Offshore leave

The 4th Congressional District, represented by 12-term Democrat Barney Frank, snakes its way from the pricey Boston suburbs of Newton and Wellesley more than 50 miles south to the blue-collar city of New Bedford on Buzzards Bay. A product of various redistricting maneuvers over the years, it is probably the oddest shaped of the 10 Massachusetts House seats. The twists and turns of political mapmaking, however, have provided Frank with one unintended benefit: They have given him a perfect window into American attitudes on economic globalization.

Programmers at work at a software firm in Bangalore, India.

In 1993, Congress was in the throes of debate over the North American Free Trade Agreement. The treaty promised expanded trade with Mexico and Canada but was viewed by labor leaders as a grave threat to US manufacturing jobs. “I got a lot of mail,” says Frank. “I could look at the envelope and, like Karnac, tell you if it was pro- or anti-NAFTA.” Letters that were formally addressed and in typed envelopes almost always came from the northern end of his district and urged him to support the trade agreement. Envelopes addressed by hand, he says, were invariably from blue-collar communities at the district’s southern end, and their writers implored Frank to vote against NAFTA, which he ultimately did.

Today, it’s clear from the 4th District mailbag that something big has happened. Frank is again hearing from constituents fretting over the potential impact of free trade. But suddenly it is the white-collar world at the northern end of his district that is wondering whether a borderless, global economy is such a good thing after all.

Jobs for skilled college graduates were supposed to be export-proof.
“These are not relatively uneducated industrial workers,” Frank says of the constituents writing to him these days. “These are among the most articulate members of society.” And they aren’t happy with what they see. At the center of the new economic unease is “offshoring,” the newfangled term for moving US jobs to lower-cost overseas locations. Whether they involve back-office accountants in Bangalore or programmers in Pune, stories of US firms pulling up stakes in this country and shipping thousands of jobs to India and other countries have dominated the business news. The trend is, in many ways, no different from the steady emigration of manufacturing jobs over the past few decades. However, the jobs now heading overseas include skilled work done by college-educated workers, the kind of work that was supposed to be export-proof. That fact, some say, makes this stage of globalization fundamentally different from earlier ones, and potentially much more troubling for the future economic security of Americans.

“In the past, it was thought that if you went to college, your economic well-being was more or less guaranteed,” says Alan Clayton-Matthews, an economist at the University of Massachusetts­Boston. “Now it’s no longer the case.”

The offshoring of white-collar jobs “breaks the promise of what I call the globalization cheerleaders,” says Alan Tonelson, a research fellow at the US Business & Industry Council and author of Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade Are Sinking American Living Standards. That promise, says Tonelson, was that “workers can achieve economic security if only they would retrain themselves with the skills needed to cross that bridge to the 21st century, in Bill Clinton’s phrase. Now we see that’s no guarantee of anything.”

There are plenty of people who say the warning bells being sounded over offshoring are false alarms. In fact, most leading economists and business leaders say the trend is just the latest manifestation of a long-running dynamic of economic change. Offshoring, they say, is part of a new era that will draw billions of players into an expanding global economy, one in which the US will continue to thrive as the leader of innovation—and home to the high-value jobs that will ride the wave of expansion.

Despite such assurances, offshoring has hit a raw nerve in the US body politic. In February, when the chairman of the White House Council of Economic Advisors, Gregory Mankiw, called offshoring “a good thing” that simply represents “a new way of doing international trade,” an uproar ensued, with some of the harshest criticism coming from Republican members of Congress who represent states that suffered large job losses in the recent recession. Democratic presidential nominee John Kerry jumped on the issue, branding corporate leaders who send jobs overseas “Benedict Arnold CEOs.”

That debate has migrated from cable news talk shows to business school classrooms. In response to student demand, MIT’s Sloan School of Management recently began offering a course on offshoring. With formal texts and firm data hard to come by, most sessions consist of guest lectures. Among the parade of speakers who came through the class this spring was former US labor secretary Robert Reich. According to a Boston Globe account of his appearance, Reich dismissed the offshoring ruckus as much ado about not much. “A year from now we will not hear about outsourcing,” he told the class. “This is business-cycle related.”

