper reports data from MGB Information Services about job growth and losses during the first Bush presidential term, including data for the information and high-tech knowledge sectors. The paper also argues that the current situation does not follow the principle of comparative advantage, whichis the underpinning of the economic argument for free trade, and that offshore outsourcing is based on absolute rather than comparative advantage under which there are winners and losers, not all winners. This is one of a series of articles by Roberts with a similar line of argument.

SAMUELSON, P. 2004. Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization. Journal of Economic Perspectives 18,3,135-146.

Samuelson sets out to disprove the standard economic claim, based on the economic laws of comparative advantage, that both China and the United States will have their net national product raised in the long run. He gives an example where China takes over some of the comparative advantage that previously belonged to the United States, and this induced permanent lost per capita real income for the United States. He points out that a similar argument was made by Johnson and Stafford in 1993 and by Gomory and Baumol in 2000.

SCHOLL, R.S., SINHA, D., DATAR, R., AND CHOHAN, S. 2003. India Will Generate $13.8 Billion From Offshore BPO Exports in 2007. Gartner Dataquest Report, Stamford, CT (June).

From the Gartner Web site. Gartner Dataquest expects that offshore business process outsourcing services will represent 14 percent of the total BPO market by 2007; India's share of supply will be around 57 percent.

SCHULTZ, C. L. 2004. Offshoring, Import Competition, and the Jobless Recovery. The Brookings Institute, Policy Brief #136, (Aug.).

Schultz provides an informative economic analysis of the causes for outsourcing and the evidence that we can see in statistics available from the US and Indian governments. Schultz argues that the jobless recovery is due to the increase in productivity evidenced since 2001. He discusses the problems with the definition of outsourcing, the similarities between telecommunications as an enabler of service outsourcing and reduced transportation costs as an enabler of product outsourcing in the past: he analyzes the shortcomings in understanding outsourcing by the Bureau of Labor extended mass layoff statistics and of the Department of Commerce on service imports; he considers the ways that data tracking of business/professional/technical (b/p/t) services could be improved for policy analysis, estimates a loss of between 155,000 and 215,000 jobs to b/p/t outsourcing, and compares striking differences between US and Indian statistics over the value of b/p/t outsourcing from India to the United States.

SEELEY, R. 2003. Report: 150,000 U.S. Software Jobs Lost Last Year. ADTmag.com (Dec. 2).

This article summarizes a report called "Cyberstates 2003", released by the American Electronics Association (AeA), that states that the US software industry lost 150,000 jobs last year (2002). "In the seven years that AeA has published its report on jobs, 2002 was the first year the software sector lost jobs. In fact, it had posted the largest gains of any high-tech sector to that point." When asked what is causing the job loss, Michaela Platzer, AeA Vice President of Research, stated that no one economic factor is involved and blaming it on outsourcing is too simplistic.

SLAUGHTER, S. AND ANG, S. 1996. Employment Outsourcing in Information Systems. Communications of the ACM 39, 7 (July) 47-54.

The generic analysis of outsourcing from a labor economics perspective is the most useful part of this article. The article is somewhat dated (1996). The authors are, respectively, professors at Carnegie Mellon and Nanyang Business School in Singapore. Topics include outsourcing as a response to dynamic changes in technology and to enhancing a company's flexibility in getting its work done. Management issues for contract workers and the impact that contract workers have on regular employees are also discussed.

SRIVASTAVA, S. AND THEODORE, N. 2004. A Report to the Washington Alliance of Technology Workers, Communications Workers of America, Local 37083, AFL-CIO. Center for Urban Economic Development, University of Illinois at Chicago, (Sept.).

Using government data from the Current Employment Statistics, this paper tracks the IT labor markets for Seattle, San Francisco-San Jose, Dallas, Chicago, Boston, and Washington D.C. through April 2004. Historical data, some of it going back to 1997, provides information for comparison.

Economist Strassmann uses the example of costs associated with a computer mouse assembled in China for the California-based multinational company Logitech. He argues that the relative savings for IT outsourcing are low and that competitors who outsource less may have an advantage of more rapid innovation. Detailed breakdown of the costs are given in the paper. The article identified reasons why IT staff are unhappy about outsourcing: it breaks up traditional funding patterns where the IT staff had control over 80% of the IT budget, threatens the status quo and particularly custom-made systems, makes IT staff compete with outsiders, opens up the possibility of using standard or even commodity solutions, and puts jobs at risk.

SUTTHIPHISAL, D., 2004.The Geography of Invention in High- and Low-Technology Industries: Evidence from the Second Industrial Revolution. Working paper, Department of Economics, UCLA.

The author is a professor of economics at McGill University. The work is based on his doctoral dissertation at UCLA and argues that there is a weak geographic link between the locus of invention and the locus of production.

TEITELBAUM, M. 2003. Do We Need More Scientists? The Public Interest 153 (Fall) 40-53.

The article provides a history of scientific workforce shortage predictions in the United States. The author discusses the sources of shortage assertions: university administrators and associations, government agencies that finances basic and applied research, corporate employers of scientists and engineers and their associations, and immigration lawyers and their associations.

