Assessing the Impact of IT-Enabled Services Offshoring on U.S. Employment and Earnings

Abstract

This paper provides a preliminary assessment of the recent impact of what can be called the “IT-enabled services offshoring” process on U.S. domestic employment and earnings in relevant services sectors. It draws upon relatively new international services trade data sets developed by the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA), which are used in conjunction with service employment and real wage data from the U.S. Department of Labor’s Current Employment Statistics (CES), and deals with the years since the turn of the new century, when concerns about the IT-enabled services offshoring process sparked intense professional discussion. The study documents that U.S. trade in IT-enabled services is generally a two-directional phenomenon, entailing both an import as well as an export dimension. While the overall U.S. trade balance for IT-enabled services has been consistently positive, consistently negative trade balances are observable in computer services, an indication of substantial offshoring in that area; moreover, the significant two-way trade pattern in the telecommunications area suggests the presence of offshoring in that area as well. With respect to the other IT-enabled categories (e.g., legal, accounting, and architectural and engineering services) consistent two-way trade has existed in all of the areas reviewed, thus suggesting the presence of some degree of offshoring across all areas. However, while not representing a congruent mapping of categories with the international trade in services data, the available occupational employment and earnings data indicate that the overall relative impact of the IT-enabled offshoring phenomenon has thus far apparently been modest, reflecting most notably the small shares that the relevant occupational categories represent in overall U.S. private employment. Moreover, the observable diverse annual fluctuations and trends in relative occupational employment and earnings in these services sectors are what one would reasonably expect in a huge continental labor market (with its numerous regional and local sub-markets) that is influenced by a variety of forces, including but beyond IT-enabled offshoring.