Date: Wed, 26 Jul 2006 00:22:21 -0700 From: Norm Matloff To: Norm Matloff Subject: administration finally allows DOC report to be released To: H-1B/L-1/offshoring e-newsletter Even those of you who are incorrigible cynics about abuse of power in the executive branch will raise eyebrows over this one, both for the primary theme and for an interesting secondary one. (Don't stop reading halfway through, at least not without going to the material on the secondary issue.) Through both the Clinton and Bush administrations, the Dept. of Commerce has been remarkably even-handed in issues relating the the industry's claims of a tech labor shortage, and the offshoring issue. Remarkably, this is largely due to two career researchers in DOC, and their principled insistence on doing objective analyses. Even more remarkably, their political appointee bosses have usually stood by them, albeit with occasional blips. You can read the history of this at http://heather.cs.ucdavis.edu/Archive/DOC.txt http://heather.cs.ucdavis.edu/Archive/DOC2.txt http://heather.cs.ucdavis.edu/Archive/DOC3.txt However, two years ago, a lengthy analysis on offshoring produced by the two researchers was suppressed by the administration. Refusing to release the report, the administration offered a 12-page "summary." Based on a slide presentation that the researchers had made earlier, it was clear that the "summary" was actually a highly sanitized version of the real findings. Congressional Democrats, anxious to find a way to embarrass the administration, kept pushing for the release of the original, unexpurgated report, but to no avail. You can read about this in http://heather.cs.ucdavis.edu/Archive/DOCPoliticized.txt Well, the administration has finally agreed to release the original report, as discussed in the article and press release below. The release was achieved based on a Freedom of Information Act request. The administration had fought the FOIA request but finally relented. The bits and pieces mentioned in the article here are intriguing, especially the material on the semiconductor industry. That material is especially interesting because it had been assumed in some circles that hardware development was more difficult to offshore than software. I'll leave it to you to read the details below. Unfortunately, though, the report itself apparently is STILL not available to the public. The rumor I heard was that the report is not available in electronic form. Now, why wouldn't the administration provide it in electronic form? Was this just to humiliate the Democrats, the equivalent of a schoolboy throwing something on the floor and saying, "You can have it, but you'll have to bend down to get it"? Or...is it because there's material in there which doesn't make the Democrats look so angelic either? Recall that John Kerry's bluster against offshoring in the 2004 election turned out to be fake, and that the presumptive Democratic front runner for 2008, Hillary Clinton, is a strong supporter of major offshoring firms such as Tata. (See the files with names beginning with "Kerry" and "Hillary" in http://heather.cs.ucdavis.edu/Archive) Now, here is the secondary issue: # Phil Bond, who was in charge of the Technology Administration at the # time, said he had nothing to do with re-writing the report. He has since # been named president and CEO of the Information Technology Association # of America (ITAA), an organization that took the lead in Washington in # defending the practice of offshore outsourcing of IT jobs. So Bond went from DOC (where he was the boss of the two researchers) to the ITAA, a classic case of a government official going to a lucrative position in the private sector where his job is to exploit his government connections. I had been aware of this move, but the article here prompted me to go back and see what I had said about him in the past, in http://heather.cs.ucdavis.edu/Archive/DOC3.txt Back in 2002, Bond had originally implied that there was a tech labor shortage, but later reaffirmed that DOC's position was that there never had been data confirming a shortage. But then in 2004, he was again talking like there was a shortage. At the time I wrote the following: % The CW article here says that Bond made those comments at "this week's % conference." Apparently due to an editing error, the article does not % say which conference it was, but presumably it was that ITAA conference. % [Added later by NM: The print edition did indeed state it was the ITAA % conference.] % % So, the ITAA seems to be following an established pattern, repeating % their strategy from 1998: They hold a national conference, at which % they invite a top DOC official to speak, during which he denies that % the administration supports an H-1B increase, thus giving (false) % assurance to those who oppose such an increase... % % While I have numerous major objections to many things in the [DOC] % report, I do agree with its major theme. That theme is that if there is % an IT labor problem at all, it is a "skills shortage" rather than a % worker shortage... % % Yet last week Bond gave the standard ITAA party line--let's get more kids % interested in math and science in order to remedy our alleged IT labor % shortage. % % In other words, Bond chose to send the ITAA message, rather than the % message of his own department's report. Isn't that last statement interesting, in light of Bond's subsequent move to the