The billions in spending included in the stimulus plan may be more effective than tax incentives in stemming the outsourcing of IT jobs
Corporate America's drive to cut costs by moving jobs offshore has hit Robert Poulk hard. A veteran of the defense, aerospace, and computer industries, Poulk never had trouble finding work—until 2003. That year, his job as a senior troubleshooter for a major software manufacturer was moved offshore to Bangalore, India. During a yearlong period of unemployment, Poulk sent out five to seven résumés a week and got only four responses. Eventually, he was hired by a temp agency and assigned a job at his old company, which he asked not be identified, where he now works as a contractor for about 30% less money and no benefits.
Having tapped his savings to make mortgage payments during his period of unemployment, Poulk is now concerned he won't have enough money for retirement. "I'm still waiting for the new prosperity that globalization was supposed to bring," he says.
Poulk's hopes, and those of other U.S. workers whose jobs have been shipped overseas, now rest with President Barack Obama, who has pledged to keep more jobs in the U.S. On Jan. 16, just days before his inauguration, Obama told workers in Ohio, "We're not looking to create just any kind of jobs here; we're looking to create good jobs that pay well and can't be shipped overseas."
Tax Credits Aren't Enough
Keeping jobs within U.S. borders proved a tall order for Obama's predecessor and may be comparably vexing for the current Administration. Poulk's job was part of an early wave of IT jobs headed offshore, but the trend has only accelerated since 2003. U.S. corporations will move at least 140,000 jobs offshore in 2009 and 2010, and more than 50% of those jobs will be in IT, according to a December 2008 report by the Hackett Group (HCKT), a global strategic advisory firm that specializes in outsourcing. By 2010, about 25% of all IT jobs at the world's largest companies by market value will have been moved offshore, according to Hackett.
Obama initially proposed a $3,000 tax credit this year and next for every net new job created. Still, outsourcing executives say that's not enough of a financial incentive to keep jobs in the U.S. "An average salary for a software developer in the U.S. is $75,000 and it's $8,000 in India," says Mary Jo Morris, president of World Sourcing Services for Computer Sciences Corp. (CSC).
Ultimately that tax credit proposal was shelved and other tax cuts aimed at creating jobs were included in the $819 billion economic stimulus package, known as the American Recovery and Reinvestment Act, that passed the House on Jan. 28.
Spending on Health, Broadband, Power Grid
Also included in the legislation are several initiatives aimed at creating jobs through spending. For starters, $20 billion in the stimulus package is directed at health information technology and the building of an infrastructure to promote the electronic exchange of health records. That investment will create or retain 86,820 jobs for one year in high-paying industries such as computer hardware manufacturing, software, and IT services, according to the Information Technology & Innovation Foundation, a nonpartisan think tank focused on public policies to advance technological innovation.
The stimulus act also includes another $6 billion to improve broadband Internet access in the U.S. That amount would create or retain 29,892 direct telecom jobs for a year and 8,304 capital equipment jobs, according to the Information Technology & Innovation Foundation. Finally, $11 billion in funds that will go to modernizing the power grid in the U.S. will create or retain 64,509 direct and indirect IT jobs for a year, according to the foundation. "IT did pretty well. There's a real focus on digital infrastructures, there's real money there," says Robert Atkinson, president of the Information Technology and Innovation Foundation. "It basically affirmed the commitment that the country's building out IT networks is important to our future."
Even if the spending doesn't prompt companies to create jobs in house, it may give them extra incentive to choose to send work to domestic firms rather than those outside the U.S., says Jagdish Dalal, managing director of thought leadership at the International Association of Outsourcing Professionals, an industry group of outsourcing leaders from Fortune 500 companies and other organizations. That's because it takes some time to set up an offshore model and the work in this stimulus package is designed to happen immediately. This will ultimately be a challenge for offshore outsourcing destinations like India and China, he says.
That would likely be welcome news to U.S. IT professionals like Robert Poulk. "My hope is that this new Administration can steer the government back to governing for the greater good," he says, "and that it can prevent the engines of commerce from ignoring their obligation to the system whose rules allowed them to flourish in the first place."