But not all the voices of doom and gloom are coming from the anti-corporate agitators who brought chaos to the World Trade Organization meetings in Seattle five years ago. Among those sounding the offshoring alarm, for example, is economist Paul Craig Roberts, a former assistant treasury secretary in the Reagan administration and a one-time avid free-trade proponent. Asked what he sees as the future for the US middle class, Roberts says, “There won’t be one. All the avenues for upward mobility are being shut off by outsourcing and offshoring.”

If Roberts can be accused of overstating the potential for cataclysm, Reich’s assessment may be too glib. The truth, if it can be found, probably lies somewhere in between. But there’s an awful lot riding on which view is closer to the mark.

Out of sight, out of job

The furor over jobs heading overseas has been described using two related, but distinct, terms. Many stories refer to the practice as “outsourcing,” a term that is accurate, but incomplete, in characterizing the job-shifting phenomenon. Outsourcing is a common business practice, which entails contracting with another firm to perform a particular task rather than retaining the work in-house. The use of cleaning companies to service the janitorial needs of office buildings is an example of widespread outsourcing in the US.

“Offshoring” denotes moving a particular job function to another country. Although offshoring often also involves outsourcing—that is, contracting with an overseas firm to provide the service—some US companies are establishing their own offshore affiliates or subsidiaries to employ overseas workers. In either case, the principle behind offshoring is no different from the one that leads firms to engage in domestic outsourcing: the belief that it can obtain a desired service or task at a lower cost.

If the anti-offshoring movement has an elder statesman, it is probably Ross Perot. It was the billionaire Texas businessman who, in his 1992 campaign for president, warned of the “giant sucking sound” that would emanate from Mexico as thousands of US jobs moved over the border if NAFTA were passed. At the same time, Perot could easily be crowned with a second title: the granddaddy of outsourcing. The company Perot founded in 1962, Electronic Data Systems, has been one of the most successful outsourcing firms in US business, handling payroll accounting for thousands of US employers.

That irony would hardly be lost on today’s business leaders, who find themselves in the crosshairs of the growing outcry over offshoring. In a global economy with competitors near and far, they say, the same business imperative that leads firms to outsource tasks to other firms in this country compels them to seek such advantages abroad.

“We have no other choice,” says John McEleney, CEO of SolidWorks, a Concord-based software firm that specializes in computer-assisted design and has operations in India. “This is the thing people have to get their heads around. It’s happening. The genie is out.”

That view is certainly the predominant one in the air on a balmy day in May, as 175 of New England’s leading technology entrepreneurs and investors gather for the fifth annual Nantucket Conference on the tony resort island off Cape Cod. These high-level skull sessions have become an important venue for free-flowing discussions among the captains of the Massachusetts high-tech industry. This year, the conference organizers have put offshoring on the agenda, and they’ve got the perfect man to moderate a panel discussion on the topic.

More than 3 million US service-sector jobs may be moved offshore by 2015.

“For the last three years I’ve been ground zero of the offshore debate, because I made the mistake of putting some numbers around it,” says John McCarthy to the group. Many of the news stories on offshoring over the past two years have relied on a 2002 report by McCarthy, an analyst at Cambridge-based Forrester Research, estimating that as many as 3.3 million US service-sector jobs will be moved offshore between 2000 and 2015.

The Forrester report has been followed by other efforts to project the extent of offshoring into the future. Last year, University of California­Berkeley researchers declared that approximately 14 million Americans, or 11 percent of the US workforce, hold jobs in occupations that are at risk of offshoring. Then, in May, Forrester revised its estimate, projecting a slight uptick in total jobs offshored to 3.4 million, but, more significantly, forecasting that the pace of offshoring would accelerate. The new report estimates that 830,000 service sector jobs will be moved offshore by 2005, a sizeable increase from the estimate of 588,000 jobs offshored by that time in the earlier report.

Despite the reports and studies, the fact is no one has a good handle on how much offshoring has taken place, let alone what the future holds. The Forrester report estimates that approximately 300,000 information technology jobs have moved offshore over the past three years. But in June, for the first time, the US Labor Department issued a report on job offshoring. According to its survey of layoffs at companies employing 50 workers or more, just 4,633 US workers were laid off during the first three months of 2004 due to their jobs moving overseas, representing a mere 2 percent of all private-sector layoffs during that period.

