Dimensions of Globalization

The rapid emergence and tremendous impact globalization has had on industries throughout North Carolina can largely be attributed to one significant factor,technological change. Perhaps more than any other business, the information technology industry has experienced both the positive and negative consequences of globalization. While North Carolina’s economy is greatly benefiting from direct foreign investment, thousands of its citizens are suffering as their jobs are being outsourced overseas. Both the favorable and adverse affects globalization has had on the information technology industry are outlined below. Possible solutions to the various difficulties North Carolina is confronting, and a projection of what to expect in the near future are presented in the Policy Implications section.

Outsourcing

Within the past decade, the idea of outsourcing has integrated itself into virtually every industry imaginable. The information technology industry has not only experienced heavy doses of outsourcing, but it has led the charge for other white-collar industries to follow. Every week, headlines describing the threat of outsourcing cover magazines and newspapers. Many United States citizens are extremely concerned with the outsourcing of Information Technology jobs because they account for several areas within a corporation. Below is a list of the top IT jobs currently being outsourced.

Primary Services Being Outsourced

Why Outsource?

Perhaps the most frequently observed explanation for why companies decide to outsource jobs is the desire to increase profits. Through the reduction of labor costs, companies are more capable of competing in the global marketplace by selling their products and services at a lower price. Many companies in the information technology industry have decided to outsource services for precisely this reason. However, a multitude of other justifications have been documented to help explain the increasing desire to outsource. According to a survey conducted by J. Collins and R. Millen, the top causes for outsourcing informational services are as follows:

Concerns over Outsourcing

The primary concerns with outsourcing lie in the minds of laborers. Due to outsourcing, many U.S. workers have lost their jobs within the past twenty years and that trend appears to be accelerating. What historically only affected blue-collar workers is now impacting the white-collar jobs of United States citizens.

Although many people are watching their jobs go abroad, the public as a whole is experiencing lower costs to many informational services. Many white-collar jobs are now experiencing the trade-off that the manufacturing sector encountered in the 1970's.

Although the degree to which outsourcing will affect the information technology industry is difficult to determine, numerous consulting firms have conducted studies in an attempt to gather a reasonable estimate. One of the most widely accepted forecasts, performed by Forrester Research in 2003, predicts that 3.3 million technology and service jobs will leave the United States by the year 2015. The study further concluded that 472,632 of those lost jobs would be computer positions, nearly ten percent of all current United States computer jobs.

Where are the IT jobs going?

It is quite clear that many information technology jobs are increasingly being conducted offshore, but exactly where is this taking place? One of the largest beneficiaries to U.S. outsourcing of information technology jobs has been India. With an English speaking language, 520,000 IT engineers, and starting salaries around $5,000, India has become extremely attractive for American businesses. (Engardio, Bernstein, Kripalani Business Week) Because of large workforces and cheaper labor, China and the Philippines have also increasingly been targets for information technology outsourcing.

Graphic Source: Business Week Online, February 3, 2003

The Positive Perspective

As described in the previous few paragraphs, many individuals perceive globalization as destructive to the U.S. economy and therefore strongly appose the decision to outsource. However, it must be understood that globalization has also created a tremendous benefit and will likely generate positive long term effects. A topic seldom discussed in contemporary society is the concept of "insourcing," the investment of foreign companies in the United States. Insourcing can be described as foreign direct investment, an area of enormous importance.

According to the Washington Council on International Trade statistics, insourcing currently accounts for over 6.5 million jobs nationwide. (The News & Observer, 2. Feb. 2004) Although this figure is less than the number of jobs outsourced, mentioned above, the gap has narrowed in the past twenty-five years. If considered in that context, it can be stated that during the period when outsourcing has become a tremendous issue, insourcing has actually been more relevant.

North Carolina has benefited remarkably from insourcing. Current data indicates that 240,000 of the jobs in North Carolina exist because of insourcing, a figure that has risen considerably in recent years. (The News & Observer, 2. Feb. 2004) State-of-the-art research facilities and a highly skilled workforce have made North Carolina an attractive location for foreign corporations. With an emphasis on continued education and investment into cutting edge industries, North Carolina will remain at the forefront in attracting direct foreign investment. For further insight into the importance of these areas go to Environmental and Social Issues.

Economic Theory

Economic theory indicates that the outsourcing of IT jobs will ultimately prove beneficial to American society. Economists claim that the outsourcing of routine jobs requiring little supervision will ultimately create new higher paying jobs. Strong evidence supporting this theory already exists.

The manufacturing industry provides an ideal example by demonstrating that outsourcing does create jobs. Routine tasks requiring little supervision were outsourced in the manufacturing industry in the 1970's and 1980's, just as many routine information technology jobs are being outsourced today. History revealed that, as many economists predicted, higher wage jobs were created when much of the manufacturing work was outsourced. Education needed to play a major role for this occurrence to unfold. The re-training of laborers to help supply them with the skills necessary to perform more complex tasks was required.

Today, the information technology industry finds itself in the same situation as the manufacturing industry employees did two decades ago. The economic predictions are the same, but if they are to uphold employees must once again embrace change and re-train themselves. If that is accomplished, the United States will continue to experience an influx of new higher paying jobs.