NCPA - National Center for Policy Analysis

Fighting Back on Outsourcing

April 5, 2004

What has been seriously lacking in the outsourcing debate thus far is hard data. Now, at last, we are starting to get some serious studies with good numbers. They paint a very different picture of the outsourcing phenomenon, says Bruce Bartlett.

A new study by Global Insight concluded that IT outsourcing, while displacing some IT workers, actually benefits the U.S. economy and increases the number of U.S. jobs:

  • Global Insight, found that the total number of jobs lost to IT outsourcing last year was only 104,000; this amounts to just 2.8 percent of IT jobs in the United States.
  • A much larger number were lost due to unrelated factors, including the collapse of the dot-com boom in 2000, the recession, and rising productivity.

The most important finding of the Global Insight study is that the cost savings from outsourcing don't just flow into higher corporate profits. They contribute significantly to higher output in the United States, which leads to job increases elsewhere in the economy:

  • The study estimates that the gross domestic product was $34 billion higher last year because of outsourcing and that this created over 90,000 net new jobs.
  • These figures will continue to rise in future years and by 2008, GDP will be $124 billion higher and the number of new jobs created by outsourcing will rise to 317,000.

Additional benefits of outsourcing are lower inflation, lower interest rates and higher real wages, which flow to all Americans. Global Insight gets these results because it looks at the ripple effects of outsourcing throughout the entire U.S. economy and not just on IT, as other studies often do, says Bartlett.

Source: Bruce Bartlett, "Fighting Back on Outsourcing," National Center for Policy, April 5, 2004.

For Global Insight study


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