ITAA? And there's more: It turns out that the new Undersecretary, Robert Cresanti, is former Vice President and General Counsel for the ITAA. (See www.technology.gov/UnderSec.htm) So, essentially Bond and Cresanti simply traded places. This former ITAAer Cresanti's duties at DOC include, according to the above Web page, "carrying forward President Bush's vision to grow the economy through the American Competitiveness Initiative." That initiative, as many of you know, includes a drive to facilitate the immigration of foreign scientists and engineers. His duties also include "[serving] as a one-stop-shop for U.S. industry representatives to discuss and resolve critical issues that challenge their ability to thrive." In other words, the lobbyists come here. That presumably includes the ITAA, now headed by Cresanti's predecessor at the DOC. How cozy. The press will never notice, and will quote Cresanti as a skilled bureaucrat who has the good of the citizenry in mind. Norm http://www.manufacturingnews.com/news/06/0724/art1.html Commerce Department Report On Offshore Outsourcing Finally Sees The Light Of Day BY RICHARD McCORMACK richard@manufacturingnews.com After nearly two years, Manufacturing & Technology News has obtained a copy of the elusive Commerce Department report on offshore outsourcing of high tech jobs in the information technology, semiconductor and pharmaceutical industries. The report, which was required by an Act of Congress, was to be submitted to Congress in July 2004. But it was never released, due to fears within the Bush administration that the controversial subject would hurt the president's re-election campaign. Senior officials in the Bush administration, including the head of the Council of Economic Advisors, had publicly embarrassed the Bush team with cavalier statements describing offshore outsourcing of high tech jobs as being good for the U.S. economy. The $335,000, 336-page report obtained last week never saw the light of day. Manufacturing & Technology News submitted a Freedom of Information Act request to the Department of Commerce on March 17, 2005, seeking release of the study, but that request was denied. Eventually, what was produced and provided by the Commerce Department in September 2005 was a 12-page document bearing a July 2004 publication date that bore little resemblance to the work done by analysts at the Technology Administration, all of whom have recently been told they will be laid off due to severe budget cuts for the agency and the issuance of a reduction in force (RIF). Although that 12-page report (at $28,000 per page) was provided to MTN and Congress, it was not made available to the public and an electronic copy has never been posted on the Commerce Department's Web site. That summary put a positive spin on offshore outsourcing and includes analysis written by political appointees that was not in the original work. Democrats on the House Science Committee asked for a copy of the full report in October, 2005, but the Commerce Department denied that request on a specious Freedom of Information Act legal claim that only the political party in power in Congress could require the document's release. After Republicans on the Science Committee acquiesced to Democrats' demands, the Commerce Department provided Congress with the full document, a copy of which has been provided to MTN. That document is quite different from the original 12-page summary, and it is apparent why Bush's political appointees so vehemently refused its release. The administration "was scared of anything having to do with outsourcing," says one source who is familiar with the report's travails. The Bush team "could not afford even a discussion" of the outsourcing issue. "The report speaks for itself," said Ben Wu, who was in charge of the report's demise while at the Commerce Department's Technology Administration. Wu now works in the state of Maryland's economic development organization. Phil Bond, who was in charge of the Technology Administration at the time, said he had nothing to do with re-writing the report. He has since been named president and CEO of the Information Technology Association of America (ITAA), an organization that took the lead in Washington in defending the practice of offshore outsourcing of IT jobs. "As leading companies locate in or contract with labor in other countries, concerns about the shift of work include fears that higher value work may shift from the United States to other locations, impacting U.S. industrial strength and high-salary employment," states a passage in the full study that was deleted in the 12-page version. "Layoffs in the United States, especially in the IT sector, have only exacerbated this concern." The 360-page version of the report describes the types of IT services and software jobs that are being outsourced. It states the obvious: that Indian outsourcing companies "are expanding staff annually by the thousands." The report describes the reasons for the trend including the fact that "venture capitalists are now encouraging U.S. IT start-ups to use lower-cost offshore destinations for software development to reduce the 'cash burn rate.' " The report states that there is "growing pressure in corporate America -- from customers, consultants, and financial markets -- to offshore IT work, as well as growing external and political pressure to stem the flow of American jobs going overseas." Yet the report