The reliability of such self-reported figures from companies is not clear. But neither is that of any other offshoring statistic. Still, few dispute which direction the numbers are heading.

“Whatever the level of outsourcing is today, it will clearly continue to grow,” says Barbara Berke, director of the state Department of Business and Technology.

Addressing the Nantucket Conference attendees, McCarthy explains that overseas outsourcing has become so vital to IT firms that Silicon Valley business leaders say “the offshoring plan is now more important than the business plan, in terms of attracting venture capital.”

Open markets, open season

The sudden embrace of white-collar offshoring as a business strategy is driven by the confluence of several factors. Three huge countries that together are home to more than 2 billion people—China, India, and Russia—have within a short period of time opened their borders far wider to trade. Each country also has a segment of highly educated, skilled workers. Meanwhile, the rapid advance of Internet and other telecommunication technologies allowing high-speed transmission of data at low cost has made the location of certain types of work less critical. Thus, computer programming, back-office accounting, medical transcription, and legal research—even the reading of X-rays and other medical tests—can, in theory, be done practically anywhere. And with wage scales in developing countries sometimes just 20 percent of that paid for comparable work in the US, the business case for offshoring is irrefutable.

“If what you do can be described in a manual, like software manufacturing, then there’s worldwide competition for your job,” says UMass economist Clayton-Matthews. While routinized white-collar jobs, like software coders or call-center operators, have been pegged as the most immediately vulnerable, the type of work that firms could ship overseas seems destined to move up the skill ladder. Using the Forrester Research projections on job offshoring over the next decade, the Washington, DC-based Progressive Policy Institute estimates that nearly half of those will be jobs paying more than $33,000 a year; more than one-third will pay more than $46,000. For people working those jobs today, that could be bad news.

Former high-tech executive Vin Maietta:
“What’s going to be left?”

“We sent textiles and some labor-intensive jobs overseas and we said, ‘OK, people are going to get better white-collar jobs,'” says Weston resident Vin Maietta, a former high-tech logistics and manufacturing vice president who was laid off last November. If white-collar jobs are shipped overseas, he asks, “What’s going to be left?”

That is the $64,000 question sending shudders through the US workforce. The answer will be particularly important to the Massachusetts economy, one of the most technology-centered of any US state. In the recent UC­Berkeley report on offshoring, the outlook for Massachusetts appeared potentially ominous. While the researchers estimated that 11 percent of all US jobs could be vulnerable to offshoring, a bar graph of jobs at risk by large metropolitan area shows Boston rising higher than nearly every other, with 15 percent of jobs deemed at risk. Only San Francisco and Silicon Valley capital San Jose were shown as more vulnerable.

“Boston sticks up pretty high,” says report co-author Cynthia Kroll. But Kroll, a senior regional economist at Berkeley’s Center for Real Estate and Urban Economics, calls the report a “broad brush-type look at things” based on employment categories, and says that, in the end, Boston may prove more resilient than places like Sioux Falls, South Dakota, which has bet its future on back-office support jobs—the type of lower-skilled, white-collar work that seems most easily offshored.

That’s certainly the view of the Progressive Policy Institute. In its report, PPI vice president Robert Atkinson suggests that the US is now going through, on a global scale, the same shift in jobs that took place domestically in the 1960s, when the South and West experienced rapid growth from the movement of industries and jobs out of the Northeast and Midwest. The report points to Boston as one of the regions that, in the earlier era, was able to reinvent its economy based on “higher value-added jobs and services,” while areas like upstate New York went into a long decline. As the pace of globalization increases and moves increasingly into white-collar occupations, the question for the US economy as a whole, writes Atkinson, is, “Will we follow the Boston region’s path or upstate New York’s?”

Berke, the state’s business and technology director, says Massachusetts will undoubtedly feel the effects of offshoring, and the fact that more knowledge-based jobs are now vulnerable understandably “strikes fear” into workers who had thought their jobs safe from competition. But she echoes Atkinson’s view that the state is better positioned than most to compete in the new global order. With the state’s lead in cutting-edge industries ranging from biotechnology to precision manufacturing, Berke says, we should be redoubling efforts to capture research and development dollars and attract high-value-added industries, not bemoaning the inevitable loss of lower-skilled work.

