Date: Mon, 12 Feb 2007 23:36:45 -0800 From: Norm Matloff To: Norm Matloff Subject: new report on offshoring To: H-1B/L-1/offshoring e-newsletter The contents of the new report discussed below are not very new. And from my point of view especially, the report makes the usual mistakes: the report claims that the solutions are more education, more innovation and more retraining. I've discussed before why these won't work, so I won't do so here. However, what is interesting about the report is that one of the authors is Robert Atkinson, who used to be one of the Democratic Party's main theoreticians; see http://heather.cs.ucdavis.edu/Archive/DemocraticParty.txt His views have been the same as those of Hillary Clinton, John Kerry, Joseph Lieberman and so: Support Big Business on offshoring and H-1B just like the Republicans, but offer more government help for business and workers than the Republicans generally do. The bottom line, of course, is the same. In that light, the present report is surprisingly alarmist. Granted, it still not predicting really major hemorrhage in programming jobs; it does recommend the usual Democratic Party remedies; and it doesn't mention H-1B at all. But its tone is grave, and this was picked up by the Mercury News reporter. Note the quote of Cynthia Kroll of the UCB Haas team I mentioned last week (http://heather.cs.ucdavis.edu/Archive/UCBGlobConf.txt). As I mentioned, the Haas people (at least Jaffee and Kroll, though I'm told Bardhan is different) have pulled back considerably from their shrill message of a couple of years ago, and are now saying that offshoring is not causing workers in the computer field any big problems. That is the acceptable line these days if one wants to "stay in the game." I don't mean that these researchers are deliberately fudging their analyses, which I do NOT believe is the case. But I do believe that the minute they find some angle on the data which is bullish on offshoring, they too hastily decide that their work is done. That makes Atkinson's new view all the more suprising. I still have four or five items stacked up for posting. Norm http://www.mercurynews.com/mld/mercurynews/business/16680139.htm Report predicts job losses to offshoring By Nicole C. Wong Mercury News Silicon Valley is likely to lose at least one out of every five computer programming, software engineering and data-entry jobs that existed in 2004 due to offshoring over the next decade, according to a first-of-its-kind report being released today by the Brookings Institution. Previous offshoring studies have examined the pros and cons of pushing work across U.S. borders, and, more rarely, at which occupations were vulnerable and where they were located. But the Brookings study is the first to forecast how many jobs could disappear in specific metropolitan areas. ``The offshore phenomena is not something like a peanut-butter sandwich -- spread evenly across the country. It's very spiky,'' said Robert Atkinson, a co-author of the report and president of the Information Technology & Innovation Foundation, a Washington, D.C. public policy think tank. ``Federal, state and regional policy hasn't caught up to that fact, and we need to take that seriously.'' The study combined Bureau of Labor Statistics data with Forrester Research offshoring forecasts and other information to estimate the percentage of jobs by occupation likely to disappear due to offshoring in each of 246 U.S. metropolitan areas between 2004 and 2015. The study also factored in additional ``offshoring risks,'' like the ratio of wages to productivity for each occupation in each area. For example, valley computer programmers' wages in 2004 were higher than those typically earned by workers nationwide with similar productivity. Offshoring's potential impact spiked higher in Silicon Valley than almost anywhere else in the country, according to the report. • The San Jose area, defined as Santa Clara County, is projected to lose 20 to 24 percent of the computer programming, software engineering and data-entry jobs it had in 2004. No other region is expected to lose a larger percentage. • Overall, San Jose is expected to lose 26,000 to 36,658 jobs due to offshoring, amounting to 3.1 to 4.3 percent of the 852,510 jobs existing in 2004. That puts the valley in the top five of vulnerable metro areas, along with San Francisco (defined as San Francisco, San Mateo and Marin counties); Boulder, Colo.; Lowell, Mass.; and Stamford, Conn. Anyone could have guessed Silicon Valley would rank high on the offshoring list since the region is renowned for its high concentration of information technology jobs. According to the report, IT service jobs accounted for about 7 percent of the valley's employment in 2004, compared with only 2.2 percent nationwide. But study co-author Howard Wial found the valley's ``moderate'' amount of predicted job losses surprising. ``I thought it might have been a little bit higher, simply because of the dominance of IT service jobs in the region,'' said Wial, a senior research associate at Brookings, a private, nonprofit research organization in Washington D.C. The report characterized the valley's predicted employment erosion as ``moderate'' in light of the annual rate of job loss due to all factors. The forecast loss of 4.3 percent of the valley's 2004 jobs over 11 years breaks down to 3,333, or 0.4 percent a year. But Carl Guardino, chief executive of the Silicon Valley Leadership Group, called the impact more than ``moderate.'' ``For those 3,333 families, it's alarming,'' Guardino said. ``That's why we need to address the underlying issues we can control. A number may be a statistic for some, but it's a real issue for a family.'' An IT job that's offshored can also ripple into a larger drop in local employment because laid off workers may leave the area. As a result, Wial said, ``you also lose local service jobs, like auto mechanics and dentists.'' That could magnify the report's job loss impact by 1.5 to 3 times the metropolitan predictions. Cynthia Kroll, a senior regional economist at the University of California-Berkeley, said the Brookings study is ``an interesting exercise'' that's filled with counting-methodology caveats. ``Do I think San Jose should start trembling? No,'' said Kroll, who in 2005 published a paper that refined which white-collar occupations were at risk of being offshored and examined the metropolitan areas where they were located, specifically San Jose. For example, San Jose's job market has experienced ``substantial restructuring'' over the past few years, she said, so ``it's not clear that what's left are those easily offshorable jobs.'' Also, questions arise around the statistical reliability of the data when drilling down to the metropolitan level partly because of the small sample size. The reports' authors acknowledge several other limitations, including the lack of accounting for jobs gained through normal employment growth or as a result of offshoring. The study should be viewed as ``the Ghost of Christmas Future,'' Wial said. ``It's not a prophecy that all these jobs will be lost . . . It's an opportunity while there's still time to use public policy do to something about it.'' _________________________________________________________________ Contact Nicole C. Wong at nwong@mercurynews.com or (408) 920-5730.