February 13, 2007

Study: Outsourcing Could Cost Boston 3% of its 2004 Jobs

The Lowell area may lose up to 4.3% of jobs that existed in 2004 to offshoring, according to a new Brookings Institution report, while the Boston metro area is expected to lose 2.6% to 3% of such jobs by 2015. IT jobs will be among the hardest hit, the report predicts, with some regions - including Boston and Nashua, N.H. - losing up to 17% of existing programming and software engineering positions in the next eight years.

The report, Implications of Service Offshoring for Metropolitan Economies, places Lowell in the highest category studied, along with Boulder, Colo; San Francisco; San Jose, Calif. and Stamford. Conn. All are expected to lose 3.1% to 4.3% of their jobs to overseas outsourcing by 2015.

Areas with high concentrations of information technology jobs are most vulnerable, followed by those specializing in back-office services. Large metro areas (a million or more) are also most likely to experience a higher percentage impact. Along with highlighting the threat from foreign competition, the report suggests governments "pursue policies that boost productivity and innovation, assist workers who are harmed by offshoring, and modernize approaches to economic and workforce development." Innovation or the ability to "make creative use" of innovations elsewhere, will likely offer the best protection against job loss, the study's authors say. But the study also has specific advice for federal, state and local authorities, including encouraging education & training and business collaboration.

Interestingly, the report calls for a variety of policies to "level the playing field" between U.S.-based companies and foreign competitors, including spreading out health care costs "widely among residents and/or businesses" instead of relying on our current employer-based insurance model.

The report's authors warn that "when indirect employment effects are considered, the metropolitan areas that are most vulnerable to offshoring could lose many more jobs than our estimates suggest. Because of multiplier effects, the total number of jobs lost in a metropolitan area because of offshoring could be 1.5 to three times as large."


  1. I completely disagree that companies in the Boston area will lose programmers and software engineers to outsourcing. The trend for outsourcing in many cases has actually reversed. I work for a software company, and we struggle to find qualified people to fill our development positions. We tried outsourcing at one point to fill positions we could not fill locally, but the quality of work that was done was very disappointing, so we simply starting taking in local people with less experience that we can train.

  2. That's encouraging news, thanks for posting. I think it depends on the company - how much collaboration and innovation are going on, what the corporate culture is, and so forth. I absolutely agree that not all jobs are good candidates for outsourcing.