also highlights the fact that the impact on U.S. competitiveness "appears to be negligible." The full report that wasn't released also contains a long (and sobering) section on the shift of the U.S. semiconductor industry to offshore locations. Again, the 12-page Bush administration release differs markedly from the one the Commerce Department quashed. It states that U.S. semiconductor companies "are hiring more engineers overseas than in the United States" due to their need to "reduce labor and operations costs and serve the growing customer base in Asia." In the long term, the U.S. risks losing high-end R&D and design jobs because, as semiconductor fabs move to Asia, high-skilled jobs move with them, states the report. The design centers that U.S. companies are "rapidly" creating in Asia "do not support local customers but support the home office with lower-cost designers," says a section of the report that was deleted from the one that was released. "The cost of employing a design engineer in Ireland, Taiwan, China or India has been estimated to be 50 to 90 percent lower than in the United States." It further states that, "the number of engineers employed offshore by U.S. semiconductor companies rose by more than 10,000 between 2000 and 2003, while engineers employed in the United States dropped by 4,000 during the same period, according to estimates by the Semiconductor Industry Association." The unreleased version of the report ventured into issues impacting the continued loss of semiconductor industry jobs. "With fewer companies investing in new wafer manufacturing in the United States, process R&D co-located with leading edge facilities may also decline, resulting in fewer high-skill jobs for U.S. graduates. Offshoring of design work can also impose downward pressure on U.S. wages and reduce the demand for U.S. design engineers. As the number of overseas design centers increases, it may draw foreign talent from the United States." The unreleased report also addressed the potential of offshore outsourcing in the pharmaceutical industry. Deleted from the final version was a discussion of how skyrocketing health care costs could lead to pharmaceutical companies deciding not to make future investments in the United States. "It may be...that investment incentives and the global geography of capabilities and infrastructure will shift in the years ahead in ways that will help other countries' pharmaceutical industries take on a larger role than at present in the global pharmaceutical innovation engine," says the report that the Commerce Department refused to release. The unreleased report provides a comparison of the average annual pay for global software workers: United States: $63,000 Japan, $44,000 Canada: $28,174 Indonesia: $12,200 Thailand: $11,124 Russia: $7,500 Philippines: $6,550 Poland: $6,400 Hungary: $6,400 Pakistan: $4,860 China: $4,750 http://sciencedems.house.gov/investigations/investigations_detail.aspx?NewsID=1167 Committee on Science, Democratic Caucus Investigations :: July 24, 2006 Globalization and the American Workforce What Did the Technology Administration Really Say? Job losses continue in industrial sectors across the U.S. with little response from the Federal Government, noted U.S. House Science Committee Ranking Member Rep. Bart Gordon (D-TN). Gordon and fellow Committee Democrats have sought to highlight this growing problem - known as "offshoring" - in an attempt to insure hard-working Americans are kept in the loop on the state of their jobs. Democrats' efforts have centered on obtaining data compiled in 2004 by analysts at the Technology Administration (TA) within the Department of Commerce. That report, entitled An Overview of Workforce Globalization in the U.S. IT Services and Software, U.S. Semiconductor and the U.S. Pharmaceuticals Industries, provided an in-depth analysis of the ongoing loss of U.S. high-tech jobs and represents the most complete analysis to date on offshoring of U.S. jobs. Until today, the TA analysts' report has never been publicly released. Today we are making available the executive summary and, for comparison purposes, the twelve-page "six-month assessment" the Department of Commerce released last September. Cover of the Technology Administration Draft report. Click to see the executive summary in PDF format. An Overview of Workforce Globalization in the U.S. IT Services and Software, U.S. Semiconductor and the U.S. Pharmaceuticals Industries First page of the August 2005 Six-Month Assessment. Click image to see the full document in PDF format. Six-Month Assessment of Workforce Globalization in Certain-Knowledge-Based Industries Background Democratic Members of the Science Committee have a long-standing interest in using Federal programs and agencies within our jurisdiction to undertake initiatives that prepare Americans for high-technology, high-paying jobs. In the 1980s, this "offshoring" seemed limited to manufacturing jobs in blue-collar industries such as textiles, steel or metal fabrication. The U.S. responded by helping create the precursors of the Advanced Technology Program and the Manufacturing Extension Partnership Program at the Department of Commerce. Recently, however, offshoring has begun to strike at the very high-tech jobs that we believed U.S. workers would move to fill as blue-collar opportunities shifted to other countries. A Cable News Network report in early March 2006 noted that 