Thursday, January 05, 2006

More Jobs Despite Outsourcing

While the politicians and mainstream media run around, like Chicken Little, worrying that the sky is falling due to the outflow of jobs and dollars to places like China and India the facts give a different story.

My regular job is managing IT Training and, as a result, I keep an eye on the IT job market in order to know the type of training needed in the market. For the past two or three years I have been flooded with news stories and reports about all the good IT jobs being exported to China and India.

As an economics instructor, I also try to keep up on other economics news and that has been full of tales about how manufacturing jobs, especially in the textile industry, are being lost to China.

It is a fact that thousands of good paying high tech jobs in the IT Industry, formerly done by Americans are now being done by people in China, India and other third world countries. Also, there has been a continuing decline in jobs in old line manufacturing industries as these companies are either moving their operations abroad to countries with lower labor costs or are losing their market share to competition from competitors operating in lower wage foreign countries. But two articles this week shed a different light on this.

First, a blog entry at by Mike Shedlock noted
that China, of all places, is LOSING manufacturing jobs. Where are the Chinese jobs being exported to? Nowhere. That's right, job growth in China's manufacturing sector is slowing and, in some cases, actually declining but the jobs lost are not being outsourced to lower wage countries. As China's economy grows, companies in China are starting to face the same pressures that companies in America and other industrialized countries have faced and are still facing. On the one hand competitors in other parts of the global economy are finding ways to manufacture certain products, like textiles, at lower cost than China and this lower cost is passed on to consumers in the form of lower prices. On the other hand, as the Chinese economy grows more jobs are created and companies in China are beginning to encounter labor shortages. When labor, like any resource, is scarce, those that need it begin to bid up the price – in this case wages.

In order to remain competitive, Chinese manufacturers must adapt new technologies and techniques that allow them to maintain or increase production at a lower cost. Like American and other advanced economies, the Chinese are beginning to produce more with less and this translates into lower prices and more goods for all the people. This is the driving force behind the ever rising standard of living that Americans have long enjoyed and the rest of the world is now beginning to enjoy.

The other piece of news comes from a recent survey conducted by Computerworld Magazine about jobs in the IT Industry. According to the survey, less than 5% of the 10 million jobs in the U.S. IT Industry have been outsourced to companies overseas. True, some of these were high paying programming and other technical positions. But, all of these programming jobs and other positions, such as call center personnel, were low end, repetitive type positions. The rapid growth of computers in the past three decades resulted in high demand for programmers which in turn translated into high pay for these positions. The high pay attracted new people into the field and now there are numerous people in foreign countries that can do this work at a fraction of the wage U.S. programmers are being paid.

Does this mean that programmers have no future in the U.S. No! There is a rising demand for programmers with the higher level skills and flexibility needed by U.S. companies. People whose skills are limited to simply writing code probably have very little future, career wise, in the U.S. However, programmers who know how to write in a number of different computer languages and have business knowledge and skills are in high demand as are computer security experts and project managers. In these areas wages are rising and labor is in short supply. In addition to having a broader range of skills, the other critical factor is a willingness to relocate as the jobs and people with the required skill sets are not always located in the same geographic area of the country.

The reality is that the U.S. still faces a labor shortage but it is a shortage of skilled people. The future is great but only for those with the ambition to continue learning new skills and upgrading their existing skills.

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