“Massachusetts has a 300-year history of being in a global economy, and we have, more than any other place in America, worked through the outflows and inflows,” says Berke. “We lost cotton a long time ago. We lost shoes. We were ‘it’ in mini-computers.” After each chapter, she says, the state’s economy redirected itself toward new pursuits that created wealth and jobs, and today is no different.

Global reach

The high-tech honchos gathered on Nantucket are more focused on the ultimate promise of technology-driven job shifts, not their potential peril. “I think it’s a natural evolution,” says panelist Brian Keane, CEO of Keane Inc., an information technology consulting and outsourcing company based in Boston. “More and more IT and business services jobs will move offshore,” he says, in a later interview. “But at the same time, I think there will be millions of new jobs that are created on the front end of innovation.”

CEO Brian Keane: Innovation means
“millions of new jobs” in the US.

Also on the offshoring panel is Desh Deshpande, chairman of Chelmsford-based Sycamore Networks and one of the heavy hitters of the Massachusetts high-tech industry. Deshpande tells the audience that he thinks about the issue through the prism created by University of Michigan business professor C.K. Prahalad, author of The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits.

“There are 6 billion people in the world,” says Deshpande. “There’s about a billion who make more than $2,000 a year. So far, economic activity has all been focused on those [1] billion people, ignoring the other 5 billion.” As the economic pyramid gets broader and taller, Deshpande says, “There’s going to be opportunities for everybody, and I think the US is probably best suited to get a big chunk of that.”

In other words, globalization will not only provide lower cost avenues of production for firms in developed countries but, by lifting billions of people out of poverty, it will also create vast new markets, markets that will require lots of high-skilled U.S. workers to manage and service.

Representing wary US tech workers on the Nantucket panel is Henry Fitek. The 58-year-old Harvard father of three spent 36 years in the IT world but has been out of work for a year and a half. Fitek worries that, far from having a dynamic effect in boosting the US economy, offshoring will do just the opposite. “Young people are changing their major away from computer science to other fields, so we’re perpetuating the change,” says Fitek, a leader of the 495 Network Support Group, an organization for displaced tech workers. “We will be forced to outsource IT work because eventually we won’t have the workforce here. Our skills will be teaching outsourcing and offshoring.”

Fitek’s gallows humor notwithstanding, the offshoring business is indeed booming. In the 1990s, Amit Maheshwari spent six years with General Electric and IBM Global Services, establishing software development centers in India for them. But seeing an opportunity to cast his own line into the offshoring waters, he struck out on his own four years ago. Just 26 at the time, and with only $17,000 on hand, he set up i-Vantage, a Cambridge-based company that helps firms establish and run offshore operations in India. Unlike some companies that help companies to contract with Indian technology companies to provide offshore services, the company’s model calls for US firms to hire Indian workers and put them on their payrolls. i-Vantage provides human resource assistance with hiring and helps find office space.

With 15 employees in the US and 300 in India who service the firm’s international clients, Maheshwari says i-Vantage recorded $4.3 million in revenue last year, a figure he expects to grow by at least 30 percent this year. “In the long run it will help with competitiveness, which is the fuel for growth,” says Maheshwari of the impact offshoring will have in the US.

A case in point, he says, is the experience of St. Croix Systems, an i-Vantage client that sells software used by hospitals to track equipment. The company recently updated its main software product using offshore programming in India that would have cost two to three times as much in the US. The savings meant St. Croix could begin work on updates to other products, while getting the main software update out the door to their clients more rapidly.

“It’s made a very big difference,” says Troy Kenyon, CEO of St. Croix Systems. “The next phase of growth will be onshore as we ramp up additional sales and marketing. We will actually end up hiring more folks here than we would have.”

That’s an example of the virtuous cycle that offshoring boosters say an increasingly global economy will yield. But that is certainly not how the offshoring storyline is playing out these days.

In 1999, when US high-tech firms were facing a shortage of qualified workers, Atul Vashistha also heard offshoring opportunity knocking. The Indian-born entrepreneur founded neo-IT, an offshoring consulting firm based in San Ramon, Calif. Having helped clients “globalize” about $1 billion of labor last year, Vashistha is having a pretty good run.

