Programmer Jobs, Outsourcing, and Our Current Economy

How programmer jobs and outsourcing affected the current economy

In 2000, the American economy was booming. The IT field, including research and development, analyst, marketing and programmer jobs accounted for fully 51% of America’s GDP! We’re talking big money. In January of 2001, job boards like DICE boasted well over 100,000 engineering, analyst and programmer jobs, waiting to be filled. In past years, the period between October and March was traditionally the slow period. In 2000 and into 2001, this mold was broken, with more positions to be filled than there were qualified candidates. IT was booming.

Let me share a true story with you, to demonstrate how outsourcing IT jobs to foreign cheap labor sources, was the beginning of what we now are experiencing in the labor market and the current state of the economy. Be warned, it’s not a pretty picture, but should give you some insight into how we got to be where we are now.

In 2000, a good friend was contracted to IBM as an enterprise architect. IBM’s end user was another big name IT company. The project involved developing a licensing system. IBM’s end user had a staff of 40 foreign programmers, who had been working on the project for a year without progress or results. My friend’s job was to coordinate the activities of all these programmer jobs and get the job done. In the end, the end user company dismissed the staff of 40, for sheer incompetence, and replaced them with this top notch engineer, truly a one man show. The licensing system moved like greased lightning and was estimated to have saved the company a million dollars in previously lost revenue. To make it all happen, he was putting in some very long days. When the project was completed, he was ready for a vacation! He took a couple of months off. In March of 2001, he checked out the job boards, only to find that the 100,000 programmer jobs had dwindled to 23,000! Hey! What happened?

The IT companies had discovered that the government had decided to give them big tax breaks for using foreign cheap labor. Suddenly, the American engineer or programmer was shut out of the market. Corporations had gone for outsourcing with gusto! Why should they pay Americans the market rate, when they could have the job done in India for a tiny fraction of the American programmers rate? As it turned out, approximately three million American programmer jobs disappeared overseas.

This continued for several years. In the end, the outsourcing strategy did not work. The corporations discovered that, due to language and other communication problems, combined with a lack of availability during normal business hours, projects were not only failing, but cost 20% more, even with the tax breaks. Meanwhile, American technology was being handed out like candy overseas. What was formerly proprietary American technology was, and still is, in the hands of foreign countries, most notably India and China. American programmer jobs were like hen’s teeth – not to be found.

At the time, three million programmer jobs, spread all over America in a period of several months, didn’t even make a blip on the public consciousness or unemployment statistics.

Taking a page from the IT industry, other manufacturing companies soon followed suit. The American textile and auto industries were virtually wiped out. Entire regions suffered massive layoffs, plunging these workers into instant unemployment. This practice has continued to today. Anyone with a basic understanding of economics can see that if too large a percentage of the population is unemployed, they will not be able to afford to purchase the products produced overseas by American companies.

We’ve now effectively lost the technology that helped sustain that booming economy. In addition, the foreign workers are now in a position to demand higher rates. No free lunch anymore. From where I sit, it looks like greed overcame the corporations.

As a result, the corporations virtually shot themselves in the foot. It’s not known if American programmer jobs will begin to rise again. Our new President-elect has vowed to come down hard with a heavy tax burden on companies that use foreign labor. We’ll see. One thing is certain. It’s going to be a long hard road back to American prosperity. Ha. There really ought to be a law! Let’s see it.