In the last decade there has been a vast expansion of the IT sector in the United States. Due to the ever increasing competition in this sector and the burst of the IT bubble, the need to save costs for IT companies has become an essential element for survival. Labour is a major cost component in the IT service sector. This makes it attractive for companies in the United States, incurring high costs for labour, to seek alternative and cheaper sources of labour elsewhere.
Recent developments in the education and welfare levels in countries such as India, China and South Korea have created an attractive workforce for American IT companies, seeking to save costs. The quality of labour in these countries is ever increasing and has reached comparable levels to that of the United States. The establishment of areas like Bangalore in India, where IT thrives, is a direct consequence of this development. Another consequence of these developments in education and welfare is that there is a very large supply of IT specialists entering in to the job market every year. The currently just over 5,000 IT graduates in Germany and the 25,000 in the USA that enter the labour market each year contrasts with 120,000 in India and as many as 250,000 in China. Partly because of this high supply of labour in India and China, next to the lower income per capita, the wages are considerably lower compared to the United States. The hourly rate for a software developer in Germany is 54 and in the United States 44. This compares with significantly lower costs of just 14 in China. In the Czech Republic and India labour costs, at 8 and 7 an hour respectively, are half less again.1
The combination of high quality labour and relatively low wages results in a net outflow of jobs going to countries such as India, China and South Korea. The pro-outsourcing consulting firm Global Insight estimates [the United States] lost 104,000 information technology jobs to offshore outsourcing between 2000 and 2003, more than a quarter of the 372,000 jobs lost in the sector overall during the period. The Economic Policy Institute found employment in U.S. software-producing industries fell by 128,000 jobs from 2000 to early 2004, while about 100,000 new jobs producing software for export to the U.S. were created in India over the same period of time.
The above mentioned leads us to believe that the number of IT jobs in the United States will diminish even further in the coming years, eventually leading to the demise of the US IT sector.
Recent developments in the education and welfare levels in countries such as India, China and South Korea have created an attractive workforce for American IT companies, seeking to save costs. The quality of labour in these countries is ever increasing and has reached comparable levels to that of the United States. The establishment of areas like Bangalore in India, where IT thrives, is a direct consequence of this development. Another consequence of these developments in education and welfare is that there is a very large supply of IT specialists entering in to the job market every year. The currently just over 5,000 IT graduates in Germany and the 25,000 in the USA that enter the labour market each year contrasts with 120,000 in India and as many as 250,000 in China. Partly because of this high supply of labour in India and China, next to the lower income per capita, the wages are considerably lower compared to the United States. The hourly rate for a software developer in Germany is 54 and in the United States 44. This compares with significantly lower costs of just 14 in China. In the Czech Republic and India labour costs, at 8 and 7 an hour respectively, are half less again.1
The combination of high quality labour and relatively low wages results in a net outflow of jobs going to countries such as India, China and South Korea. The pro-outsourcing consulting firm Global Insight estimates [the United States] lost 104,000 information technology jobs to offshore outsourcing between 2000 and 2003, more than a quarter of the 372,000 jobs lost in the sector overall during the period. The Economic Policy Institute found employment in U.S. software-producing industries fell by 128,000 jobs from 2000 to early 2004, while about 100,000 new jobs producing software for export to the U.S. were created in India over the same period of time.
The above mentioned leads us to believe that the number of IT jobs in the United States will diminish even further in the coming years, eventually leading to the demise of the US IT sector.
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