500,000 American jobs have migrated to India in recent years. That number is expected to triple in the next two years as American companies seek to cuts costs and streamline business. India is but one example of a country that seems to be gaining employment at the expense of American workers. Over the last six years, the U.S. has lost just under 3 million jobs due to offshoring. Now, we are witnessing software engineering, computer design, research and development, radiology, architecture and design and other high-value-added positions moving offshore to low-wage markets such as India, China, Ireland, and Brazil. For the past two years, Science Committee Democrats tried to get specific details and information from Federal experts on this alarming trend. Our efforts were met with resistance, stonewalled by Federal agencies, and a lack of the Committee's traditional bipartisan cooperation. The Federal Government did the research, taxpayers paid for the report and the Technology Administration produced its analysis and findings, yet the Administration buried the truth in rhetoric. Democrats wanted the data, and finally got it. Brief Timeline of the Report and Informational Requests * January, 2004: The FY2004 Consolidated Appropriations report directed the Technology Administration to undertake a study on "the extent and implications of workforce globalization in knowledge-based industries such as life sciences, information technology, semiconductors and finanacial services." The report was due by June 23, 2004. $335,000 was earmarked for this study. * No less than five analysts at TA immediately began work on the report in January 2004, ultimately producing a draft almost 200 pages in length. Just before submitting their drafts to TA management, the analysts were ordered to remove all citations and sourcing in their analytical report. However, neither the report nor a summary is ever released by Commerce. May, 2005: Democratic Staff of the Science Committee ask the Commerce Department for the status of the offshoring report and a briefing. Commerce Legislative Affairs never responded to the request (nor to subsequent requests during the summer). August 3, 2005: Reps. Gordon, Costello (D-IL) and Wu sent a letter to Secretary Gutierrez asking him to release the report - now more than a year overdue - and also asking questions regarding why the report was so late. The Secretary did not respond. September 15, 2005: A report summary, twelve pages in length, was released by Commerce in response to pressure from the Committee letter and from a Freedom of Information Act request filed by the trade publication Manufacturing News. The summary was fifteen months late. Staff learned that it was actually composed during August of 2005 and "back-dated" to comply with the Appropriation Committee's direction. October 11, 2005: Reps. Gordon, Costello and Wu sent a letter to Secretary Gutierrez once again requesting a copy of the original draft report produced by TA analysts. No response. December 23, 2005: Dan Caprio, Deputy Assistant Secretary for Technology Policy, denied Democratic Members' request for the original draft report. His reply thanked them for their "FOIA request." January 26, 2006: Rep. Gordon asked Chairman Boehlert (R-NY) to sign a document request to the Commerce Department requesting a copy of the draft report and other materials. Chairman Boehlert declined. February 8, 2006: Reps. Gordon and Wu wrote to Subcommittee Chairman Ehlers (R-MI) asking that he sign a request for the final draft report. Chairman Ehlers declined through his staff. March 9, 2006: Rep. Gordon introduced H.Res. 717, a Resolution of Inquiry directing the Secretary of Commerce to deliver a copy of the final draft TA report to Congress. The Resolution was referred to the House Science Committee. March 29, 2006: The Committee defeated the Resolution of Inquiry, but on a tie vote (17-17) failed to report to the House that the Resolution should be defeated. Chairman Boehlert recessed the markup. April 5, 2006: The Committee reconvened to complete the markup and reported the Resolution of Inquiry to the House without a recommendation. At the same time, Chairman Boehlert agreed to request that the Department deliver the report to the Committee. Related Content Related Press Release(s): * Dems Quest For Jobs Report Successful * Frustrated by Lack of Federal Commitment to Curb Offshoring, Dems Seek Commerce Report Containing Data on Loss of U.S. Jobs * Gordon: Commerce Report on Offshoring Confirms U.S. Job Losses May Accelerate * What Is Happening to American Jobs? Related Letter(s) To Admin: * Letter to Secretary of Commerce Seeking Mandated Report on Impacts of Offshoring and Globalization * Second letter to Secretary of Commerce on Mandated Report Concerning Impacts of Offshoring and Globalization Related Legislation: * Resolution of Inquiry Directing the Secretary of Commerce to transmit to the House of Representatives a copy of a workforce globalization final draft report produced by the Technology Administration. Related Markup(s): * Full Committee Markup Complete consideration of H. Res. 717, Directing the Secretary of Commerce to deliver a draft report on offshoring jobs * Full Committee Markup H. Res. 717, Directing the Secretary of Commerce to deliver a draft report on offshoring jobs 394 Ford Building Washington, D.C. 20515 | Phone: (202) 225-6375 Fax: (202) 225-3895 | Contact Us Online