U.S. BUREAU OF LABOR STATISTICS 2002. Fastest Growing Occupations, 2002-2012. Labor Review Table 3 (Feb.). (Available at http://www.bls.gov/emp/emptab3.htm).

The article provides the Bureau's occasional prediction on fastest-growing occupations. The list includes a number of IT-related occupations among the fastest growing.

U.S. GOVERNMENT ACCOUNTABILITY OFFICE 2004. Current Government Data Provide Limited Insight into Offshoring of Services. Government Accountability Office GAO-04-932 (Sept.).

This report analyzes the quality of federal data in understanding offshore outsourcing. It considers definitions of offshoring and examines data on import and export of services, US direct investment abroad, and multinational company operations. The report finds that there is no commonly accepted definition of offshoring and that it is used in various ways; federal data provides some insight into services offshoring but is not good enough to provide a complete picture; US outsourcing to developing countries was still small in 2002 compared to outsourcing to developed countries; and federal data is limited in determining the effects of services offshoring on US employment and the US economy. There are 25 tables and figures.

VAN WELSUM, D. AND VICKERY, G. 2005. Potential Offshoring of ICT-Intensive Using Occupations. Working Party on the Information Economy; Committee for Information, Computer and Communications Policy; Directorate for Science Technology and Industry; Organization for Economic Co-operation and Development DSTI/ICCP/IE(2004)19/FINAL. (April).

The paper examines indirect sources, trade data, and occupational employment data to try to measure the scale and impact of offshoring. It takes a new approach using existing employment data on occupational categories most likely to be affected by offshoring. The data indicates rapid growth of offshoring, broadly distributed across countries although there are a few leaders such as India. Jobs lost are small relative to general job turnover. Perhaps as much as 20% of total employment in the European Union, United States, Canada, and Australia could be affected by offshoring of service activities. The share is declining in the United States, Canada, and Australia, especially since 2001, while it continues to increase in the European Union.

VAN WELSUM, D. 2004. In Search of Off Shoring: Evidence from U.S. Imports of Services. Birkbeck Working Papers in Economics & Finance, BWPEF 0402. Birkbeck College, University of London (Sept.).

The paper uses IMF, WTO, and BEA data, plus data from several other economic analyses, covering the years 1986 to 2002, to investigate the relationship between import of services by the United States and international sourcing of services production. The analysis augments traditional import statistics with activity of foreign-owned affiliates in the United States and US-owned affiliates in other countries. The author finds evidence that investment of US-owned service sector affiliates overseas has a positive impact on import volumes which is consistent with offshoring of services formerly done in the United States. Investment in the US service sector reduces import of services, pointing to substitution of trade. The paper contains a brief literature review and various tables of descriptive statistics, mainly on imports of services and growth of service industries.

WESSEL, D. 2004.The Barbell Effect. The Wall Street Journal (April 2) A1.

The article gives some illustrative examples of the problems with the Bureau of Labor Statistics 10-year forecasts by examining the long-term forecast made in 1988. The rest of the article focuses on the impact that technology and outsourcing is having on US jobs: jobs that can be reduced to a series of rules will either be automated or outsourced; jobs that require human pattern recognition and action on it are less likely to have this fate. One of the biggest worries is that middle-class jobs will get outsourced or automated, leaving a barbell effect of a large number of low-pay, low-skill jobs and a large number of high-skill, high-pay jobs that require extensive education - with little in the middle. This would lead to even a larger wage gap in the population than there is today.

WULF, W. A. 2005, Outsourcing/Offshoring of Engineering Jobs. National Academy of Engineering Public Discussion. (Available at http://www.nae.edu/nae/NAEPubDisc.nsf OpenDatabase).

This is the annual meeting speech of the president of the US National Academy of Engineering. It provides various data on the offshoring of engineering, discusses the quality of data, and argues against protectionist legislation.

ZEILE, W. 2003. U.S. Affiliate of Foreign Companies. Survey of Current (Aug.).

This paper provides preliminary results from the BEA's annual survey of foreign direct investment in the U.S. Some highlights:

• reversal of a trend of foreign acquisitions of US companies,
• current-dollar gross product of US non-bank affiliates fell (6%) in 2001 - the first time in history,
• foreign sell offs caused a 2% drop in affiliate employment - the first drop since 1992,
• the affiliate share of US employment in the information sector dropped from 10% to 7%,
• exports by all businesses were particularly affected by a sharp drop-off in foreign demand for high-tech capital goods,
• a one-third reduction in imports by affiliates in computer and electronic products.

ZEILE, W. 2004. Operations of U.S. Affiliates of Foreign Companies. Survey of Current Business (Aug.).

This report is based on BEA's 2002 benchmark survey. Production increased 9% while employment dropped 3% in majority-owned non-bank US affiliates of foreign companies. Some points made:

• In the manufacturing and information sectors in 2002, affiliate value added increased substantially after decreasing in 2001. In the information sector this was partly attributed to closing down unprofitable business operations.
• Affiliates account for 14% of all R&D performed by all US businesses - up from 11% in 1997. 90% of this R&D performed for themselves.