But the 38-year-old businessman, speaking by telephone from his West Coast office in late April, is not having such a great day. His picture is on the front-page of that morning’s Los Angeles Times, and the paper might as well have added a bull’s-eye onto the image. He’ll take your job and ship it, blared the headline over a long profile of Vashistha, described in the story as “one of the leading practitioners of ‘offshoring.'”

“As the sun started coming up, the volume of e-mail started going up,” says Vashistha, describing the avalanche of angry messages he was receiving. Not surprisingly, Vashistha says he would have put a very different headline on the story. “I would have said, KEEPING AMERICA COMPETITIVE or SAVING AMERICA,” says the native of Jaipur, in northwest India, who now boasts of being a proud US citizen. “I believe globalization is good for America, and I think it’s great for the long-term future of our country.”

Not so shore

In early March, Barney Frank took to the floor of the US House of Representatives to address the issue of jobs and the US economy. Federal Reserve Bank chairman Alan Greenspan frequently invokes economist Joseph Schumpeter and his theory of “creative destruction,” Frank said. According to Schumpeter’s theory, which dates to the 1940s, in the long run, the economic churn that does away with certain jobs will yield better-paying, higher value-added positions in their place.

“As I have told Mr. Greenspan,” Frank said in his floor speech, “there is another economist whom people believe much more instinctively, John Maynard Keynes,” who famously remarked, “in the long run, we shall all be dead.”

In an interview, Frank says the backlash brewing against offshoring is being driven by a feeling that, no matter what its long-range benefits, most Americans are not enjoying the fruits of the globalization bounty. The US economy has rolled up record gains in productivity in recent years, driven by a mix of factors, including huge advances in technological innovation, as well as the offshoring of jobs. But unlike the period following previous recessions, US workers are getting little bounce from the rebound, Frank says. The recession officially ended in November 2001, only seven months after it began. Following the past five US recessions, Frank says, the real growth in wages and salaries over two years was 10 percent, 12 percent, 9 percent, 11 percent, and 3.6 percent, respectively. In the two-year period since the recent recession officially ended, wages and salaries have grown just 0.4 percent.

“You cannot argue for things that increase productivity if the majority of the people in the country are convinced, with good reason, that very little of that productivity will come to them,” says Frank.

Paul Harrington, of the Center for Labor Market Studies at Northeastern University, says when the growth in national income in the two years following the end of a recession is considered, the share that went to wages in the two years following the 2001 recession was the smallest of any post-recession period in 50 years. Meanwhile, corporate profits have never represented a bigger share of the post-recession income growth. In the first two years after a recession, the corporate profits typically account for about 16 percent of national income growth, says Harrington, with 19 percent being the 50-year high before the 2001 recession. “This time around it’s 41 percent,” he says. “It’s just way out of line.”

The worry that offshoring may be good for business but bad for many families’ bottom line is translating into a raft of legislation at the state and federal level to ban or curtail the use of taxpayer funds to purchase offshore services. Legislation has been passed or is pending in 31 states to curb the use of public dollars on offshore services, and there are eight bills pending in Congress to address offshoring at the federal level.

State Sen. Jack Hart wants to ban the
state from buying services offshore.

In Massachusetts, state Sen. Jack Hart attached an amendment to the state budget to ban state purchasing of offshore services after learning that a portion of a $200,000-a-month contract to handle customer service calls from food stamp recipients is handled at a call center in India. “I am appalled that we have taxpayer-supported services that are being shifted to a Third World country,” says Hart. Romney vetoed the budget rider in June; at press time, the Legislature had yet to take up overrides.

Last year, the state of Indiana reversed course on a contract to offshore welfare services that would have saved the state $8.1 million. According to the US Chamber of Commerce, the decision to scrap the contract will cost Indiana taxpayers $162,000 per job saved. Meanwhile, North Carolina agreed to spend an extra $1.2 million to save 34 instate call center jobs that had been slated for elimination, with the work to be handled offshore.

There are hints of uncertainty even among advocates of globalization.

Blocking federal or state service contractors from offshoring will hardly stop job emigration. And many would argue that lower-skilled call-center jobs or routine back-office processing positions are not the jobs we should be fighting to retain anyway, especially when it involves forsaking savings in public spending that might otherwise be available for other needed services.

What’s clear, however, is that offshoring has become the touchstone for Americans’ growing sense of economic insecurity—and, for some, moral outrage. Jeff Crosby is president of Local 201 of the International Union of Electrical Workers/Communication Workers of America, which represents workers at General Electric’s turbine manufacturing plant in Lynn. Defense manufacturing has hardly been immune from offshoring, a fact that strikes Crosby and other labor leaders as a bitter irony. Among those hit by layoffs at the Lynn plant caused by a shifting of defense work to a GE facility in Mexico was a worker whose son is serving in Iraq.

“Nobody thinks you should have to send your kid to Iraq and your job to Mexico in the same day,” says Crosby. “The whole concept of ‘public good’ is under attack.”

Compounding the unease is the fact that even among the most ardent globalization advocates there are hints of uncertainty as to whether the newest chapter in the free-trade story will stay on script. “If foreign countries specialize in high-skilled areas where we have an advantage, we could be worse off,” Harvard economist Robert Lawrence, a member of the Council of Economic Advisors during the Clinton administration, told Business Week last year. “I still have faith that globalization will make us better off, but it’s no more than faith.”

Globalization warming

At the Nantucket Conference panel discussion, CEO Brian Keane was brimming with faith in globalization, but worried about talk of reining in its reach. When asked what the appropriate response of the federal government should be to concerns over offshoring, he had a straightforward answer: “Stay out of the way.”

Although his reply might be sound economic theory and sound business strategy, it may not be viable public policy. Barney Frank says the offshoring issue is poisoning the political environment for all trade treaties. For example, he says, Republican leaders in Congress are holding back a treaty to expand trade with Central American countries because they worry that it would face rough going. “If equity is not enough, self-interest ought to persuade” free-trade advocates that mitigating measures are needed, he says.

One way to temper the budding backlash against offshoring, and to address important needs in education, environmental protection, and health care, says Frank, would be to capture some of the huge productivity gains of the past several years on behalf of average Americans. “Let’s take a part of the wealth we’re generating and put it to public uses,” he says.

“Taking” that wealth means taxing it, something there appears to be little appetite for in the current Congress. But Frank insists that policy-makers may have to do something in order to gain public support for economic globalization —support that is, if anything, eroding as the offshoring job cycle speeds up. “Fifteen years ago, [free traders] told me to tell garment workers [in my district] to retrain to be programmers,” Frank points out; now, programmers are the ones fearing for their jobs.

But Daniel Drezner, a University of Chicago political scientist who is writing a book on globalization, turns that observation on its head. “A lot of the jobs that are under threat now didn’t even exist 15 years ago,” he says.

That doesn’t make the new white-collar job dislocations any easier. In the 1980s, Karen Schneider worked as a secretary at General Electric’s ordnance facility in Pittsfield. After getting laid off, she went back to school and received a bachelor’s degree in computer information systems in 1990 from Westfield State College.

“You do all the right things,” she says. “I went to state college, I got my degree. Tech was the field to be in.” But after a decade in the high-tech industry, she got laid off again, in February 2003, this time from a computer consulting firm in Lynn. She has been looking for a new job ever since, but to no avail. “I’m kind of lost as to what I’m supposed to do now,” she says. “I’m a little bit tired of going back to school. And it’s not cheap.”

Laid-off worker Karen Schneider: “Tech
was the field to be in”—until it wasn’t.

Clayton-Matthews, the UMass­Boston economist, says there remains a huge pay premium for those with college degrees. “The mantra is still the same: Go to college,” he says. But Clayton-Matthews says that old mantra now comes with an added stanza: “Be prepared not to have a single job in your career, or even a single career.”

Some experts say what we need are not restrictions on trade and offshoring but ways to provide support for a workforce that will have to put up with far more volatility than ever before. Among the ideas that have been floated is “wage insurance.” In 2001, Brookings Institution scholar Robert Litan and Lori Kletzer, an economist at the University of California­Santa Cruz, outlined the concept, whereby states would provide, for up to two years, some fraction of the wages lost by workers who are laid off. Unlike traditional unemployment insurance, however, workers would collect payments only after securing a new job. The payments would supplement the income of those able to secure new employment only at a lower wage.

Others have proposed wage insurance specifically targeted to workers affected by offshoring, as well as expanding the benefits of the federal Trade Adjustment Assistance program, which assists displaced manufacturing workers, to include service-sector workers.

Litan and fellow Brookings scholar Lael Brainard have also called for tax reform in order to eliminate incentives to send work offshore, incentives that include allowing companies to defer taxes on foreign earnings but not domestic. “Unless policy-makers get out ahead of the offshoring debate, they will find themselves reacting to a host of Band-Aid proposals that do more harm than good,” Brainard and Litan wrote in a recent policy brief.

The elephant and the Pentium

While various policy approaches might help a white-collar workforce navigate the new reality of increasingly turbulent economic times, Massachusetts government and business leaders say the most important thing the state can do is maintain its standing at the top of the skills ladder.

“We can’t afford to do [here] what people can do for $5,000 [a year] somewhere else in the world, because it’s not sustainable,” says Deshpande, the Sycamore Networks chairman, who donated $20 million to MIT two years ago to found the Desphande Center for Technological Innovation.

Maintaining the state’s edge as a center of research and development, not lashing out at offshoring, is the key to remaining competitive as globalization extends to higher-skilled work, says Berke, the state director of business and technology. If anxiety over offshoring “inspires people to pursue education, then it’s not misplaced,” she says. “But it should not be used by the Chicken Littles. The sky is not falling.”

Meet the Author

Michael Jonas

Executive Editor, CommonWealth

About Michael Jonas

Michael Jonas has worked in journalism in Massachusetts since the early 1980s. Before joining the CommonWealth staff in early 2001, he was a contributing writer for the magazine for two years. His cover story in CommonWealth's Fall 1999 issue on Boston youth outreach workers was selected for a PASS (Prevention for a Safer Society) Award from the National Council on Crime and Delinquency.

Michael got his start in journalism at the Dorchester Community News, a community newspaper serving Boston's largest neighborhood, where he covered a range of urban issues. Since the late 1980s, he has been a regular contributor to the Boston Globe. For 15 years he wrote a weekly column on local politics for the Boston Sunday Globe's City Weekly section.

Michael has also worked in broadcast journalism. In 1989, he was a co-producer for "The AIDS Quarterly," a national PBS series produced by WGBH-TV in Boston, and in the early 1990s, he worked as a producer for "Our Times," a weekly magazine program on WHDH-TV (Ch. 7) in Boston.

Michael lives in Dorchester with his wife and their two daughters.

About Michael Jonas

Michael Jonas has worked in journalism in Massachusetts since the early 1980s. Before joining the CommonWealth staff in early 2001, he was a contributing writer for the magazine for two years. His cover story in CommonWealth's Fall 1999 issue on Boston youth outreach workers was selected for a PASS (Prevention for a Safer Society) Award from the National Council on Crime and Delinquency.

Michael got his start in journalism at the Dorchester Community News, a community newspaper serving Boston's largest neighborhood, where he covered a range of urban issues. Since the late 1980s, he has been a regular contributor to the Boston Globe. For 15 years he wrote a weekly column on local politics for the Boston Sunday Globe's City Weekly section.

Michael has also worked in broadcast journalism. In 1989, he was a co-producer for "The AIDS Quarterly," a national PBS series produced by WGBH-TV in Boston, and in the early 1990s, he worked as a producer for "Our Times," a weekly magazine program on WHDH-TV (Ch. 7) in Boston.

Michael lives in Dorchester with his wife and their two daughters.

Deshpande echoes that sentiment, and points out that places like India and China are still overwhelmingly poor countries that are a long way from competing with the US on an even footing. “Thirty years ago, when I came here from India, people always used to say, ‘Do you have an elephant at home?'” Deshpande said at the Nantucket conference of tech leaders, laughing at the distorted image Americans held of his native country. “Now it’s the other way around. They all think that everybody in India has a computer. Neither one of them is true.”

That may help to keep some of the offshoring angst in perspective. And robust job growth over the coming months would surely dampen the offshoring debate. But there’s no doubt that the growth trend line in India is for PCs, not pachyderms, just as there will be millions more people with college-level skills in China and other parts of the world. With that in mind, even if they heed the call to continue reaching ever higher on the skills ladder, it’s hard to blame American workers for keeping one eye over their shoulder.