Cover Image


View/Hide Left Panel

Estimates of the number of jobs that will actually be offshored vary as well. These estimates are generally expressed as the number of jobs offshored over a period of time (NAPA, 2006). For example, Forrester estimates that 3.4 million jobs will be offshored from 2005 to 2015 (340,000 per year); Goldman Sachs estimates that 6 million will be offshored from 2003 to 2013 (600,000 per year) (GAO, 2004). Thus, despite a consensus that offshoring is significant and increasing, it is impossible to say what the net impacts on U.S. employment have been or will be.

Even if the number of jobs offshored is at the high end of estimates, only a small percentage of overall jobs in the services sector would be lost (or gained) when trends in the domestic U.S. economy are factored in. After the collapse of the tech bubble and during the slow recovery that followed, some U.S.-based companies announced large-scale layoffs in the United States, at the same time launching new operations overseas, particularly in India. However, since 2005, the U.S. tech economy has stabilized and recovered, and there have been fewer cases like these. Thus, overall, there may still be net job creation in the United States in many occupations that will be subject to widespread offshoring over the long-term.

Even though engineering is on almost every list of occupations vulnerable to offshoring, the uncertainties in estimates of offshoring of engineering are even greater than for offshoring in general. For example, McKinsey Global Institute (2005), based on its global analysis, estimates that more than half of engineering positions in the industries it examined could be performed anywhere in the world. NASSCOM (2006) projects that the Indian engineering services offshoring industry will grow from about $1.5 billion today to $30 to $60 billion by 2020.

Yet it would be unwarranted to conclude that half of the 1.5 to 2 million current U.S. engineers are in danger of losing their jobs in the next few years. For one thing, the Bureau of Labor Statistics estimates that the U.S. engineering workforce will grow by 13 percent between 2004 and 2014, roughly in keeping with the projected growth of the total U.S. workforce (CPST, 2006). For another, offshoring will be limited by the supply of talent available in destination countries. Although emerging economies such as India and China are turning out large numbers of young engineers and are taking steps to increase their numbers and improve their quality, the speed at which these improvements can be made is limited. McKinsey (2005) estimates that only 15 to 20 percent of young engineers in developing countries are currently qualified to work in international companies. Finally, developments in the United States will play an important role. For example, U.S. engineering education may or may not evolve in ways that support engineering as a profession that can attract more of the best and brightest U.S. students.

The emergence of offshoring signaled the beginning of an era in which a broad swath of the U.S. workforce, including engineers and workers in many other services professions, became subject to international competition. Based on a comprehensive, up-to-date understanding of trends in offshoring, the United States can remain a premier location for engineering activity, and the engineering enterprise can adapt and renew itself. However, for the United States to develop policies to preserve its economic vitality and avoid adopting policies that are counterproductive, policy makers must have a clear understanding of what is happening and why.

At the organizational level, the institutions and associations that educate and rely on engineers also need to understand trends in offshoring as a basis for developing new approaches to defining necessary skills and training engineers for careers in a globalized world. On the personal level, individual engineers must have the information they need to determine the most promising career paths and prepare themselves accordingly.

Realistically, it may be some time before even glaring data deficiencies are addressed. In addition, much of the offshoring activity by companies is inherently difficult to track through trade statistics. As a result, although industryspecific analyses of the type commissioned for this workshop will continue to be important sources of information about offshoring and globalization, they can provide only a snapshot. Further studies will be necessary as engineering offshoring evolves.

Winners and Losers

FINDING 3. Offshoring appears to have contributed to the competitive advantage of U.S.-based firms in a variety of industries, and the negative impacts of offshoring on U.S. engineering appear to have been relatively modest to date. However, the negative effects have been much more severe in some industry sectors and for some jobs than others.

Cost reduction is often an important factor in the initial offshoring decision, particularly for IT-related companies. Another consideration is the need to compete in new or rapidly growing markets. For individual businesses, decisions about where to locate engineering activities are made on the basis of both value and the potential for market growth—similar to the way decisions concerning access to capital and other resources are made. The second factor has been very important to foreign-based firms locating engineering activities in the United States. This so-called “onshoring” is an important part of the overall picture of globalization.

Although some kinds of offshoring have appeared only recently, disaggregated business models have a long history in several U.S. industries. For example, “fabless” semiconductor companies that contract out manufacturing first appeared in the 1990s. U.S. firms developed this model, and fabless companies (e.g., Broadcom) are among the most successful and fastest growing semiconductor companies in the past decade. The “foundry” industry, which fabricates

The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement