A fundamental mistake made by many critics of foreign outsourcing has been to confuse the passing pain of the IT recession with an alleged long-term decline in the sector. That mistake is compounded when current output and employment levels are compared to the peak of the boom in 2000 rather than to the more normal levels from the late 1990s. A more accurate and less alarming picture of the industry emerges if we compare the state of the industry a few years after the bubble burst to its state a few years before.
Beginning in the early 1990s, with the takeoff of Windows-based computing and the Internet, employment in the IT industry surged. Employment in software and related services grew by one million between 1993 and 2000, before dropping by 166,000 between 2000 and 2002. The story has been much the same across other IT sectors: stupendous growth throughout the 1990s, then a pullback in employment of 10 to 20 percent during the recession. In the IT industry as a whole, employment levels even after the recession are still no lower than in 1998. During the past decade, annual employment in the industry has still grown at a rate twice as fast as employment in private industry in general.
Despite the turbulence of the past four years, the U.S. information technology services sector remains a major force in the U.S. economy. The domestic software, computer, and communications industries accounted for a combined $621 billion of GDP in 2003, up from $510 billion in 1999. IT services that are moving offshore are more than offset by increased output here at home. Any sluggishness in employment growth has been because of rising productivity, not because of falling production.
The jobs that have been lost in the U.S. IT sector tend to be the lower skilled and lower paid jobs in the industry — just as trade theorists would predict. From 1999 through 2002, total employment in the IT industry did drop by more than a quarter-million, from 6.24 million to 5.95 million. But declining employment was concentrated in those occupations requiring relatively low or moderate levels of training and education.
In contrast, the number of IT jobs that require a relatively high level of training and education declined more slowly. In the year before the dot-com and telecom bubbles burst, the industry employed 3.43 million workers whose jobs required at least an associate’s degree and work experience. After a surge of hiring in 2000, followed by a painful shakeout, the number of such highly skilled workers stood at 3.51 million in 2002, still up 2.3 percent from 1999. The number of high-technology jobs overall has actually been increasing since the end of 2003, according to the Bureau of Labor Statistics. Contrary to the popular angst over “our best jobs going overseas,” the best jobs are staying here.
The recovery and expansion of job creation that has already begun in the IT sector should continue into the future. According to the U.S. Department of Labor’s bi-annual projections, the number of jobs in computer and mathematical science occupations is expected to increase from three million to four million in the next decade, a rate of growth that will be twice as fast as employment in the rest of the private economy. Seven of the 30 fastest-growing occupations will be in the computer field. Despite the lingering slackness in IT employment, those jobs still pay an average of $67,000 a year.